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Encana Corp. has a plan to help deal with the gas glut.

The natural gas giant is taking a page out of the century-old playbook of major oil companies that also own gasoline stations, and broadening its reach from production of natural gas to new ventures in downstream marketing.

Encana is at the forefront of the natural gas industry's effort to develop new markets to help North America make good use of prolific shale gas plays, and bring some vitality to a commodity that has long suffered from chronic oversupply and weak prices.

The company's vision involves a major change in North America's transportation system: trucks, buses and commercial fleets of vehicles running on liquefied natural gas.

"Given the abundance of gas, it's a common-sense alternative to rebalance our energy portfolio,' said Eric Marsh, Encana's executive vice-president. "We fundamentally believe that natural gas should be the cornerstone of North America's energy portfolio."

To pursue that goal, Calgary-based Encana is building gas liquefaction plants and fuelling stations for truck and bus fleets.

The company has announced a deal to provide mobile refuelling stations for a fleet of 200 natural-gas-powered trucks being purchased by California-based Heckmann Water Resources, which supplies water for Encana and other producers in Louisiana's Haynesville shale gas play.

It expects to replicate that deal with trucking firms across North America, even as it transforms its own fleet of 1,300 heavy-duty vehicles from diesel to liquefied natural gas (LNG) and operates six new natural gas fuelling stations.

The company - North America's second-largest gas producer - is also planning to construct a liquefaction plant near Calgary to produce liquid transportation fuel, and add as many as four others in the U.S. in the next couple years.

With the boom in shale gas production, the North American industry is facing a supply glut that promises to keep prices depressed for the foreseeable future. Without new sources of consumption, prices will remain low and production from new shale plays will fall far short of potential, says Robert Ineson, Houston-based director for North American gas at energy analysis firm IHS CERA.

"We would say that the amount of production you are able to get is following how quickly you can change demand," Mr. Ineson said.

Natural gas is used widely for heating, and has promising growth prospects in electricity production. In their effort to boost demand, producers are urging politicians and consumers to adopt a new view of gas as a foundational fuel that will remain competitively priced for decades. The most prominent of those campaigners has been T. Boone Pickens, the high-profile Texas oilman who has invested heavily in natural gas. Mr. Pickens has financed a publicity campaign touting the "Pickens plan" for embracing natural gas as a transportation fuel.

That message has gained traction as the civil war in Libya and broader instability in the Middle East and Africa drive crude prices to levels not seen since their brief peak in 2008. The price spike underscores yet again the high cost of dependence on crude oil.

Natural gas has some clear advantages. There is plentiful North American supply and its use does not involve the transfer of vast wealth to Middle East sheikdoms. It is cleaner burning and lower in carbon emissions than oil or coal. And gas-fired power plants are cheaper and faster to build than nuclear ones without the safety concerns that are again in the spotlight with the Japanese reactor disaster.

But the industry has some major hurdles to overcome in order to grab a significant slice of the transportation market.

While other countries have begun to expand the use of natural gas in transportation, the United States and Canada have neglected the fuel, relying predominantly on gasoline and diesel, while looking to biofuels and electric vehicles for cleaner alternatives.

Now the industry has a new ally in U.S. President Barack Obama. In recent weeks, Mr. Obama has added natural gas to his list of "clean energy" sources that would qualify for incentives that encourage their use in transportation and power generation.

The Democratic President has thrown his support behind legislation championed by Republicans in Congress that would provides incentives for companies to purchase natural-gas-powered vehicles for their fleets and to build fuelling stations needed to keep them on the road.

But Washington observers warn that the highly divisive state of U.S. politics and worrisome federal debt will likely derail - or at least postpone - any government support for the natural gas industry.

"The legislative outlook over the next couple years is pretty grim in the U.S.," said David Goldwyn, a Washington consultant and former State Department energy official. "It's a budget issue," he said, noting that with government subsidies "getting whacked all over, the prospects for a new tax expenditure make it a very serious challenge."

However, Encana's Mr. Marsh notes that high oil prices have sparked widespread concern in the United States, as the pump price reaches $3.70 (U.S.) a gallon with forecasts for $4 by summer. As a result, politicians at the federal and state level are eager to address U.S. dependency on oil - and imported oil in particular. Dozens of states have adopted or are considering incentives similar to those being considered by Congress.

IHS CERA's Mr. Ineson discounts the prospects of gas demand for transportation, suggesting that at most the sector could account for one billion cubic feet a day by 2020, compared to current U.S. and Canadian production of roughly 70 billion cubic feet a day.

But the industry is more optimistic.

With government incentives and a $100-a-barrel oil price, the market for gas-powered trucks and fleet vehicles could expand dramatically, said Richard Kolodziej, president of NGVAmerica. His Washington-based lobby group argues that the market could grow from 110,000 vehicles currently to 500,000 in five years and three million by 2025.

Given that the targeted market is trucks and buses that get low mileage and travel large distances, the impact on demand could be substantial - as much as four billion cubic feet a day.

"This is when we're talking $100 a barrel [for oil] now it's $108; if it goes to $110, $120, $150, it changes everything," Mr. Kolodziej said. "And it depends on the government policy. ... If we had our federal government saying we encourage it, that gets you a big impact."

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