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House's NAT GAS Act Redux Promotes Fuel for Transportation

Four members of the House of Representatives introduced sweeping legislation Wednesday that, if enacted, will set the nation on course to rely on natural gas for some of the country's transportation needs over the next seven years. While the legislation was received warmly by the oil and gas industry, industrial gas users were crying foul.

In a display of bipartisanship on the eve of a possible government shutdown, Reps. John Sullivan (R-OK), Dan Boren (D-OK), John Larson (D-CT) and Kevin Brady (R-TX) officially submitted the New Alternative Transportation to Give Americans Solutions Act (NAT GAS Act) to Congress. The HR 1380 legislation has 76 co-sponsors and reportedly has the support of President Obama.

"Natural gas is a cleaner, cheaper, more abundant alternative to foreign oil, and it is in both our economic and national security interest to use the vast reserves we have right here in our own backyard as the bridge fuel toward energy security," Sullivan said Wednesday.

Similar legislation failed to muster enough support for a House vote last year, despite 146 co-sponsors and strong support from the energy industry and independent oil billionaire T. Boone Pickens (see Daily GPI, April 15, 2010; March 25, 2010).

Included in the bill are measures to create or extend -- over the next five years -- tax credits for using natural gas as a fuel, purchasing natural gas vehicles (NGV) and installing natural gas refueling facilities. The credits, some of which expired on Dec. 31, would also be available to Native American tribal governments.

The timing of the legislation's unveiling would appear to be ideal for supporters as it comes at a time where natural gas appears to be riding a wave of favorable momentum. The legislation was released just a week after Obama promoted domestic natural gas as one solution for U.S. energy needs going forward (see Daily GPI, March 31a).

On Tuesday the the industry-led Marcellus Shale Coalition proposed an aggressive expansion of natural gas transportation infrastructure across Pennsylvania that it believes could increase demand by as much as 5.4 Bcf over the next decade (see Daily GPI, April 6).

Richard Kolodziej, president of NGVAmerica, said the five-year window outlined in the NAT GAS Act was critical because it would give fleet owners time to consider making the switch from diesel or gasoline to natural gas while keeping markets stable.

"This is particularly important in the market for heavy-duty vehicles, [which] account for about 25% of all the on-road fuel consumed in this country," Kolodziej said Wednesday. "Moving more of these vehicles to natural gas can make the fastest impact on reducing our dependency on foreign oil."

The NAT GAS Act also calls for a new tax credit to manufacturers to help spur the production of vehicles powered by natural gas. The credit would be equal to the lesser of "10% of basis" of the vehicle or $4,000, and limits the aggregate credits per manufacturer to $200 million.

The bill also clarifies that NGVs are "advanced technology vehicles" and therefore qualify for the Department of Energy's Advanced Technology Vehicle Manufacturing Incentive Program. In addition it encourages the Environmental Protection Agency to "take steps to reduce the regulatory burden on conversion manufacturers." The legislation describes current certification procedures for aftermarket conversion manufacturers as "onerous."

Oil and gas industry leaders heralded the legislation.

"The provisions contained in the NAT GAS Act offer a viable road map for helping Americans take the next step toward a cleaner, more efficient transportation future by encouraging meaningful investments in natural gas vehicles," Dave McCurdy, president of the American Gas Association, said Wednesday. "This legislation will help drive our clean energy economy forward by creating jobs and enhancing our energy security."

Regina Hopper, president of America's Natural Gas Alliance, concurred, adding that the bill "is a strong step forward in continuing the momentum around greater use of clean, American natural gas for transportation."

Pickens, himself the author of a plan to cut America's dependence on foreign oil by more than one-third within 10 years, has predicted that Congress will pass the NAT GAS Act with strong bipartisan support and be signed into law by Obama by the end of 2011 (see Daily GPI, March 31b).

However, not everyone was applauding the new legislation. In anticipation of the bill, the Industrial Energy Consumers of America (IECA) made their opposition clear on Tuesday in a letter to Boren and Larson, the two lead Democratic sponsors.

"As manufacturers whose competitiveness is dependent upon the cost and availability of natural gas, we are opposed to the Natural Gas Act of 2011 that would subsidize the use of natural gas in vehicles," said Paul Cicio, president of the IECA. "Greater demand of natural gas to the transportation sector is the responsibility of markets, not Congress, subsidies or mandates. Subsidizing natural gas demand is not sound energy or economic policy and will have the long-term effect of increasing the price of natural gas to all consumers. If natural gas offers added value to vehicle owners, including corporate fleets, private-sector investments will be made and demand for natural gas will increase."

Cicio added that subsidizing gas to the transportation market is the equivalent of subsidizing the manufacturing sector to lower the price of gas to help the United States compete with foreign competition. "Should the manufacturing sector also ask for a subsidy? We recognize the value of increased energy security in using greater amounts of domestic natural gas," he said. "Given its importance, Congress should instead ensure that there are no regulatory barriers to entry to using natural gas in the transportation sector."

In addition to the NAT GAS Act, NGV support could also be found at the state level on Wednesday. Saying extraction is only "half of the job" of capitalizing on the Marcellus Shale, a group of Pennsylvania House Republicans reintroduced legislation to promote the use of NGVs in the state (see shaledaily.com).

The seven bills in the Marcellus Works plan include a combination of tax credits, grants and loans to help convert fleets to run on natural gas and to build new fueling stations across the state, as well as changes to existing regulations. The program is estimated to cost $55-65 million using "taxes already imposed on the industry."

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