Let’s put the brakes on the NAT GAS act

posted at 2:45 pm on February 4, 2012 by Jazz Shaw

Insanity: doing the same thing over and over but expecting different results.

Apparently we didn’t learn much, if anything, from the ethanol boondoggle, Solyndra or Washington’s other adventures in meddling in the markets. If we had, perhaps Congress would not currently be considering passage of H.R. 1380, the New Alternative Transportation to Give Americans Solutions Act. (Or NAT GAS) In it, the tax code would be amended to to provide a series of credits and breaks to benefit the production and expanded adaption of natural gas, both liquified and compressed.

Not everyone is buying into the enthusiastic hype, however. A group of conservative leaders have come together to remind us precisely what’s happened in the past when the government attempts this sort of market manipulation.

Today AFP joined a group of 16 conservative coalition partners in renewing their strong opposition to the NAT GAS Act and urging Members of Congress to reject the legislation in 2012.

H.R. 1380, introduced by Representative John Sullivan (R-OK), and S. 1863, introduced by Senator Robert Menendez (D-NJ), would create new and expand existing special tax treatments for the production, conversion, and sale of of natural gas-powered vehicles — all at a time when Congress should be simplifying the tax code instead of adding more special handouts for favored interests.

You can read their full letter at the link.

Now, some of you may already be wondering about why I’m not supporting this. “But Jazz, I thought you liked natural gas!

I do. Quite a bit, actually. Not only do we have a lot of it, but it burns pretty cleanly and we can produce vast quantities with far less disruption to the surrounding lands with new technologies. As increased supply has driven prices down, other industries are turning to natural gas for their energy needs, spurring further economic development. Also, additional transportation segments are looking at converting, such as with trains.

So why would I not be embracing H.R. 1380? Because if natural gas is to continue to succeed as a viable, mass market energy source – which I fully believe it shall – it needs to be able to do it on its own and prove that it’s viable. If the demand is there, the market will respond. If it isn’t, then it wasn’t meant to be. Washington has repeatedly proven that it has zero clue when it comes to picking winners and losers in the free market. Let’s not allow them to stick their noses even further into the energy industry.

Bonus: You can get a feel for where the various presidential candidates stand on this and related issues here.

Edit: Link fixed for the study on powering trains with natural gas.


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Crony capitalism. I wonder where Romney will fall on this one.

astonerii on February 4, 2012 at 2:47 PM

Well said, Jazz. Yup, this is another boondoggle playing off an attractive and currently hot technology, trying to transfer tax money into private pockets. I love nat gas, but it’s got to pay its own way, like everything else.

Bartrams Garden on February 4, 2012 at 2:51 PM

Can we just leave the tax code the F alone ?

Any idiot can understand the value of natural gas and millions of consumers vote for it millions of times a day – that’s how the people actually voice their support, by making the choice – we do not send people to congress to make that kind of choice for us via the Tax code !!!!

alQemist on February 4, 2012 at 2:51 PM

Because if natural gas is to continue to succeed as a viable, mass market energy source – which I fully believe it shall – it needs to be able to do it on its own and prove that it’s viable.

Yes yes yes! A thousand times yes. We don’t need government to subsidize something that is already building a viable, true, and predictable market place. Just don’t get in the way, D.C., reduce regulations if you really want to help. But there’s no need to fund something like this.

Well said, Jazz.

Weight of Glory on February 4, 2012 at 2:51 PM

Bonus: You can get a feel for where the various presidential candidates stand on this and related issues here.

Wow, Santorum’s the worst. But they’re all wrong on this “energy independence” garbage. I don’t care if we’re energy independent or not. The issue should be that we’re the most economically viable place for producers so the price everywhere comes down. That has more to do with regulations then tax breaks.

lowandslow on February 4, 2012 at 2:59 PM

Yes, because government involvement always makes everything better. /

CherryBombsBigBrownBeaver on February 4, 2012 at 3:01 PM

This is also a national security issue.

The natural gas sector is already at risk from foreign belligerants. These days Russia, Iran, Venezuela, Qatar, and Algeria are reportedly pursuing the creation of a “natural gas OPEC.”

