A U.S. Senate version of the House proposal for creating more use of natural gas in transportation was unveiled on Tuesday as an alternative means of expanding tax credits for gas infrastructure and vehicles, according to a trio of senators sponsoring the New Alternative Transportation to Give Americans Solutions Act of 2011 (NAT GAS Act).

Senate Majority Leader Harry Reid was joined by Sens. Richard Burr (R-NC) and Robert Menendez (D-NJ) in proposing the legislation that they claim would boost domestic production of vehicles capable of running on natural gas — either compressed natural gas (CNG) or liquefied natural gas (LNG). To pay for tax credits for vehicles and fueling infrastructure the senators are proposing a temporary user fee on the use of CNG and LNG in vehicles.

One of the nation’s largest CNG/LNG for transportation providers in terms of fuel and infrastructure, Seal Beach, CA-based Clean Energy Fuels Corp., is supporting the Senate bill, saying it will provide a five-year extension of the tax credit incentives for the purchase of natural gas vehicles. Clean Energy also cited a fourth author and second Republican sponsor of the bill, Sen. Saxby Chambliss (R-GA).

“Backing by Congress is critical for our nation to succeed in its goal of utilizing domestic natural gas instead of imported petroleum,” according to Clean Energy CEO Andrew Littlefair.

While the proposed measure is a variation of the legislative initiative advocated by former oil billionaire-turned-clean fuel advocate T. Boone Pickens, it has stirred conservative opponents in Congress and in think tanks such as the Heritage Foundation. Pickens has been pushing for passage of the NAT GAS Act for years (see Daily GPI, April 15, 2010).

The move in the Senate attempts to “leverage the arbitrage between oil and natural gas,” according to an analysis by Baird Equity Research. “The user fee to fund the bill diverts part of the savings realized when natural gas is used as a transportation fuel instead of oil,” the Baird review said.

Because gas is “cheap and abundant,” Menendez said the fuel should be used more in the United States to displace oil. He claimed the bill would “create jobs, lower transportation costs, lower pollution in urban areas, and make us more energy secure.” And he is claiming the measure would not add to the nation’s bulging budget deficit.

Reid echoed Menendez’s remarks, calling the need for more jobs and less foreign oil “an economic and national security imperative.” He said the alternative legislative proposal would create “one million jobs” while helping make the nation more secure.

Burr stressed the measure’s impact on energy independence, which in turn should “play a vital role” in the nation’s national security.

Analysts, however, are skeptical that Congress can turn its attention to this issue in the midst of the fiscal year 2012 budget issues facing the nation’s lawmakers. One of the analyses projected that the measure could have a better chance early in the new year before Congress gets bogged down in the larger, long-term budget and deficit issues.

The background analysis offered with the proposed legislation by Menendez’s office envisions plentiful long-term domestic gas supplies (up to 3,000 Tcf), continued cheap prices with CNG selling for the gasoline gallon-equivalent of $2.33, compared to average per-gallon gasoline prices around $3.46, so the decision has to be made between using the additional gas domestically or exporting the supplies to higher-priced Asian and European markets, which undoubtedly would raise North American gas prices.

The Senate proposal aims to allow tax credits to be applied against taxpayers’ minimum tax, and it allows transfers of the tax benefits to sellers, manufacturers or lessees in cases of leased vehicles. It would also modify the credit for the purchase of CNG and LNG vehicles.

A question initially raised by some analysts is how much bipartisan support the bill will ultimately receive. The fee offsetting the cost of the credits is viewed as the key to addressing this concern.

Some states are working to embrace the adoption of natural gas vehicles (NGV). Last week the governors of Colorado, Oklahoma, Wyoming and Pennsylvania signed a pact designed to increase the use of NGVs in the fleets of each state (see Daily GPI, Nov. 10).

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