By Gabe Rozsa
Natural Gas in Transportation – Cheap Transportation Fuel but a Major Infrastructure Challenge.
Transportation consumes approximately 28% of U.S. energy demand, mostly in the form of gasoline and other transportation fuels derived from crude oil. These sources have been subject to significant price increases, due in part to rising international competition for a scarce commodity that is adversely affected by political instability, particularly in the Middle East. Some argue that the abundance of natural gas in North America and its relatively low cost should drive policies that encourage greater use of natural gas in the transportation sector for both economic and energy security reasons. T. Boone Pickens has been advancing his “Pickens Plan,” which originally called for a shift to wind energy for electricity generation and then using natural gas supplies intended for power generation to help fuel the transportation sector. Recent increases in natural gas supplies and the fiscal climate for tax incentives have called into question aspects of the plan, but he, and others in the industry, continue to push for expanded use of natural gas in transportation.
A bipartisan group in the House and Senate, along with the White House, support legislation to provide for significant tax incentives for the purchase of natural gas powered vehicles and for the fuel and fueling infrastructure on which they would run. However, fiscal conservatives argue that it is too expensive and is another example of Congress attempting to pick winners and losers in the energy markets. The New Alternative Transportation to Give Americans Solutions or NATGAS Act incentives package, which would provide incentives for natural gas vehicles and refueling infrastructure, was offered by Senators Menendez, Burr and Reid as an amendment to the Senate Transportation bill, but it fell well short of the 60 votes needed to amend the bill. Efforts to revive it in either the House or Senate are likely to fail as well, unless the bill is further revised to reduce its costs, find acceptable pay-fors and address specific concerns raised by certain interests opposed to key provisions in the bill. However, we will continue to see this debate play out as the continuing increase in supply and the drop in natural gas prices make this energy source increasingly attractive in the transportation sector.