Terp Mole on February 4, 2012 at 3:02 PM

Flashback 2010: Huge natural gas reserves found off Israeli coast

According to the U.S. Geological Survey, the entire zone may have reserves of 122 Trillion cubic feet of gas, which is half the proven reserves of the entire United States.

Let’s see. The nation with the largest number of Nobel prize winners per capita will now turn their technological genius to Natural Gas?

This market competition was over before it started.

Terp Mole on February 4, 2012 at 3:07 PM

Apparently we didn’t learn much, if anything, from the ethanol boondoggle, Solyndra or Washington’s other adventures in meddling in the markets.

No, we the People haven’t learned a damned thing, but, then, we never do.

However, the critters who gave us the boondoggles learned plenty. They learned the voters will let them get away with just about any kind of vote buying, no matter how obviously corrupt it is.

fadetogray on February 4, 2012 at 3:07 PM

Jazz Flashback: Israel Working Toward Energy Independence

Good for them.

…bad for us?

wuh?

Terp Mole on February 4, 2012 at 3:10 PM

Because if natural gas is to continue to succeed as a viable, mass market energy source – which I fully believe it shall – it needs to be able to do it on its own and prove that it’s viable.

Yes yes yes! A thousand times yes. We don’t need government to subsidize something that is already building a viable, true, and predictable market place. Just don’t get in the way, D.C., reduce regulations if you really want to help. But there’s no need to fund something like this.

Well said, Jazz.

Weight of Glory on February 4, 2012 at 2:51 PM

Please! Can we get someone that matters to listen to you???!!!

KOOLAID2 on February 4, 2012 at 3:10 PM

On the other hand, one can make a not-so-insane argument that change takes time; it takes energy to overcome the inertia (of established gasoline stations and lack of LNG stations), and government can be the right catalyst—providing the activation energy to make the inevitable change simply happen faster.

I know it’s a slippery slope to liberalism (trying to use government in all things to achieve good), but surely if the incentives are provided as strictly short-term, infrastructure related benefits, we can reap the benefits with little risk of the pitfalls?

novakyu on February 4, 2012 at 3:12 PM

Just don’t get in the way, D.C., reduce regulations if you really want to help.

Absolutely!

Drained Brain on February 4, 2012 at 3:15 PM

On the other hand, one can make a not-so-insane argument that change takes time; it takes energy to overcome the inertia (of established gasoline stations and lack of LNG stations), and government can be the right catalyst—providing the activation energy to make the inevitable change simply happen faster.

I know it’s a slippery slope to liberalism (trying to use government in all things to achieve good), but surely if the incentives are provided as strictly short-term, infrastructure related benefits, we can reap the benefits with little risk of the pitfalls?

novakyu on February 4, 2012 at 3:12 PM

No.

darwin on February 4, 2012 at 3:17 PM

novakyu on February 4, 2012 at 3:12 PM

What you are describing is what venture capitalists do every day of the week. If natural gas for transportation is indeed viable nationally, some firm (or firms) will provide the necessary startup captial (in the multiple billions if necessary). If the enterprise suceeds, the VC guys will make (another) fortune. If it doesn’t the taxpayers aren’t out a single dime.

Cecil on February 4, 2012 at 3:19 PM

It’s a stupid idea. Coming from someone who has been hit hard by the massive supply of natural gas on the market–we lease five wells–I still think it’s dumb. My wife and I are making a quarter of what we were in 2007. We inherited the wells and land right AFTER the economic collapse. Use more natural gas peeps! I could use the money! HA!

robblefarian on February 4, 2012 at 3:20 PM

I am a geologist working the Barnett Shale gas play in Texas. And the low gas price ($2.50 per MCF) really sucks for my business right now. About double that, where it has been on average for the last 10 years, would be grand.

That being said, Jazz, I agree completely. Getting the government involved in commodity markets, or any market, always leads to disaster.

We (the US) are now a net exporter of natural gas. Some in congress (dems, of course) are now trying to block liquified natural gas (LNG) export facilities to keep the price low. What they don’t understand is that by keeping the price low, they suppress new drilling to produce more. Production capacity would drop faster than the price would go up, and we would end up with shortages as the petroleum industry tries to ramp up with more drilling. The government needs to stay the hell out of it.

iurockhead on February 4, 2012 at 3:24 PM

Nein! nein! nein! NG can and will make it in a free market; nuff said!

