What role should government play in energy production? NAT GAS Act not part of the answer

This week’s question, posed by Amy Harder with the National Journal’s Energy & Environment blog, is especially relevant to ACC President Cal Dooley’s testimony last week before two subcommittees of the House Committee on Ways and Means.

In his reply to Harder’s question, Dooley flips an argument that proponents of the New Alternative Transportation to Give Americans Solutions Act (NAT GAS Act) often cite as a reason for subsidizing natural gas vehicles.

As you’ll see, the argument doesn’t favor subsidizing the use of NGVs at all – it actually presents sound reasoning against it.

Click here to read Dooley's reply.

Why Subsidize a Growing Industry?

By Cal Dooley

In recent weeks, we’ve seen how using the tax code and other government support programs to drive energy policy and influence markets can lead to unintended and detrimental results. Rather than endorse specific market outcomes – essentially picking winners and losers in the marketplace – President Obama should focus on developing a comprehensive energy strategy that promotes the sustainable, efficient use of all energy sources.

That’s why, in testimony last Thursday before two subcommittees of the House Committee on Ways and Means, I presented a case against legislation that would introduce unnecessary distortions into the natural gas market. The New Alternative Transportation to Give Americans Solutions Act (“NAT GAS” Act) aims to do just that by boosting the production and use of natural gas vehicles (NGVs) at a price to taxpayers that even the bill’s supporters put at $5 billion. Simply put, it’s a bad idea.

One of the arguments that proponents of the NAT GAS Act cite is the cost advantage of running a vehicle on natural gas rather than on diesel. Fuel savings alone, they point out, would add up to approximately $57,000 per year. Given the cost differential between buying a natural-gas-powered truck and a diesel-powered one – estimated to be $70,000 – it would only take 15 months to pay off the investment. That’s an impressive 80 percent return.

But, if you think about it, this is not an argument for subsidizing the use of NGVs – it’s an argument against it! I would bet that many private sector companies, both big and small, would be pretty pleased with an 80 percent return in just 15 months.

That’s probably the reason so many large fleet operators are choosing to switch their trucks to natural gas without the NAT GAS Act. And today’s low cost of natural gas is probably the reason that natural gas fueling stations are being installed in towns and cities across the country, paid for by the private sector.

There is a legitimate debate to have about the role of government in supporting the adoption of energy technologies. But this seems to be an issue that can easily be put to rest: more taxpayer money shouldn’t be used to provide handouts to an industry that is already growing, at a time when we are trying to eliminate unnecessary federal spending. Instead, we should let industry and the marketplace continue to let their current business model work.

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