Make no mistake—natural gas is an abundant and affordable domestic energy resource that can and should be utilized wherever possible. As the world’s largest producer of natural gas, we are developing more of it here at home and demand is forecast to rise significantly over the next 20 years. Recently, natural gas demand from the power generation sector increased 42.3 percent since 2000 and 7.2 percent in 2010 alone. Given that a plethora of new EPA regulations will require shutdowns of about 20 percent of all coal plants and countless industrial facilities, requiring conversions to natural gas energy generation is already under way. Therefore, if demand is on the rise now and for the foreseeable future, it makes far more sense to increase supply to keep prices low, rather than artificially boost demand and risk creating a bubble that could dramatically increase prices.
Furthermore, if natural gas demand is high in the utility sector—indicating that electricity, not transportation, is its best use at the present time—why provide subsidies or government support for a demand that isn’t there? The market and consumers have proven over and over —“déjà vu all over again”, but in a positive way—to be the best arbiters of what energy technologies succeed or fail. To put it simply, if natural gas vehicles (NGVs) are superior to gas or diesel, and they may be some day, consumers will figure that out on their own. That there hasn’t been a boom in NGV usage yet is the strongest signal that either the price for NGVs remains prohibitively expensive or the technology isn’t quite there yet. And if the federal government subsidizes demand and prices naturally rise for natural gas, adversely impacting all of us in the process, NGVs themselves will never be a viable alternative unless this tax subsidy becomes permanent. It makes no sense.
Ultimately, the NAT GAS Act would make just about everything from electricity to food much more expensive for consumers, lead to more job losses and waste even more taxpayer money. From homeowners’ utility bills and the cost of American made goods to business closures on Main Street and manufacturers moving abroad, the costs of this legislation and taxpayer boondoggle would soon become obvious.
Farmers would pay more for fertilizer (over 80 percent of the cost of nitrogen fertilizer comes from natural gas), while manufacturers could see their electric bills skyrocket. While some producers will pass on these costs through higher consumer prices, others will simply ship jobs and facilities overseas—where the cost of doing business is lower—in order to remain competitive. At the end of the day, neither inflation nor job losses help the economy. Hence, neither will the NAT GAS Act.
Finally, to the argument that natural gas is necessary to wean the US off of oil imports from the Middle East, some obvious and essential points have been overlooked. First and most importantly, the U.S. and Canada (our ally and current largest supplier) have enough oil resources to produce 22.5 million barrels of oil per day, which is today’s current consumption level, for decades to come. Secondly, the reason these resources aren’t being produced can be attributed to the federal government placing restrictions on developing the areas with the greatest resource potential, subjecting the development of resources to a cumbersome and oblique regulatory process, and delaying the approval of the infrastructure needed to bring resources to market. If, based on the first point, we were to remedy the second, there would be no need to transition. And no need for subsidies.
Who benefits then, if not consumers, workers or manufacturers? To find this answer, simply follow the money: Natural gas suppliers and the makers of natural gas engines. Do a little digging and you’ll find two of the loudest cheerleaders of the NAT GAS Act are billionaires T. Boone Pickens and George Soros, who would get even richer with its passage. Perhaps a new quote will gain infamy as a result of this debacle (albeit satire and mine): “Why compete in the free market when it’s more profitable to have Congress do your bidding for you?”
America needs a diverse selection of energy resources, not an overreliance on any given fuel—or any particular pair of subsidy-chasing billionaires for that matter. The recent bankruptcy scandal and dismissal of thousands of employees at Solyndra, President Obama’s prized energy darling and a recipient of $535 million in federal tax dollars, proves that government has no place picking winners and losers in the marketplace. The NAT GAS Act would only perpetuate such costly Congressional folly.
Thomas J. Pyle is President of the American Energy Alliance