The Politics of Natural Gas Subsidies

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And even more profitable if subsidized.

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. 

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  1. Ron?

    Is that you?

    I like how you gave a disclosure but forgot to tell us what your name is.

    1. Fucking Corning,

      Ron’s on the run. He’s lying low on Hit & Run until this whole thing quiets down.

      AND YOU FUCKING BLEW HIS COVER, ASSHOLE!

  2. JC & ACB: Yep. Caught.

    1. Ron, get the fuck back into my attic. I’m not going down with you

  3. Government intervention is worst kind of intervention!

    1. Anal intervention is a close second… unless that’s your thing.

      1. Spencer, if it’s done right, you’ll love it

        1. but the risk of it not being done right are enough to ward me off any potential benefits. Kind of like my views on heroine that way.

  4. for Koch conspiracists. You know who you are

    We’re all conspiracists down here, Ron.

  5. Billionaire, seeking rent
    Shouldn’t get a single cent.

    1. It’s a nice place to vent
      Under this tent.

      Anybody want a peanut?

      1. you’re all bent
        libertarians will never make a dent

  6. Putting in a nationwide fueling infrastructure is a huge, huge outlay. I’d be interested to learn how this was done in the early days of the auto-mobile.

    1. piles of horsecrap down mainstreet had something to do w it

      1. You are still the worst troll ever. You make youtube commenters seem intelligent.

    2. Simple, the market did it

      Stores sold gasoline, mostly as a cleaning solvent in tins, when cars started traveling farther and farther the stores sold more gasoline and started to stock up on it. Once they sold enough for it to be worth it they bought large tanks to dispense the gasoline. The more they sold the more incentive to improve the delivery of gasoline.

  7. See, the energy is “clean”, so it’s okay to let these billionaires loot the public treasure.

  8. Conservatives seem to eat up whatever T. Boone Pickens is peddling.

    Recently my dad, the man i measure all conservatives by, told me about how we should run cars on natural gas.

    I think Ron just uncovered the source of my dad’s new idea.

  9. New Alternative Transportation to Give Americans Solutions Act (NAT GAS Act)

    Can they pass a law making cutesy acronyms like this illegal?

  10. 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.

    Cool.

    You say these are conventional. Have you explored the possibility of expanding the wells out put through fracking?

    1. How much of your royalties would go to the State under a carbon tax, Ron?

  11. Recently my dad, the man i measure all conservatives by, told me about how we should run cars on natural gas.

    Nothing un-conservative about that much. Its the let’s-subsidize-it part that’s bad.

    1. If you have ever seen a T. Boone Picken commercial he tends not to emphasize the subsidies part.

      He talks about jobs and America and getting back to work and freeing ourselves from foreign oil.

      The commercials are obviously directed at conservative audiences:

      http://www.metacafe.com/watch/…..ommercial/

      Also after finding that video i think i found the exact source of why my dad started talking about natural gas for cars:

      http://www.metacafe.com/watch/…..ommercial/

      1. Mostly because a tax credit, as in “decreased taxs for the purchaser of a nat gas truck” is different than a subsidy, where tax dollars are collected and then a check is given to whomever.

        A lot of the subsidy talk is coming Charles Koch and his lobbyist. WHich is ironic sine her just bought 4 ethanol plants this year and now supplies 10% of the countries ethanol.

      2. So liberals are not for jobs/america/freeing us from foreign oil? Is that what I should deduct from your post?

  12. I think we should run cars on fart power. How has this not been proposed? We could wear contraptions that trap our farts and convert them into fuel.

    The BEAN and beer lobbies would be all over this!

    1. Why not? This comment section runs, more or less, on fart power.
      It’s a proven resource.

    2. They have developed a prototype.

      http://images.wikia.com/southp…..5/ITSP.jpg

  13. Trucks that run on natural gas cost nearly twice as much as diesel-powered ones. Independent truckers and trucking companies don’t have the money to replace their current fleet with CNG vehicles, UNLESS the taxpayers pick up the bill for the more expensive CNG trucks. So we are all expected to spend our tax dollars subsidizing the purchase of CNG trucks, then spend more subsidizing fueling stations for them. And in the end, Pickens will reap the profits, all in the name of “energy security”. Pickens is no dummy. The question is, are we?

    1. NG vehicles are currently more expensive, but that will change if the market for them picks up. There is nothing radical about NG technology, there are even vehicles that can run on either gas or NG.

      Im not in favor of subsides, but i cant help but think that building out a NG infrastructure is a quite a challenge, especially when you are laying the piping and having to get a right of way.

      I really do think that NG vehicles have great potential, especially when combined with fracking. If nothing else, having an alternitive to gasoline would help stabilize the price of both, especially when dealing with vehicles that can use either, or can be easily converted between the two.

      1. In any area where you have home or industrial use for gas, it shouldn’t be that hard. But I agree, I’d rather have energy options considering the way China has been snapping up oil commitments during the economic downturn.

    2. As a general rule, I figure if Pickens is for it, it primarily benefits Pickens and screws the rest of us. Thsi rule has yet to steer me wrong.

    3. you are clearly uninformed. Nat gas trucks do not cost nearly double, and once an economy of scale is created they will be equal to less. given the choice would you rather t boone have your tax money or Osama;s 19 wives, 232 kids, and 10934 grandkids???

