FleetSmart Profiles: Municipalities and Utilities

Blue Line Transportation Ltd. – Hamilton, Ontario

Taxi Fleet Achieves Fuel-Cost Savings With Alternative Fuels

In the early 1980s, Blue Line Transportation Ltd. began converting its taxis from gasoline to propane in an effort to reduce fuel and maintenance costs. More recently, natural gas has become the company's alternative fuel of choice. Both fuels offer significant price advantages compared with gasoline, as well as fewer greenhouse gas emissions.

About the company

Blue Line Transportation Ltd. is the largest taxi company in Hamilton, Ontario, which has a population of approximately 500 000. The company has been an independent business since 1984. (For many years before that, Blue Line's owner, Tony Rizzuto held a half interest in what was then Hamilton's largest taxi company.)

The nature of the taxi business is such that fuel costs and vehicle maintenance and replacement are the major operating expenses. To reduce these expenses, Blue Line began switching its vehicles from gasoline to propane in the early 1980s. The fuel-cost savings achieved from the conversion program have helped Blue Line expand its fleet. Now it is more than twice the size of its nearest competitor in the Hamilton market.

Today, Blue Line favours natural gas conversions, in part because propane prices have increased and because the company negotiated a favourable contract to buy natural gas at prices that are significantly less than retail. At the same time, propane continues to be a popular choice, particularly among the company's independent drivers.

Make-up of the fleet

The Blue Line fleet consists of 200 cars and 27 vans. About 75 percent of these vehicles are independently owned. Most of the passenger cars are full-sized vehicles equipped with eight-cylinder engines (many are former police vehicles).

Across the fleet, 69 vehicles (23 company owned and 46 independently owned) run on propane, and 25 more can run on either natural gas or gasoline (17 company owned and eight independently owned). Blue Line opted to remove the gasoline tanks in all of the company-owned propane fuel vehicles to minimize vehicle weight and to ensure that the drivers use the cheaper propane fuel. The natural gas vehicles can run on either gasoline or natural gas. More than half of the independently owned vehicles still run on gasoline, partly because some owners find it difficult to allocate the funds needed to pay for the conversion. Blue Line has provided some help in this regard with a financing package.

Refuelling and driver acceptance

Installing an on-site propane refuelling system further reduced fuel costs and made refuelling easier for the drivers. Moreover, it was a major factor in the early success and ongoing viability of the conversion program. "By having our own bulk tank storage, I can save five to ten cents per litre of propane compared with other companies," says Blue Line owner Tony Rizzuto. Blue Line installed natural gas refuelling facilities in 1993. All of the equipment costs were recovered by savings on fuel.

Although natural gas and propane vehicles offer fuel-cost savings, their range is restricted compared with gasoline vehicles. Propane vehicles typically must be refuelled twice per 12-hour shift, and natural gas vehicles require refuelling two to three times per shift. Although refuelling occurs primarily at the Blue Line office, propane and natural gas are both available throughout the Hamilton area, should a driver run low on fuel.

According to Blue Line Vice-President and General Manager Luke Haze, drivers require little training to make the switch to propane and natural gas vehicles, aside from being informed of the need to refuel more frequently. "The drivers are very conscious of fuel and maintenance costs, and they have been very supportive of the switch to these fuels," he reports.

Cost-effective conversions and quick payback

In the early 1980s, government incentives helped defray more than 80 percent of the cost of converting vehicles from gasoline to propane. As those incentives disappeared, Blue Line achieved savings by negotiating a discount with the conversion garage. As a result, Blue Line paid between $1,200 and $2,000 for a typical conversion. Today, the same process typically costs $2,230 for a propane vehicle and $3,100 for a natural gas vehicle.

However, these investments are quickly repaid through fuel-cost savings. In March 2003 in the Hamilton area, the per-litre cost of propane was about 45.9 cents, natural gas about 40.9 cents, and gasoline 77.7 cents. Although propane contains less energy than the same amount of gasoline, natural gas actually contains more. Natural gas yields 32 130 BTU/m³, gasoline yields 30 330 BTU/m³ and propane yields 22 195 BTU/m³.

"For us, natural gas is the cheapest fuel out there right now," notes Mr. Haze. "When you figure in the higher energy content it is clearly the best buy. We're trying to convince our independent drivers that this is the way to go."

Drivers can save about $8 per day (over two shifts) using propane rather than gasoline and about $20 using natural gas instead of gasoline. At this rate, Mr. Haze reports that conversion costs for propane are repaid in about nine months and natural gas in about six months. After this, a propane-fuelled vehicle will save about $2,900 per year, and a natural gas vehicle will save about $7,200 per year compared with a gasoline vehicle.

Operation and maintenance

From a maintenance perspective, all of Blue Line's mechanics are now licensed to do conversions, which enables them to switch propane or natural gas equipment from one vehicle to another, if necessary. Some conversions are now done in- house, though others are contracted out. The fleet's natural gas vehicles are carefully inspected each month to ensure a high level of reliability.

According to Mr. Rizzuto, the switch to alternative fuels has had a positive impact on engine maintenance costs. "Although older cars with carburetors had some problems with hesitancy in using propane, the modern fuel injector has eliminated that problem. Propane and natural gas vehicles are cleaner burning, and you can get more life out of the spark plugs."

Mr. Rizzuto acknowledges there may be a slight loss of power with alternative fuels compared with similar gasoline vehicles. He adds, however, that Blue Line drivers are happy to accept that small loss of power in return for the fuel-cost savings and other advantages.

The company reports that starting in cold weather has not been a problem. "Years ago, there were some problems with cold starting, but that had more to do with the vehicle itself than its use of propane," says Mr. Rizzuto. "The primer button (which pumps a small amount of propane directly into the intake manifold to make starting easier under extreme conditions) in newer propane cars has eliminated cold-starting problems."

In addition to reducing operating and maintenance costs, the conversion program has extended the average life of vehicles in the Blue Line fleet (although this also depends on the previous use of the car). The average life span of the vehicles as taxis is two to two and a half years. Some are driven more than 500 000 kilometres before disposal.

The bottom line

Mr. Haze says, "The amount of money we save using natural gas and propane is very significant. Advances in conversion kit technology have made these alternative fuels almost as reliable as gasoline. We are very pleased with our supplier who works hard to solve any problems we have and is always improving its product. It's true we spend a little extra on regular maintenance than we do on gasoline cars, but in the end it has paid off by reducing downtime."

Adds Mr. Rizzuto, "I would recommend propane and natural gas to all taxi fleets. Money-wise, they've given us an advantage, and the fact that the fuels are more environmentally friendly than gasoline has allowed us to make our part of the country a little bit cleaner."

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