Colorado, Oklahoma Pitch Natural-Gas Cars in Michigan

The governors of Oklahoma and Colorado met with executives from General Motors Co. (GM), Ford Motor Co. (F) and Fiat SpA (F)’s Chrysler Group LLC, to ask for more cars and trucks with engines that run on compressed natural gas.

They’ve joined with 11 other states, most rich with natural-gas stockpiles, to commit to buy thousands of those vehicles a year for their fleets. As marketable reserves of natural gas in the U.S. have grown and the per-gallon price has declined compared with gasoline or diesel, the fuel choice is a patriotic and non-partisan one, the governors said.

Oklahoma Governor Mary Fallin, a Republican, and Colorado Governor John Hickenlooper, a Democrat, met with groups led by Steve Carlisle, a GM vice president; Ford’s Mark Fields, president of the Americas; and Peter Grady, Chrysler’s head of dealer networks. The states will issue a joint request for proposals on July 24, they said.

“What we want to do is be a partner to Detroit and make it so it works for them as a business proposition,” Hickenlooper said in an interview yesterday in Dearborn, Michigan.

A massive supply of natural gas from North America’s shale rocks has made the U.S. the world’s largest producer of natural gas and forced prices to record discounts versus crude oil.

President Barack Obama, in a speech in January in Las Vegas, called the U.S. the “Saudi Arabia of natural gas.” He’s pushed companies and the federal government to buy more vehicles that run on compressed natural gas, or CNG, for their fleets.

Demand Issue

“Supply is not the issue, demand is,” said Sam Brothwell, a senior utility analyst for Bloomberg Industries. “That’s why the gas-producing states want to see a new end use developed for natural gas.”

Another hurdle is infrastructure. There are about 500 public CNG filling stations in the U.S., according to the Energy Department. That’s less than 0.3 percent of the 159,000 gas stations in the U.S. tallied by the National Association of Convenience Stores in 2010.

Natural gas, an odorless mix of mostly methane, is the source of about a quarter of the energy used in the U.S., according to the Energy Department. Most is used for heating, cooking and power generation. About 0.1 percent is used for transportation fuel, according to the department.

While most comes from wells, recent improvements in hydraulic fracturing, or fracking, has made it easier to extract gas from shale-rock formations. The process uses water, sand and chemicals to open fissures in rocks and release gas. Fracking takes place near surface and ground water. The Obama administration is developing standards for natural-gas producers to disclose the chemicals used in fracking.

Fallin said the auto executives took them seriously and each said they would participate in the bidding process.

“We’re trying to be a game changer for the marketplace and helping with the demand,” she said.

The governors declined to give a specific total that the states would commit to purchase. In November, when the effort was announced, the goal was for each state to buy 5,000 CNG vehicles each year.

To contact the reporters on this story: Mark Clothier in Southfield, Michigan at 7132 or mclothier@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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