Tuesday, December 4, 2012

NAT GAS Act Redux (and the Devil's Advocate)

It looks like the NAT GAS Act will get a second chance this coming year.  At the Natural Gas and Trucking Summit in Arlington, VA last week, U.S. Representatives Lee Terry (R-NE) and John Sullivan (R-OK) announced that they would reintroduce a version of the NAT GAS Act that was originally put forward by T. Boone Pickens aimed at increasing the adoption of natural gas as a fuel for trucks.

While I support the concept of the bill, I don't expect a different outcome this time around (the House and Senate bills died in committee in 2011).  Maybe I'm getting old or tired of the 24 hour news cycle, but news of the new NAT GAS bill makes me want to put on my devil's advocate hat for a few minutes.

The argument favoring natural gas for trucks is an economic one first and environmental second.  Natural gas is cheaper than diesel fuel and companies can hedge future prices of natural gas to help keep costs predictable.  Natgas is also cleaner to burn - especially important in states where air quality is legislated - and easier on engines.  On the negative side, natgas trucks cost more than diesel trucks and reduce some operational flexibility, especially for long-haul vehicles.  But ultimately it's a business decision, and it looks like a win-win investment to me.

So why do I have to pay for it?

We now live in a climate of where corporations expect extra incentives (I won't say "handouts") to be coaxed to make certain decisions.  A federal subsidy to convert existing vehicles to natgas or to purchase new ones would accelerate the payback period and make it a sweet deal.  But why should we, the American citizens, have to grease the skids for companies to make a good business decision?

I realize that as a natural gas supporter I utter heresy with these words, but where do we draw the line on corporate welfare?  Is this corporate welfare?  Government incentives should be used to create an environment for people (corporations are people, remember?) to do the right thing.  If we believe that the U.S. is a market economy, subsidies should be in place long enough to allow the creation of a self-functioning market.  If no self-sustaining market is possible, this is the wrong approach.

Where is that point with natural gas trucks?  Obviously, the concept of natural gas powered trucks in the U.S. is still in the early stages, but there has been lots of progress to date.  There are hundreds of new filling stations popping up across the country.  The major truck engine makers are competing to introduce the latest natural gas technology.  Truck owners are beginning to recognize the many advantages of natural gas.  Things are going pretty well, but what needs to be done to keep the market moving forward?

In these pages, we've long talked about the "chicken and egg" problem where it comes to natural gas vehicles and fueling infrastructure, but another chicken and egg situation is that of artificial versus natural financial incentives to move to natural gas.  Natgas prices have been quite low for four years now.  At some point, the business decision makes itself without the need for government incentives.

Personally, I agree that there needs to be some financial incentive to purchase or upgrade truck fleets and support the building of fueling infrastructure to keep the market moving towards sustainability.  But I also believe that any direct financial benefit should be low enough to force the buyer think of it as a tipping point rather than free money.  It should also be time limited.  The program will not be a successful incentive if it is open-ended or up constantly for extension.  It needs to be temporary.

In this climate of "fiscal cliffs" and budget cuts, I doubt a bill creating a financial incentive to  bolster cheap natural gas will make it far in Congress, but I don't think the death of this bill will kill natgas for transportation. It likely will slow down the adoption, but as long as natural gas stays relatively cheap, we will see its increased use in truck transportation.


Michele McKay said...

Before taking such a move, I think lawmakers should consider consulting and seeking some advices who are knowledgeable in the field like some oil companies and the common motorists perhaps in Calgary or anywhere in the place. In this way, they could come up with a unanimous decision in which whether the bill is ready to be passed or not.

Peter Moore said...

As long as gas is involved surely, the overall economy will be affected by it. Basically because, fuel is one of the most vital factors in trading especially in importing and exporting goods to any place.

Alan Mistretta said...

"If no self-sustaining market is possible, this is the wrong approach." You are correct in stating so. To date, there has been no self-sustainable product in the market because humans tend to abuse them. Thus, oil which seemed to be sustainable years ago, looks like a non-sustainable product now.