Oracleforhire on February 4, 2012 at 3:29 PM

What they don’t understand is that by keeping the price low, they suppress new drilling to produce more.

Iurockhead, they do understand; no drilling is their goal!

Oracleforhire on February 4, 2012 at 3:32 PM

This is the Democrats’ version of supporting our energy infrastructure. They can’t conceive of an economic activity that isn’t routed through the government with opportunity for graft.

“No more fossil fuels! Fracking is bad! We should be building wind and solar and…ok…checking the polls. Well, you people really want this, huh? Alright, we’ll subsidize the whole thing for fifteen tetradillion dollars. I’ve got to make some phone calls.”

HitNRun on February 4, 2012 at 3:33 PM

The government needs to stay the hell out of it.

iurockhead on February 4, 2012 at 3:24 PM

They’ll just tax the crap out of it and make it more expensive. Government kills everything … especially when democrats are in power.

darwin on February 4, 2012 at 3:33 PM

HitNRun on February 4, 2012 at 3:33 PM

I say “the Democrats,” and I want to say “Obama,” but I should say “Washington,” because I have a feeling quite a large number of Republicans will be signing up.

This is what has become of the Republican party: pro-business statism.

HitNRun on February 4, 2012 at 3:35 PM

New Alternative Tricks to Get Americans Screwed (Or NAT GAS)

oldernwiser on February 4, 2012 at 3:36 PM

Please! Can we get someone that matters to listen to you???!!!

KOOLAID2 on February 4, 2012 at 3:10 PM

Heh. I can’t even get my wife and kids to listen to me!

Weight of Glory on February 4, 2012 at 3:41 PM

Give me $2 a gallon fuel to run my car and I don’t give a rip where it comes from or in what form. I prefer it come from within our shores, obviously.

FireBlogger on February 4, 2012 at 3:42 PM

“I don’t care if we’re energy independent or not.”

Oh, I bet you’d start caring if some incident sparks a full-on war in Iran or surrounding areas and gas shoots up to $10 a gallon. I would love nothing more than to utilize our oil and gas deposits to their fullest extent and stop depending on the Middle East (AND South America) to keep our energy prices stabilized.

But I agree, government needs to get out of the way and just encourage the private market to do its thing in terms of natural gas. Enough with the extra tax incentives… especially if we want to see a flat/fair tax system in our lifetimes.

TMOverbeck on February 4, 2012 at 3:45 PM

Huh. Maybe Hot Gas can get a $500 million loan guaranty.

Akzed on February 4, 2012 at 3:56 PM

Sure sounds like crony capitalism, at best. I note that one of the nation’s largest natural gas producers (perhaps the largest producer) is Chesapeake Gas, which, despite its name, is headquartered in Oklahoma City. Note that the person who introduced the bill in the House is a Republican from Oklahoma. Natural gas prices have been depressed, largely as a result of more supplies becoming available. One way to increase the price is to increase demand for the product, which is precisely what the bills discussed above would do.

Henry Bowman on February 4, 2012 at 4:02 PM

A simple Executive Order issued by a President mandating that all federal vehicles be run on natural gas by such-and-such a date (not my idea; have heard others espouse it) would likely provide incentive for the private sector to build more vehicles/conversion kits as well as a national infrastructure of filling stations.

The idea would then be to have states individually follow suit vis-a-vis their vehicles, and — with enough of a build-out — finally consumers would be in a position to freely choose such vehicles over gasoline-fueled ones.

It would make us quite a bit less energy-dependent on other nations (and Canada has great reserves similar to ours) as well as be better for the environment as far as pollutants go.

Anybody see any downside(s) to this?

ShainS on February 4, 2012 at 4:03 PM

Having come from the petroleum business I say leave petroleum to transportation. If you want to encourage anything back Natural Gas to fixed facilities like housing and commercial businesses. That will free up petroleum for transportation and lower total demand.

As a volunteer fireman I saw a propane tank explode over a hill. It lit up the sky and killed a man near it. CNG in vehicles will be no different.