  14. Can a natural gas powered engine in a class 8 truck make 500 horsepower at between 1500 and 2000 lbs-feet of torque? Can they do it at 6-8 mpg and with fuel tanks big enough to go 1000-1500 miles between fillups? What about safety factors with 20 big trucks all filling their propane tanks at the same time in a relatively small space at the truck stop? Just a few problems right off the top of my head with converting the commercial fleet to natural gas. Oh, and there is the cost of swapping motors on all those trucks.

    1. I assume that the most efficient way to get a NG fleet is to build it new, rather than replace the engines on old trucks. I would also say its likely that even under the most rosey of NG scenarios, there will be both petroleum and NG running side by side for some time.

      As for the power, sure, the NG trucks that are currently in use have the same power as thier diesel counterparts. If you need 500 horsepower, you start with that as a design requirement and go from there, the fact that NG is less energetic than diesel is simply a design problem to be solved. Likewise with range, NG tanks are larger than diesel, but, again, that is simply a design problem to be solved, no big deal. Trucks are actually ideal for NG because they have more room for a larger NG tank, as opposed to like a subcompact car.

      As for MPG, you are using the wrong metric. What truckers care about is cost per mile, and in that realm, NG is currently much cheaper. Ive read that the NG equivelent to 1 gallon of gasoline (in terms of power) costs about $1.80 a gallon. In other words, to get the equivelent to 1 gallon of gas you have to buy $1.80 worth of NG, not a bad tradeoff if you ask me.

      1. Thanks for the info mofo.

      2. $1.80 per mile is good until “everyone” is using NG for driving. I can easily see the demand driving up the cost 100% or more. This puts it in line with diesel. No more savings.

        With the added bonus of everyone’s home heating bill doubling.

        Reference: E85 a couple of years ago.

        1. the difference is the supply of nat gas isn’t subsidized and, with the EIA’s numbers on shale gas, supply shouldn’t be as effected with horizontal drilling bringing more gas online.

  15. As evidence of its broad appeal, backers point to support from both President Barack Obama and Representative Ron Paul, a Texas Republican and Tea Party favorite.

    “These credits reduce taxes for the production or purchase of vehicles that run on American-made natural gas,” Paul said in a statement released June 27. “These credits are not subsidies.”

    A $64,000 tax credit for buying a $195,000 truck is a fucking subsidy.

  16. Let’s be clear about natural gas. The United States is still a net importer of natural gas and has been for 25 years (2.6 trillion cu. ft. in 2010). Shale gas has helped close the gap recently, but it’s unlikely to keep up with millions of new NG cars. As with everything else, the sweet spots of shale gas get taken first, and the tougher plays come later. Unlike conventional oil wells, shale gas wells plunge in productivity early.

    Government statistics on natural gas

    1. Remember, however, that the combo of fracking and horizontal drilling is relatively new, so even though we have been a net importer in the past, these new technologies could help us both power new vehicles and export NG to boot. Think of the way oil extraction technologies have made wells more and more productive even as the well becomes more depleted. There is no reason to believe that NG technology wont go the same way.

    2. Yeah, but almost all of those imports come from Canadia.

      1. Doesnt change my underlying point, we have been a net importer of NG because the technology wasnt there to produce more. Now that new technology is coming online to greatly increase our production, there is no reason to believe that we wont start becoming a net exporter, or, at least, produce enough to keep up with the additional demand that NG cars would add.

  17. You could forget the subsidy of you could get the EPA to back off on certification costs, which drastically increase the costs of converting vehicles.

  18. There are 8 gallons of gasoline in 1 mmbtu of energy and the wholesale price of natural gas is just over $4/mmbtu. Retail CNG (compressed natural gas) is sold in “gasoline gallon equivalents” and is typically 50 cents to $1 less than the price of gasoline.

    Somebody do the math and tell me whether these guys REALLY need a government subsidy to help to create demand for their product or not…

    1. I think the demand is there, it’s just that the cost to convert a vehicle is staggering…$10k-$12k. Hard to make that pay back even if CNG is 1/3 the cost of petrol. Like I said, a significant portion of that cost is the EPA certification.

    2. I agree that we don’t need a subsidy. The way the government props up ethanol is insane.

      That being said, I am a fan of less taxes so the tax credit idea appeals to me. By having a credit that mitigates the cost differential, even partially, the individual business is able to decide if they want to buy a nat gas truck or not. And, with the clean air restrictions for trucks tightening, nat gas fits under easily while diesel has to have an added chemical cat back system. So, those guys can make a market decision on what works best for them.

      If they don’t like CNG, the worst thing that can happen is we have 5 years of a tax credit that no one uses and revenues stay the same. But no on is just getting a blank check just to keep them in business, unlike the E85 crowd.

  19. We can either spend money or continue to send money to Saudi Arabia and watch that same money fund terrorists. Energy is not a perfect market. Foreign oil is controlled by government cartels. Either we sit back and be at the mercy of the Middle East or start investing in America.

  20. I don’t know about you guys, but I think it’s good news that Pickens is doing this. http://youtu.be/zHUy3092lGg

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