Traverse City’s two largest transportation fleets could someday be running on natural gas – a cleaner, cheaper and domestically-sourced fuel – instead of diesel. But “someday” comes with some significant cost caveats.

A just-completed Natural Gas Vehicle Feasibility Study commissioned by the TC Chamber of Commerce lays out extensive benefits for both the Bay Area Transportation Authority (BATA) and Traverse City Area Public Schools (TCAPS) converting to compressed natural gas (CNG). But the conversion isn’t without its challenges – specifically, an immense capital outlay at the outset.

DTE Energy funded the approximately $10,000 study, according to the Chamber’s Doug DeYoung, which was pursued by an energy committee that is exploring options for the region’s energy future.

DTE has natural gas interests elsewhere in the state, including some 16 CNG filling stations and upwards of 200 company natural gas vehicles, according to Steve Rawlings, DTE’s regional manager. He applauded the Chamber and committee for its interest in studying the impact of a natural gas transportation initiative locally.

If conversion were to happen, a most-feasible, realistic scenario looks like this: DTE builds a CNG facility in Traverse City with TCAPS, BATA, AT&T (a partner in other communities) and MichCon/DTE in a long-term commitment to run at least a portion of their fleets using compressed natural gas. The study recommends that these potential partners should phase in to CNG, following their regular planned fleet replacement schedules. BATA currently has 74 buses in its fleet (including two hybrids) and TCAPS has 100.

But how likely is a Traverse City CNG filling station? “It will require a fair amount of critical mass – lots of partners and collaboration,” says Rawlings. “If we can get critical mass, the numbers show savings for users … along with the benefit of getting off foreign oil,” he adds.

TCAPS CFO/COO Paul Soma was “not surprised at all” by the study’s results.“ There are a lot of reasons to convert to natural gas,” Soma says.

A key case in point: Natural gas prices are more predictable than diesel because of the opportunity to lock in a multi-year contract with suppliers.

In 2011, TCAPS spent in excess of $600,000 on fuel for approximately 200,000 gallons. Its fleet travels 1.4 million annually.

Overcoming the initial capital infrastructure investment, however, is significant, Soma stresses. For example, CNG school buses cost $10,000 to $12,000 more than diesel buses, and TCAPs tries to replace ten buses annually, an expenditure of nearly $1 million. Beyond bus costs, there is also the cost of a filling station to factor in.

BATA Executive Director Tom Menzel says that 20 percent of transit agencies are already running on compressed natural gas, including Blue Water Area Transit in Port Huron, so there are models to study. The question, however, is how to do it here.

BATA spent $736,959 on approximately 210,000 gallons of fuel in fiscal year 2011 (Oct.1, 2010 – Sept. 30, 2011).

“The issue is how do we evolve into it,” says Menzel. “We’ve replaced 70 percent of our fleet in the last 24 months, so it wouldn’t be cost-effective for us right now. It costs $18,000 to $20,000 per bus to have them retro-fitted.”

Rawlings says the next step is putting together a proposal for both BATA and TCAPS to consider – both Soma and Menzel say they are still interested in learning more and discussing options. If a collaboration were to move forward – which would require a 10-15 commitment from all the parties involved – Rawlings says it is feasible to have a CNG filling station up and running by late 2013.