Natural Gas Industry Cozies Up to Washington

Public outrage at cronyism and corporate welfare is growing—and that’s all to the good. But don’t expect well-connected special interests and politicians to go gentle into that good night. Especially if they think the darkness can be dispelled via energy subsidies that are supposed to lead to green jobs, lower gas prices, and energy independence.

The latest energy boondoggle on the table involves the natural gas industry and is called the New Alternative Transportation to Give Americans Solutions Act (NATGAS Act). The bill would provide subsidies for the manufacture and purchase of cars that run on natural gas, the conversion of commercial trucks from diesel to natural gas, the creation of natural-gas filling stations, and tax preferences to favor the use of natural gas over other energy sources. All told, NATGAS could end up costing taxpayers somewhere from $3.8 billion annually (according to the Joint Committee on Taxation) to as much as$14 billion a year by other estimates.

Like many bad ideas, it has bipartisan support, with politicians such as Tom Cole, Charlie Rangel, Ron Paul, and Harry Reid all pushing for its passage. The bill has stalled in Congress, coming up nine votes short of the filibuster-proof 60 votes in the Senate. But with nearly 180 co-sponsors in the House, it’s likely to be reintroduced after the election. Having big players in the natural gas industry such as T. Boone Pickens and Chesapeake Energy pushing the bill will only make its resurrection all but certain.

The rationale behind NATGAS is familiar. Backers say that they’ve got a whiz-bang technology whose benefits are guaranteed. The only problem, they say, is that transition costs to the new and better technology are really high. In this case, investors are reluctant to spend the billions of dollars in capital expenditures necessary to earn natural gas the much larger share of the transportation market it supposedly deserves. Such a view is as self-serving as it is ahistorical. The automobile itself provides a counter-example. The shift from horse-powered vehicles to gasoline ones came about without tax subsidies for filling stations. And in fact, some companies are already converting trucks, cars, and buses to run onnatural gas without the NATGAS Act’s large subsidies. Honda, the only company that sells factory-ready natural-gas-powered cars in the country, is offering buyers $3,000 of free fuel as an incentive.

Natural gas does in fact provide a proven, less-polluting alternative to conventional fuels for cars and trucks. But the reluctance of investors to pour the $130 billion to $210 billion that may be needed over the next 20 years to build for the natural gas infrastructure alone stems from precisely the sort of market forces that government should respect. Natural gas prices are well below historic levels while oil prices are well above historic levels. There’s no guarantee that these prices will stay at those mismatched levels over the life of the capital expenditure needed to ramp up the market for natural-gas vehicles.

Read more at Reason. By Veronique de Rugy.

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Comments

  1. If it was such a good idea industry would be doing it. When it has to be subsidized the only thing that happens is the taxpayer gets screwed. T. Boone Pickens set up the city of Phoenix, AZ with natural gas dispensers and other infrastructure for the city bus system a number of years ago. It obviously hasn't caught on so now T. is trying to recoup his investment by stealing from the taxpayers in the form of subsidizes.

  2. JennieWalsh says:

    Solyndra made a $30,000 "donation" to Obamination's campaign. They got back from Obamination. $48,000,000. Our government is being run by criminal RACKETEERS at taxpayer expense and plunder. Obama was "advised" that Solyndra was a VERY POOR "investment risk". No surprise that he ignored the advice. I wonder how much the natural gas industry gave Obamination.

  3. JennieWalsh says:

    Are you sure that Ron Paul is pushing the above agenda?

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