Pickens has consistently said that the USA needs its own energy plan and this involves using its own resources (see Daily Show Extended Interview - January 27, 2011). Getting off of OPEC oil and switching to an abundant domestic fuel is a worthy cause and makes a lot of sense. In many interviews, Boone Pickens often says that $4/MCF natural gas is equivalent to 7 gallons of diesel fuel. On an energy basis, $4/MCF natural gas converts to a Diesel Gallon Equivalent (DGE) price of $0.527/DGE. Lately, the price of natural gas has dropped and is now selling for less than $3/MCF (i.e., less than $0.395/DGE). A DGE is the amount of natural gas that has the same amount of energy as a gallon of diesel fuel and, yes, bulk natural gas really is currently about 1/10 of the cost of diesel fuel.
Part of the NAT GAS Act involves the allowance of significant tax credits for natural gas vehicles:
- $7,500 if such vehicle has a gross vehicle weight rating of not more than 8,500 pounds,
- $16,000 if such vehicle has a gross vehicle weight rating of more than 8,500 pounds but not more than 14,000 pounds,
- $40,000 if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and
- $64,000 if such vehicle has a gross vehicle weight rating of more than 26,000 pounds.
T Boone Pickens owns Clean Energy Fuels and they're not offering any bargains in natural gas fuel for vehicles. They appear to price their fuel at around 50¢/gallon less than the going price for gasoline. That $3/MCF natural gas translates to a price of $0.35/GGE (Gasoline Gallon Equivalent). The CEF station near Rochester NY is selling CNG for $2.69/GGE compared to the National Fuel Gas (a gas utility) station in Buffalo NY at $1.27/GGE. That price difference suggests to me that CEF has about $1.42/GGE more profit built into their price. Pickens and Clean Energy Fuels stand to do very well at the expense of the American taxpayer if the NAT GAS Act is passed.
With the national average price of diesel fuel going for around $3.85/gallon (and climbing), I'm not sure why Pickens needs huge subsidies to convert heavy duty trucks to natural gas. Using the Westport diesel-LNG dual fuel engine, the equivalent dual-fuel economy of these LNG trucks is similar to those running on pure diesel but is a lot cheaper per mile. I would think that today's $3/gallon fuel savings would be incentive enough for trucking fleets to convert. Perhaps, subsidies are the only way heavy duty fleets can have a reasonable return on their investment if LNG is sold at a heavily inflated price.
With natural gas at such a low price, I think the main reason that trucking companies are holding off converting their fleets to natural gas is that they're waiting for the very generous subsidies to make it even more worth their effort. Otherwise, I suspect that the poor record of previous LNG conversions in transit bus systems has made many fleets skeptical of using natural gas (see LNG Issues).
Does the US taxpayer really need to fund a huge tax credit boondoggle like the the NAT GAS Act?
If the USA really wants to get off of OPEC oil, shouldn't it consider all types domestic energy instead of skewing the market to only natural gas?
This legislation appears to be written to favor Clean Energy Fuels and Westport Innovations. Does the US taxpayer need to subsidize their (likely) massive profits?