The Politics of Natural Gas Subsidies

Billionaire T. Boone Pickens is urging Congress to pass the New Alternative Transportation to Give Americans Solutions Act (NAT GAS Act) to subsidize the deployment of vehicles fueled by compressed natural gas and associated infrastructure. By one estimate, the NAT GAS Act would spend $9 billion to subsidize the creation of a fleet of CNG vehicles. It's probably just a coincidence that Pickens is a major shareholder in the natural gas fueling station company Clean Energy Fuels Corp. In a press release today, Pickens asserted:

"The NAT GAS Act (H.R. 1380), would create half a million jobs.  Simply by switching 18-wheelers to natural gas, the US could cut its dependency on OPEC in half.  Until we end our dependence on foreign oil and get on our own domestic resources, we will continue to be faced with uncertainty.  We need to take control of our own future and we can do that by getting on our own domestic resources."

But there other things to do with natural gas than burn it in vehicles. In an op/ed in Roll Call, Calvin Dooley, head of the chemical industry's lobbying group, the American Chemistry Council notes that demand for natural gas is already increasing for power generation and argues that the NAT GAS subsidies would increase price volatility for gas. This would have a deleterious effect on the chemical industry. As Dooley explains: 

Natural gas is the primary raw material, or feedstock, used by the chemical industry to create ingredients for 96 percent of all manufactured goods. To put it simply, natural gas is to the chemical industry, and chemical products are to manufactured goods, as flour is to a bakery. Stable feedstock costs for the chemical industry mean greater certainty for other manufacturers, which helps keep consumer prices low and leaves more resources available for expansion and hiring throughout the economy….

In recent months, numerous chemical manufacturers have announced new investments thanks to the outlook for predictable domestic natural gas markets. For example, Dow Chemical Co. announced it will restart operations in facilities idled during the recession and Eastman Chemical Co. has already done so. Executives from Bayer are in talks with companies interested in building new ethane crackers at its two industrial parks in West Virginia, and other companies including Chevron Phillips Chemical Co. and LyondellBasell are considering expanding operations in the U.S.

These investments will generate new, high-paying jobs in the chemical industry and hundreds of thousands more throughout the economy.

A recent American Chemistry Council study found reasonable increases in shale gas production would result in nearly 400,000 new jobs in the chemical sector and supplier industries, more than $132 billion in U.S. economic output and nearly $4.4 billion in local, state and federal taxes annually.

It's well past time for the Feds to stop trying to tell Americans what they should burn to drive their vehicles. That's the job of prices in markets. Let's stop all subsidies, tax breaks, and any other government meddling in energy markets and may the best fuel win! 

Special bonus Bloomberg article here for Koch conspiracists. You know who you are. 

Disclosure: I receive several thousand dollars per year in royalties from conventional gas wells that I inherited. I suspect that I would benefit if Pickens' subsidies were enacted.