The Nat Gas Act

Earlier this week, there was a big move in stocks like Clean Energy (CLNE) when the Nat Gas act was filed in the Senate with bipartisan support. The Nat Gas act gives a federal subsidy to buyers of vehicles powered by natural gas and to developers of infrastructure to allow fueling of such vehicles. Clean Energy, for example, builds and operates filling stations that dispense natural gas. The bill also contains a funding mechanism for the subsidies, so it is outside the current fight about the size of the deficit.

I doubt that the bill will become law in the current Congress. Most important, it is not supported by Obama. Without White House support, it is hard to see the bill passing. The White House, of course, is not against subsidies; Obama supports subsidies for electric vehicles. Nor is Obama opposed to federal involvement in the automobile industry; heck, the USA still owns a big part of GM. No, the problem with the bill is that it encourages natural gas, a fossil fuel which is now abundant due to the use of hydraulic fracturing or hydrofracking. The most strident environmentalists do not want use of any fossil fuels to be encouraged. Nor do those environmentalists want fracking used in fear that it will contaminate the water supply. Of course, natural gas is 40% cleaner than the cleanest gasoline produced from oil and way cleaner than burning coal, the source of most of the electric power that will be used by electric cars. If ten million new natural gas cars were sold instead of the same number of gasoline powered cars, it would be the equivalent of removing 4 million of the gasoline powered cars from the highways. On the fracking argument, the environmentalists are again misguided. Fracking has been used for many decades and there are no instances of water supplies getting contaminated due to the process.

Perhaps the oddest thing about the Obama position is that the Nat Gas act could actually give the president something positive to say about subsidies. Using natural gas as fuel makes sense. It is domestic, so every increase in using natural gas means a reduction in the amount of imported oil. Drilling for natural gas produces hundreds of thousands of jobs in the USA. Royalties from the natural gas production spread large amounts of cash to landowners, thereby improving local economies. Just look at the relative prosperity of parts of Pennsylvania due to the drilling in the Marcellus shale. With all these advantages, there is one more that is most important: natural gas fuel is much less expensive than gasoline or diesel, and this is likely to remain so for the foreseeable future. In other words, there is a strong economic advatage for natural gas over oil based fuels. The subsidy would just help move the economy more quickly to using nat gas.

Most of Obama's subsidies have been to green energy items. For example, the electric car subsidy promotes the sale of highly expensive vehicles that can only go 40 miles on a charge. Even with the subsidy, these vehicles are not selling. They are too expensive and do not operate well enough to meet the requirements of the public. In other words, the Obama subsidy is pushing a failing item. The Nat Gas Act would be a subidy to an item that would succeed. Indeed, even without the Nat Gas Act, vehicles that run on natural gas will become more and more prevalent as we move forward. The Nat Gas Act, however, would push America into a better economic position more quickly than the market acting alone.

So, once again, we have a misguided president who is supporting things that do not make sense economically and opposing things that ought to be done.

Obama has got to go.