Milton Firm Creates a "Virtual Pipeline" for Big Natural Gas Customers
This week, Entergy announced that it’s finally pulling the plug on Vermont Yankee. The main culprit for killing the New England nuclear-power market — cheap natural gas — is the same fuel that’s driving the astonishing growth of NG Advantage.
The Milton headquarters of NG Advantage looks more like a truck stop than a start-up company that’s altering the energy landscape of New England. Two temporary office trailers and six tractor-trailer cabs are parked in the asphalt lot, near what look like two ordinary fuel pumps.
In fact, the pumps are dispensing natural gas via truck to a growing number of commercial customers that can’t get it by any other means — the first natural gas delivery business of its kind in the nation. In the six months the company has been operating, it’s become one of Vermont Gas Systems’ largest natural gas customers; last week NG announced plans to open a second facility in New Hampshire.
NG Advantage has found a business opportunity in the widening gap between the cost of natural gas and other fuels such as oil, propane and wood pellets. In effect, it’s created a “virtual pipeline” that allows some of New England’s largest fuel consumers to switch to natural gas years before a real pipeline ever reaches them. It does so by tapping into the Vermont Gas Systems supply that comes down from Canada to Chittenden County. After compressing and loading the fuel into its own specially designed tanker trailers, NG trucks the compressed natural gas, or CNG, to energy-intensive consumers, such as hospitals, universities and paper mills. If those customers could buy directly from Vermont Gas, they would likely pay about 50 percent less for energy; with NG, which has additional shipping costs, they save between 30 and 40 percent.
NG Advantage has another selling point: conversion to natural gas is “greener.” CNG burns much cleaner than other fossil fuels, emitting fewer particulates and greenhouse gases. Gov. Peter Shumlin’s long-term energy plan calls for dramatically expanding natural gas use in Vermont, which includes support for extending the pipeline to Middlebury and Rutland, increased gas-fired electric generation and expanding the use of CNG-powered fleet vehicles.
Lawrence Miller, Vermont’s secretary of commerce and community development, is an unabashed supporter of NG Advantage and its potential to spread natural gas use to businesses outside of Chittenden and Franklin counties currently served by the pipeline.
“Anywhere we can deliver cost improvements in the energy portfolio, I think it’s very important we do so,” Miller said. “We can’t afford to meet our climate objectives by just having manufacturers go out of business. That just won’t work.”
The couple who started NG Advantage, Tom and Mary Evslin of Stowe, have a long history of starting and running innovative businesses. In the mid-1990s, Tom Evslin conceived, launched and ran AT&T’s first internet service provider, AT&T WorldNet Service. Then in 1997, the Evslins teamed up to found ITXC Corp, a NASDAQ-traded company that provided wholesale VoIP, or internet-based telephone calls. By 2000, ITXC had become the world’s largest internet telephone network, with customers in more than 175 countries.
Tom Evslin later served as Vermont’s chief technology officer and “stimulus czar” and oversaw the distribution of federal stimulus dollars; Mary Evslin was the founding chair of the Vermont Telecommunications Authority. Both had retired when they decided to launch NG Advantage — their latest venture — two years ago.
Evslin said the idea of trucking natural gas to large industrial customers off the pipeline first occurred to him while working on a federal grant application to retrofit Vermont homes and businesses with smart electricity meters. When he saw that the wholesale price of electricity had declined due to lower natural gas prices, he realized he was looking at a long-term phenomenon.
“I like to think about what opportunities there are when all the assumptions change,” Evslin explained. He and his wife had exploited a similar opportunity back in the 1990s with ITXC when the price of long-distance phone calls and internet connections began dropping precipitously. With NG, Evslin saw a chance to capitalize on another “disruptive change” in an industry — in this case, North America’s natural gas boom.
For decades, the price of oil and natural gas dovetailed each other. If major manufacturers weren’t located on a gas pipeline, it didn’t make financial sense to truck the gas to them.
However, with the advent of new extraction technologies in the last six years, notably, horizontal drilling and hydraulic fracturing, aka “fracking,” it has become economically viable to recover gas from locations no one had previously thought possible. Suddenly, businesses off the pipeline were at a disadvantage compared to competitors that were on it. When Evslin began seriously considering the NG Advantage model, the price of natural gas versus oil on a per-BTU basis had finally dropped low enough that, according to his calculations, this business model could turn a profit.
Still, Evslin had to convince New England’s large energy users to make the switch. That proved easier than expected when he identified customers that “had to do something new because they had no other choice. They had to get their energy costs under control, or else.”