BullShooterAsInElk on February 4, 2012 at 4:04 PM

Also forgot to mention: would create a pretty large boon to the economy by essentially creating an entire new industry.

ShainS on February 4, 2012 at 4:05 PM

So why would I not be embracing H.R. 1380? Because if natural gas is to continue to succeed as a viable, mass market energy source – which I fully believe it shall – it needs to be able to do it on its own and prove that it’s viable. If the demand is there, the market will respond. If it isn’t, then it wasn’t meant to be. Washington has repeatedly proven that it has zero clue when it comes to picking winners and losers in the free market. Let’s not allow them to stick their noses even further into the energy industry.

Well said, and you can say this about any product or service someone wants to provide. The market will determine if something is going to be useful to them.

Mirimichi on February 4, 2012 at 4:21 PM

You forgot to mention that this legislation is also called the T. Boone Pickens makes more billions natural gas act.

slp on February 4, 2012 at 4:36 PM

What you are describing is what venture capitalists do every day of the week. If natural gas for transportation is indeed viable nationally, some firm (or firms) will provide the necessary startup captial (in the multiple billions if necessary). If the enterprise suceeds, the VC guys will make (another) fortune. If it doesn’t the taxpayers aren’t out a single dime.

Cecil on February 4, 2012 at 3:19 PM

And the current crash in natural gas price (mainly due to inability to export it as easily as crude and, well, technological breakthroughs that increased production; also the mild winter) is probably discouraging many of those guys—and as long as there’s nothing to stimulate new initial demand in natural gas they’ll remain discouraged; it’s a chicken-or-egg problem.

Economy can get stuck in sub-optimal equilibrium as a matter of historical accident (the accident being vast majority of combustion engines have been made for a refined petroleum product, not natural gas). Perhaps with enough time, we will get out of that (when crude goes to $200 per barrel and natural gas goes below $2 per thousand cubic feet, surely the incentive would be overwhelming). But why wait if a little pump-priming will get us out of this sub-optimal equilibrium now, not 20 years later?

novakyu on February 4, 2012 at 4:56 PM

That pic on the home page reminded me of the Vent intro. I miss The Vent. I always felt like MM and MKH were talking directly to me. Well, sort of. Okay, they were just great eye candy.

I’ll be in my bunk.

platypus on February 4, 2012 at 5:32 PM

METHANOL

not much else to say, except

stop the letting the feds give money to private parties…T BOONE, SOROS, KAISER, HOLLYWOOD, BUNDLERS, CHICAGO, GOLDMAN, JP, ILLEGALS, EUROPE, UN, GREENS

John Kettlewell on February 4, 2012 at 5:33 PM

You forgot to mention that this legislation is also called the T. Boone Pickens makes more billions natural gas act.

slp on February 4, 2012 at 4:36 PM

As long as it doesn’t help that b!tch Buffet.

platypus on February 4, 2012 at 5:34 PM

Totally disagree. Unlike ethanol and solar, natural gas is a PROVEN energy source. If the government can actually do the right thing for a change and pick a proven winner that speeds up it’s development, makes us energy independent, and helps drive exports where we can get back some of the billions we sent overseas, I’m all in.

msupertas on February 4, 2012 at 6:05 PM

Tax breaks, like loan guarantees and mandated healthcare waivers, are as good as cash in DC.

Kenosha Kid on February 4, 2012 at 6:06 PM

Subsidies and mandates suck the wind out of any good idea.

The free market is the most efficient decider of winners and losers, EVERY TIME.

Government intervention only works… um, never. Case in point: USSR. For those too young or so badly educated, Google it.

hillbillyjim on February 4, 2012 at 6:30 PM

What we actually do need is the FERC or Congress to facilitate the expansion of natural gas lines to where it is not available. The are many significant size communities in the northeast that have to burn oil because there is no natural gas line there. Given that the commodity price of natural gas is in the 2.30 to 2.50 dollars per million BTUs and fuel oil is 21 dollars per million BTU’s on the commidity price, there is plenty of market incentive to switch and plenty of energy independence reason for government to support the switch. Yet, we see no action to facilitate expansion of service area. WHY?

KW64 on February 4, 2012 at 6:36 PM

The fundamental problem with governmental meddling in the marketplace is extremely simple — laws are binary, reality blends.

