A Westlake Village company is moving ahead in starting up a $35 million plant in Texas to produce liquefied natural gas – despite a global slump in the price of fuels. Applied LNG plans to begin processing by the end of the year at its new plant in Midlothian. The company is in the process of getting equipment approvals from the Texas Railroad Commission. Greg Roche, vice president of sales and marketing for Applied, said the process should be completed in time for a plant ramp up in December. “We flip the switch and things start up,” Roche said. “Once started, it is verifying everything is working together seamlessly.” Applied targets customers that are large users of traditional fuels such as diesel and propane but are looking to reduce fuel costs and lower carbon emissions. The company serves clients in the waste hauling, public transit, trucking, agriculture and manufacturing industries, mostly in California. The Texas plant will expand its geographic reach into the South and Southwest. The company built its Texas production facility on 31 acres, which it purchased in the spring of last year, at the RailPort Business Park in Midlothian, just south of Dallas-Fort Worth. The company also operates a production facility with two liquefiers in Topock, Ariz., on the California border. A single LNG liquefier operated by the company has capacity to process 86,000 gallons a day, which is typical for a small-scale commercial LNG plant. When fully built out, the Midlothian site will have six liquefiers, Roche said. “It expands our service territory so that we can serve Louisiana and have access to larger geographic markets,” he said. Applied has been in the wholesale natural gas distribution business since 2008, when an acquisition of another energy company gave it ownership of the Topock facility. Its fleet of 49 delivery trucks is the second largest in the industry, after Clean Energy Fuels, a wholesaler and retailer of natural gas in Newport Beach owned by oil-and-gas tycoon T. Boone Pickens. Falling prices The company has decided to build its plant at a tricky time for the energy business. New techniques such as horizontal drilling and hydraulic fracturing have created an abundance of natural gas that has led to a fall in LNG prices. Diesel – the prime competitor for LNG – has followed a similar trajectory. U.S. diesel prices last week averaged $2.53 a gallon at retail, its lowest price in six years and a decrease of $1.12 a gallon from a year ago, according to the Energy Information Administration. Liquefied natural gas is wholesaling at a projected $2.80 a gallon in October, a 28 percent drop compared with $3.89 a year ago. The price is forecast to be at $3.26 in October of next year, according to the federal agency. However, there are other factors that are boosting the LNG market, not the least of which are federal regulations pushing fleet operators to reduce pollution associated with diesel. The tighter regulations make natural gas-powered trucks an alternative. The Southern California market in particular is a strong one for Applied because the state and local air districts have some of the country’s strictest emissions rules. Brian Gilmore is a partner and managing director at Westlake Securities, an investment banking and financial advisory firm in Austin, Texas, that has hosted energy conferences attended by Applied. While the liquefied natural gas market is not where it was two or three years ago, the Environmental Protection Agency’s tough emissions rules make LNG a good investment, according to Gilmore. “This is a clear solution,” he said. Uses of liquefied natural gas are expanding beyond just trucks and buses, too. In June, Miami cruise operator Carnival Corp. announced an order for four new ships powered by liquefied natural gas that can eliminate emissions of soot particles and sulfur oxides. A few months earlier, Royal Dutch Shell of the Netherlands launched the first LNG-powered supply vessel in the Gulf of Mexico capable of operating for seven days without refueling. Two more ships are set to follow. Gilmore said there are even pilot programs for LNG trains. “There is still a lot of excitement around it,” he said. Self-made plant The liquefying process starts by taking natural gas from a pipeline and pumping it to a liquefier. Houston’s ConocoPhillips Co. is supplying Applied’s gas, but it can come from any energy company transporting it through the pipeline. After removal of heavy carbons, the gas is cooled to a temperature of -260 degrees Fahrenheit at which point it becomes a liquid. The liquid is then poured into tanker trucks for delivery to end users, where it is stored in above-ground tanks until used by vehicles. Large quantities can be transported because liquefied natural gas is one-six-hundredth the volume of the nonliquid version. Applied employs about 40 workers, including six who oversee the largely automated facility in Topock. The new Texas production plant will require a similar number of workers. Delivery truck drivers are independent owner-operators and not included in the headcount. The privately held company would not disclose its revenue. It partially funded the Midlothian plant construction with a $22.5 million loan from Texas Capital Bank, a subsidiary of Texas Capital Bancshares Inc. in Dallas. The Midlothian site is near state and interstate highways and existing natural gas pipelines. It is also close to the productive Eagle Ford shale formation in south Texas and has access to oil and gas fields in Louisiana and Oklahoma as well as industrial customers in Texas and Arkansas. “Many industries are candidates for cleaner-burning LNG such as rail, mining, marine, asphalt and distributed power generation,” Roche said. Whereas most oil and gas plants are designed and built by outside engineers and construction managers, all the work for the Texas project was done in-house at Applied. Using internal staff for such a complex project was unique in the energy industry, Roche said. “It speaks to our capabilities as a company to develop and execute large projects,” he added.