Another imperative, as 70-year-old Evslin saw it, was to find someone young and successful to be the “face” of the company. In April 2012, the CEO job went to Neale Lunderville, the erstwhile secretary of administration for former governor Jim Douglas. In October 2011, Gov. Peter Shumlin tapped him to oversee Vermont’s recovery efforts after Tropical Storm Irene. As soon as his Irene work was finished — “First I needed Neale to fix the roads for us!” Evslin quipped — the Evslins approached him. Last week, the thirtysomething CEO was on vacation.
Tom Evslin admits that the energy sector was new to all of them. But both he and Lunderville had previously served as secretaries of transportation: Evslin from 1981 to 1982 under then-governor Richard Snelling, Lunderville from 2006 to 2008 under Douglas.
Evidently, their collective savvy in navigating the world of regulatory affairs paid off. In 2011, NG Advantage asked the Vermont Public Service Board to formally declare that it didn’t have jurisdiction over this new breed of energy business. Although NG Advantage planned to sell natural gas just as Vermont Gas does, the company argued that it would not have a monopoly and thus shouldn’t be regulated like a public utility.
It took six months, but the PSB finally agreed. One hundred days later, NG Advantage had all the permits it needed to start construction. On September 27, 2012, the company broke ground on the Milton facility and completed work last February. Then, with 15 employees and 15 custom-built trailers containing carbon-fiber fuel tanks originally designed for the NASA space program, NG Advantage began delivering natural gas to its first customers in March.
Among the first to sign up was Soundview Paper, which produces recycled paper towels, tissues and napkins at a paper mill in Putney and fit the criteria to make the conversion worthwhile: It consumed at least 150,000 gallons of oil or propane a year. On March 28, the energy-intensive plant, which operates around the clock and processes about 110 tons of recycled material each day, switched from oil to CNG to power its boilers.
Soundview didn’t have to build any storage tanks to do so; when NG Advantage delivers a trailer full of gas, it leaves the trailer there for as long as it takes the company to go through the supply. Fuel levels are monitored remotely via computer by NG Advantage’s dispatchers, with deliveries scheduled automatically as needed — from two a day to one every four days. Evslin notes that his company maintains no computer servers in Vermont. Instead, it relies entirely on cloud computing and servers in other regions of the country. In the event a major storm shuts down all of New England, he says, “We can worry about our customers, not our trucks.”
Soundview CEO George Wurtz reports that the switch has allowed the mill to reduce its CO2 emissions by nearly a third. With the money it’s saving on energy, the company recouped the cost of the conversion within a few months.
How does Vermont Gas feel about all this? Great, apparently. The next best thing to counting Wurtz as a customer is having its biggest buyer, NG Advantage, convert him to gas.
“NG Advantage is an innovative way to bring another energy source to Vermonters who don’t have access to natural gas,” says Steve Wark, communications director for Vermont Gas. “We see them as a valuable partner, because not only are they helping to get natural gas to more customers, it also helps us pre-develop specific areas.”
As Wark explained, it will likely be years before Vermont Gas can run its pipeline as far south as Rutland — and organized opposition in Addison County suggests it’s not a slam dunk. Other parts of the state may never have access to natural gas via pipeline.
Not everyone is convinced that NG Advantage is such a gas. Some local environmentalists charge that getting Vermont’s largest fuel consumers to switch from one fossil fuel to another is a step in the wrong direction. And there’s the added irony that NG’s fuel is currently delivered by diesel-powered trucks — not vehicles that run on CNG.
Paul Burns, executive director of the Vermont Public Interest Research Group, suggests that the relatively low price of natural gas in recent years doesn’t factor in the true ecological costs of its extraction, especially as the industry becomes increasingly reliant on fracking. Thus, he says, natural gas is less deserving of its reputation as the “cleaner fuel.”
Some, such as Evslin and commerce secretary Miller, recognize the environmental hazards associated with fracking but suggest that natural gas will serve as a valuable “bridge” to a cleaner energy future. Burns disagrees.
“Fracking is not the ‘bridge’ that we ought to be crossing to be getting to cleaner fuels,” he argues. “We really think it’s time to skip the bridge and move directly to cleaner fuels.”
Evslin counters that many of the past problems associated with fracking are now being addressed. He also points out that the natural gas NG Advantage buys comes from the TransCanada pipeline, most of which comes from conventional extraction methods.
But Burns is unconvinced. “Fracking may be getting better,” he adds, “but I don’t think we ever really understood just how bad it is.”
Try telling that to NG’s clients: The company expects to have 30 percent more by the end of the year.