Let’s say — just as an exercise — that it currently makes sense for 1/3 of our energy to be coal and 2/3 to be natural gas. It doesn’t matter what the options are, and it doesn’t matter what the proportions are, for the purpose of this illustration.

Now, of these people, there are going to be “strong preference/preference/weak preference” flavors. So maybe 1/9 of people are strong coal, 1/9 are weak coal, 2/9 are strong gas, 2/9 are weak gas.

What makes markets so efficient is that conditions could change to where it makes sense to be 1/2 coal and 1/2 gas, and people would adjust along with it. Some strong coals would remain strong, some moderate coals would become strong coals, some weak coals would become moderate coals, some weak gas folks would become weak coal users, etc. The shifts would mainly take place with those who weren’t all that invested one way or the other. Strong gas folks could remain strong gas folks.

With a government mandate, the effects are much more severe and jarring. To return to the original state and mandate a cessation of coal — those “strong coal” guys are just hosed. They’ve had their investments wiped out, their business models trashed. The moderate coals are going to be seriously hurt, and the weak coals will be impaired. By contrast, the gas factions won’t adjust — there will still be strong, moderate, and weak gas users…..their economic outlooks won’t improve through planning and infrastructure development…..because who knows when the mandate can be overturned?

cthulhu on February 4, 2012 at 7:12 PM

subsidies for buyers of Nat gas vehicles or conversions without relaxation of drilling/fracking regs sounds like a prescription for a spike in nat gas prices. Another well meaning, i.e stupid and short sighted, government policy that becomes a victim of unintended consequences.

The greater demand will drive up prices making the Nat gas less attractive as a fuel option irrespective of the subsidy.

oznerola on February 4, 2012 at 7:27 PM

Natural gas is a stupid, stupid, stupid, stupid automotive fuel.

The energy density of CNG is too low, and it is ridiculously unsafe to constantly carry even a 1000 psi tank around in your regular transportation vehicle, much less a 3000 to 5000 psi tank.

LNG has a very short shelf life, and, again, who in their right mind is going to constantly ride around on a -270 degree jug of eager-to-vaporize liquid?

It is potentially workable for public transportation or maybe even some kinds of long haul vehicles, but it is an idiotic fuel for personal transportation.

Troll Feeder on February 4, 2012 at 7:41 PM

Because of all those things, I’m pretty sure it’ll get massive subsidies.

Troll Feeder on February 4, 2012 at 7:42 PM

There is another problem inherent of the govt. manipulating markets so that is the real possibility of giving inside information on pending legislation to big campaign contributors to front run the market. Many bills are large and have details buried under masses of details and as they say the devil is in the details. They would portray it as communicating with constituents and nothing would be in writing, plus the SEC is an agency dependent on congress.

dunce on February 4, 2012 at 9:20 PM

This… very much this. Thanks Jazz I’m a bit surprised you came down on this side.

Every time I see a “switch everything to Natural Gas” post I cringe and post the National Import/Export numbers.

** I’ll leave that out this time, they’re not hard to find

Our imports are going down, slowly, but we’re still importing about 10% of our usage. If our reserves were cheap/easy/cost effective to use we wouldn’t be importing that much would we?

Enforcing this bill will raise Nat Gas prices to our development/usage price; until I know how much that is I’m not going to be a fan.

Has anyone done the study on the lifting costs of the proven reserves we’d expect to use over the next 5-15-30 years in order to justify this change from a cost/benefit viewpoint?

And what are the storage and distribution costs for this increase?

I invested heavily in Natural gas in the 90′s when (before) the price spiked, and I watched some winters when our storage numbers dipped to nearly 0… and I recall California having brownouts and supply issues because their pipelines for natural gas weren’t sufficient for their heating demands.

How many more pipes do we need, where do we need them, what will they cost, how long will it take to get them in place?

Where will we store the extra gas we’ll need for this to cover seasonal differences? How much will that cost?

Does anyone have an answer to any of this? I’m actually curious if anyone has even calculated these numbers, and I’m curious of Congress has any idea of the answers to any of these questions.

There are other potential problems (prioritization in a shortage situation, etc.) but that’s probably enough for now.

