Ford Motor Co. is on to something. This year, hundreds of taxis, powered by compressed natural gas, will pop up around the country: 120 Ford Transit Connects in the Los Angeles area, 70 in Connecticut. Las Vegas, St. Louis, and Philadelphia will also see their own fleet of Transit Connects soon.
America’s abundant supply of cheap, accessible natural gas and the stubbornly high cost of gasoline and diesel are making natural gas vehicles more attractive and economical. This is how the free-market economy is supposed to work. With more than 111,000 natural gas vehicles on U.S. roads and more than 12 million worldwide, it is clear a market is evolving.
Unfortunately, whenever the private sector is on to something good, meddlesome politicians and special interests are not far behind.
The vehicle for the latest meddling is the New Alternative Transportation to Give Americans Solutions Act. More than 180 representatives — Republicans and Democrats — have signed on.
Unfortunately, the NAT GAS Act would not give Americans a new solution for alternative transportation; rather, it would simply give a handout to those who are already producing and using natural gas vehicles.
Manufacturers would receive a $4,000 tax credit for every natural gas vehicle produced, and consumers would receive $7,500 for the purchase of a light-duty car and $64,000 for a heavy-duty truck. Businesses could get $100,000 for installation of a commercial fueling station, and fuel would be subsidized at the rate of 50 cents per gallon. Over five years, it adds up to between $5 billion and $9 billion.
One of the leading backers of the legislation is billionaire T. Boone Pickens, who has substantial interests in the natural gas industry. He recently toured West Chester University’s natural gas fueling facility with two Southeast Pennsylvania Republican congressmen, Patrick Meehan and Jim Gerlach, both NAT GAS Act supporters.
The showcase tour was ripe with irony. Somehow, the university managed to acquire more than 20 vehicles that run on natural gas and two filling stations without these market-distorting subsidies.
Why would a university have made such an investment without the NAT GAS Act’s federal handout? Pickens’ trademark candor gives us the answer: “The fuel is so much cheaper. It’ll pay for whatever the conversion \[to natural gas\] cost is.”
In Philadelphia, compressed natural gas is selling for the equivalent of about $2 per gallon of gasoline. Across the river, it sells for just $1.76. If the economic rationale for conversion exists, why create a raft of federal subsidies?
One of Pickens’ most common refrains is that we must reduce our dependence on foreign oil.
But if Pickens and others are concerned about our reliance on foreign oil, they should maximize access to a broad array of energy sources, especially on the domestic side, not seek narrowly targeted tax subsidies. Not only will a market-based approach provide consumers more options, it will also result in a diversification of energy sources and types.
History is littered with schemes to end our use of foreign oil, and we have seen government intervention and market distortions fail repeatedly. Less than a decade ago, bold promises were made about ethanol, while mandates and subsidies were crafted. Now there is widespread agreement that the ethanol experiment was an expensive boondoggle.
There is one major difference between ethanol and natural gas, though. Even a NAT GAS Act supporter, Rep. John Sullivan (R., Okla.), told the Tulsa World that “the ethanol industry won’t survive without” a government boost, but “the natural gas industry will survive.”
Sullivan is exactly right. Pennsylvanians already know this. The commonwealth is home to the world’s second-largest natural gas field. In the last year, the Marcellus Shale field has created 48,000 jobs — a number that is expected to double, perhaps triple, over the next 10 years.
Unfortunately, 14 members of the state’s congressional delegation, including Philadelphia Democrats Robert Brady and Chaka Fattah, are supporting what amounts to a corporate handout and another wrinkle in an overly complicated tax code. Industry specific carve-outs are not going to jump-start the American economy or usher in a new era of transportation.
Washington should stop trying to pick winners and losers. We should simplify the tax code, roll back industry-specific credits, and use all the natural resources at our disposal. Only by unleashing America’s entrepreneurial spirit will we create jobs and commercialize the next great transportation breakthrough.
Tim Chapman is chief operating officer of Heritage Action for America (heritageaction.com), a conservative grassroots advocacy group based in Washington. E-mail him at email@example.com.