Industrial Group Says No to Natural Gas Subsidies

May 24, 2011
Describes proposed legislation as a non-market-driven mandate.

A coalition of agricultural and manufacturing organizations has asked Congress to oppose legislation that would provide subsidies or mandates for natural gas usage in vehicles and power generation.

At issue is a bill called the New Alternative Transportation to Give Americans Solutions Act, or NAT GAS Act, backed by oil and gas tycoon T. Boone Pickens. The act, introduced in the House by Rep. John Sullivan, R-Okla., would lower taxes for the production or purchase of natural-gas fueled vehicles.

But critics say the bill "picks winners and losers" and is not market driven. The impact for manufacturers, now benefiting from historically low natural gas prices, could be higher production costs that lead to more jobs shifting overseas, wrote the coalition in a May 23 letter to Congressional leaders

"The problem is that markets, not Congress, should determine demand, says Paul Cicio, president of the Industrial Energy Consumers of America, speaking on behalf of the coalition. "None of us on that letter are opposed to using natural gas vehicles. We're just opposed to Congress subsidizing it."

The plan could increase natural gas demand up to 7%. That, combined with potential environmental regulations on shale gas exploration, could ultimately raise prices for all consumers, Cicio says.

Shale gas exploration has created abundant supplies of natural gas in the United States, but government intervention could offset any price benefits, the coalition contends.

"History has shown that unforeseen circumstances, including the potential for both federal and state regulations to be placed on shale drilling, can either slow its production, increase its costs or otherwise dramatically alter these types of future projections," the coalition says in its letter signed by approximately 50 manufacturers and organizations.

Rep. Sullivan has said that natural gas is cleaner, less expensive and more abundant than other alternatives. It's also primarily produced in North America, compared with oil, which is mainly imported from foreign nations.

Sullivan said in an editorial published in the Tulsa World May 21 that "lower taxes to encourage the production and purchase of vehicles that run on cheaper fuel produced in America is not a subsidy, it's common sense."

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