Unless someone would like to claim that Congress has actually done their due diligence and researched this before pushing it… does anyone still have that level of faith on Congress?

gekkobear on February 4, 2012 at 9:54 PM

A group of conservative leaders have come together to remind us precisely what’s happened in the past when the government attempts this sort of market manipulation.

At least somebody has some sense.

chemman on February 4, 2012 at 10:25 PM

The government doesn’t “pick winners and losers.” It only picks losers–winners can take care of themselves.

Al_H on February 5, 2012 at 12:31 AM

it needs to be able to do it on its own and prove that it’s viable.

Well put. I am a big supporter of Nat Gas for our future. We could well be energy exporters by exploiting it. It can be easily distributed via pipelines and doesn’t require decades of “research” or “infrastructure” upgrades or any other “help” from the government. The problem for us is that we have so many laws that prevent us for accessing it. We don’t need handouts from the Feds, we need them to get the he11 out of the way!

Annoy Sarah Palin, vote Mitt!

MJBrutus on February 5, 2012 at 5:05 AM

Congress is looking in every crack and crevice for tax dollars to fund the departments of the federal government. Are we hearing the screams of the country of Greece? We now owe more money than we are able to tax. We are BROKE and the candidates running for the White House are ignoring it hoping it will go away. Soon there will be a total collapse of the funding of it all and private property will suddenly belong to the Federal Government. I thought at one time I own my home but then I realized that I rent it from the Town Government via taxes. Be late paying your property taxes and see what happens? We are in a very serious debt and we keep spending. When the money runs out there will be hell to pay because there are millions of people that believe we are just fine and the Government will take care of us.

mixplix on February 5, 2012 at 7:56 AM

I’m a bit tired of everyone whining about nat gas prices being so low. By the time it gets to the customer it’s the same price or higher than it’s been the last 10 years. Most suppliers are locked in to higher prices that they contracted for when it was nearly triple today’s price.

If any legislation at all is called for, it would be legislation limiting the futures trading market to contracts lasting 12 months or less. Don’t much care for the futures market as it has been the cause of a lot of average peoples’ financial problems over the last few years. Too many hedge funds with too much cash can and do artificially create demand/supply cycles that almost always turn out to be nothing except money grabs.

jw362 on February 5, 2012 at 8:46 AM

If you all want the natural gas industry to succeed or fail on its own merits, than you shouldn’t be arguing against the NATGAS act, you should be arguing against and working to dismantle the government subsidies given to coal, oil and ethanol producers. The NATGAS act is simply an attempt to level the playing for natural gas so that it can even get on the field to compete on the merits, as so many of you want. And considering how much of it the industry tells us we have, we’re seriously stupid as a nation for continuing to throw money to foreign nations for their oil.

LeftCoastRefugee on February 5, 2012 at 9:36 AM

Well said Jazz. Normally you are full of Hot Gas but this post is actually sensible.

Well done.

CorporatePiggy on February 5, 2012 at 10:16 AM

Several years ago I looked into converting one of my cars to run on NatGas. The cost was prohibitive for me; $3,000 if I remember right.

While this bill might provide me the opportunity to make the transition, I wish the government would stay out of this decision making process. Let the gas companies subsidize these transitions.

Earlier I read where Chesapeak gave some evironment nutcases 26 milllion. Had they used that money to help people convert their cars to NatGas, they would expand their customer base, drive up consumption and demand and increase their profits. What’s so wrong about the market place making these decisions?

gasmeterguy on February 5, 2012 at 10:27 AM

Washington has repeatedly proven that it has zero clue when it comes to picking winners and losers in the free market.

I don’t care if they’re batting 1.000. They have no *constitutional business* picking winners and losers.

GWB on February 5, 2012 at 4:43 PM

Natural gas (NG) is NOT a good idea for cars and trucks – dangerous to carry a large high pressure load of it, and the energy output is not as high as gasoline. NG works great for home heating because it’s easily pumped through utility lines – not as if you can do that with coal.

Since we use NG for home heating throughout the west, I’d rather not see NG prices pumped back up by forcing its use for purposes where it is not the best fuel.

dentarthurdent on February 6, 2012 at 11:44 AM