NCPA - National Center for Policy Analysis

Natural Gas Industry Cozies Up to Washington

November 14, 2012

The natural gas industry has been a bright spot in the sluggish economic growth. New methods for extracting natural gas have provided cheap sources of energy and an abundance of new jobs. However, the natural gas industry is using its position to get subsidies from the federal government, says Veronique de Rugy, a senior research fellow at the Mercatus Center.

A bill introduced in Congress called the New Alternative Transportation to Give Americans Solutions Act (NATGAS Act) would give subsidies to the natural gas by incentivizing many things, including:

  • Manufacturing and purchasing cars that run on natural gas.
  • Converting commercial trucks from diesel to natural gas.
  • The creation of natural-gas filling stations.
  • Tax preferences to favor natural gas over other energy sources.

The stated reason for the NATGAS Act is that the transition costs to new and better technologies are too high and no investors are willing to invest in it, thereby making government intervention necessary. However, companies are already converting trucks, cars and busses to natural gas without the subsidies because it is already cost effective.

Instead, the government is going to make taxpayers pay somewhere between $3.8 billion annually to as much as $14 billion to fund NATGAS. The government is going against market forces and investing in natural gas infrastructure at a time when many investors are steering clear.

The natural gas industry also benefits from regulations on other energy sources. For example, the Environmental Protection Agency (EPA) instituted many regulations that make it nearly impossible for coal to compete. These EPA rules came from indirect support of special interests. For example, Chesapeake Energy, the second-largest provider of natural gas, gave $25 million to the Sierra Club to pursue lawsuits against the coal industry.

Rather than pumping the industry with subsidies, the government should level the playing field and allow the market to decide which energy source is best.

Source: Veronique de Rugy, "Natural Gas Industry Cozies Up to Washington," Reason Magazine, November 6, 2012.


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