As a fuel, natural gas is clean-burning, domestic, abundant and employs well over half a million Americans each year. But environmentalists and regulators have begun studying the industry’s recent transformation, struggling to catch up with changes that have outpaced existing oversight.
A new federal bill has unearthed some of these mixed feelings about natural gas–about its use, its reputation and about the role of the resource in our national energy policy.
President Obama, for one, thinks natural gas can help slash our oil imports by a third by 2025 if we use more of it.
He mentioned the virtues of natural gas earlier this year when he unveiled his Blueprint for a Secure Energy Future. Another mention came during his State of the Union address in which he said he wanted 80% of our energy to come from clean sources by 2035.
But the President’s response to the zeitgeist has never been more pronounced than it was during a speech at Georgetown University at the end of March, when he endorsed the landmark Pickens Plan and the controversial NAT GAS Act, known formally as the New Alternative Transportation to Give Americans Solutions Act.
“The only way for America’s energy supply to be truly secure is by permanently reducing our dependence on oil… We’re going to have to find ways to boost our efficiency so we use less oil…We have a few different options. The first is natural gas,” President Obama said.
Enter HR 1380, the NAT GAS Act, the brainchild of Okahoma Republican John Sullivan, Dan Boren, D-OK, John Larson, D-CT and Kevin Brady R-TX. About a third of the House has cosponsored it.
Specifically the bill would give $5 billion in incentives to automobiles manufacturers that build vehicles that run on natural gas instead of gasoline or diesel fuel. It would also increase the federal tax credit for refueling stations that sell compressed and liquefied natural gas.
Is $5 billion just too much?
But mostly, the NAT GAS Act has unearthed ardent opposition among budget watchdogs who say a $5 billion price tag is a turn-off when one of the goals is to cut the $1.6 trillion federal deficit.
Meanwhile, proponents of the act claim that it will save money.
“The way I see it is that our nation can’t afford not to pass the NAT GAS Act. Right now oil is over $100 per barrel, meaning American taxpayers are sending an outrageous $2 billion every single day overseas for foreign imported oil – any way you slice it, the total cost of the NAT GAS Act will be less than what we are already shipping overseas every three days,” Congressman Sullivan said.
“I don’t think you can have it both ways when we’re staring at a $1.6 trillion budget deficit,” said Steve Ellis, vice president of Taxpayers for Common Sense, a budget watchdog group. “We should be cutting spending and increasing revenue and not decreasing revenue, and not giving more tax subsidies in the form of corporate welfare to the natural gas industry.”
“We aren’t picking winners and losers in the energy market,” Sullivan said. “Natural gas has picked us – it’s cleaner, cheaper, more abundant and best of all, American made – all we have to do is remove the economic barriers in place for those who choose to use it.”
Taxpayers for Common Sense is among a handful of budget and environmental groups, including Friends of the Earth, Heritage Action, Americans for Prosperity, and Americans for Tax Reform to oppose the act.
“One man’s incentive is another man’s subsidy,” said energy analyst Christine Tezak with Robert W. Baird & Co. Inc. “The bill intends to address policy issues beyond economics.”
Playing poker with the federal budget
The government is trying to meet its energy needs and address its energy policy goals to bring more clean energy alternatives to market, including natural gas-fueled vehicles.
There’s a hurdle, Tezak said, “because it costs $5 billion and nobody has any money to pay for it.”
Could the up front costs be offset somehow by costing Americans less money to fill their “gas” tanks? Maybe, she said; “It all depends on how you do the math.”
Sullivan said he’s still waiting for a figure from the Joint Committee on Taxation to show how the $5 billion will be offset in savings.
The environmental impact
Aside from the $5 billion price tag, the way people feel about natural gas is “complicated,” Ellis said.
Some say natural gas is a fossil fuel. Others disagree. Environmental groups are fragmented over the bill.
“The jury is still out on natural gas, whether it’ll be better than coal or oil from a greenhouse gas perspective. It’s unclear,” said Ben Schreiber, tax analyst at Friends of the Earth.
Friends of the Earth has joined Taxpayers for Common sense in fighting against the NAT GAS Act for more than budget reasons. Schreiber said his group believes in subsidies, but only for renewables and electric vehicles.
“We’re going to run out of easily obtainable natural gas,” he said. So, investing “millions of dollars in infrastructure” to help build up the natural gas transportation sector “doesn’t make any sense,” he said.
Friends of the Earth supports natural gas, however, as a transitional fuel for power plants.
“Natural gas may be a transitional fuel, but natural gas cannot be the long term answer for our climate needs,” Schreiber said. “We’re going to run out of easily obtainable natural gas. That’s one of the reasons we don’t support the NAT GAS Act.”
Flirting with Big Oil
Senate Democrats are generally against the bill because it provides tax breaks for an industry intrinsically tied to Big Oil.
Unfortunately for the gas industry, its association with the oil industry even in nomenclature sometimes hurts its reputation as a clean burning fuel for large scale use.
Richard Kolodziej, NGVAmerica’s president told a House Energy and Commerce subcommittee in May that natural gas is not as tied to oil as some would believe.
“Natural gas is priced much lower than petroleum. The two fuels no longer track one another and haven’t for many years,” he said.
Concerns with “Fracking”
Even if President Obama endorses natural gas, he’s made it clear that he’s concerned about hydraulic fracturing, a key process by which shale rock formations about a mile underground are fractured with a high pressure stream of water and chemicals to release natural gas.
“Recent innovations have given us the opportunity to tap large reserves…But just as is true in terms of us extracting oil from the ground, we’ve got to make sure that we’re extracting natural gas safely, without polluting our water supply,” Obama said.
Many environmentalists are against hydrofracking.
“We don’t need to be doing hydrofracking,” Friends of the Earth’s Schreiber said. “It’s just bad for the environment.” He cites several studies that have questioned the safety of drinking water in and around aquifers where gas companies are fracking.
But the natural gas industry is counting on natural gas from shale to help sustain its abundance.
IHS Cambridge Energy Research Associates said shale formations currently yield 20 percent of US natural gas supply. It expects shale gas will make up 50 percent of US natural gas supply in the next 25 years.
Though fracking has been going on since the early 20th century, extracting natural gas from the formations is now being blamed in some studies for potentially contaminating drinking water and polluting the atmosphere.
President Obama has already indicated he wants to continue fracking, as long as its safe.
Earlier this month he asked the Energy Department to construct a panel of experts to determine what steps can be taken to improve the safety of fracking.
The panel will report back to DOE in three months. And in six months, the panel will develop guidance for the federal government on how ensure the public is protected from any harmful consequences of fracking.