US gas producers have good reasons to crave market expansion but no reason to support growth accelerated by government. They should oppose legislation extending tax breaks for natural gas vehicles (NGVs).
For producers, gas prices are painfully low. The shale-gas boom has created stubborn surplus from which only market growth offers lasting relief. But prodding by the federal government can only hurt.
Legislation stimulating demand for gas-fueled vehicles can seem enticing at first glance. The oil and gas industry gets little such support from Washington, DC. Lately, it has received mainly antagonism from the national capital.
But an especially hostile political climate provides no reason to grab any help that emerges; in fact, it's a subordinate reason to oppose the clumsily titled New Alternative Transportation to Give Americans Solutions (NATGAS) Act.
Government choices
The main reason to resist the measure is that the federal government shouldn't make energy choices. Its decisions are driven by politics, and its market expectations are always wrong.
Its fuel preferences become dependent on political favors instead of commercially robust. Inevitably, political support dissipates—as is happening now with ethanol.
Unlike energy forms already trapped in this cycle, gas can compete. It can survive a price slump and even benefit from the market expansion that eventually will result. If it stays grounded in rules of the market, gas will thrive.
Its producers, processors, and transporters don't need the new, extended, and expanded tax credits of the NATGAS Act for the manufacture and purchase of gas-fueled vehicles and associated refueling infrastructure.
Pursuing favors like those in the current political climate can yield only grief. It's a climate in which dislike of the oil and gas industry, intensified by high gasoline prices, has crowded out clarity.
It's a climate in which lawmakers propose to deny oil and gas companies the ability to deduct business costs from taxable income and claim to be ending "subsidies."
It's a climate deliberately confused by an administration that, in its budget proposals, equates oil and gas production incentives with consumption subsidies used by some governments to appease restive populations.
In such a climate, fortification of market stimuli for natural gas will surely aggravate political problems of the oil and gas industry.
The industry should find only minor comfort in the Senate's refusal last week to pass a proposal to end tax provisions, fancifully called subsidies, of the five largest US oil companies.
A measure of the quality of thinking behind this initiative is an item setting the percentage depletion rate for targeted companies at zero. In fact, large, integrated oil and gas companies haven't been able to use percentage depletion since 1975. The measure was moot.
Sponsors of it, though, will receive press notice not for being risibly ignorant about what they proposed but for shaking their fists at oil companies. Of course political posturing, not the soundness of tax law, is the point here.
Democrats now can accuse Republicans of siding with "Big Oil." And, in most places, they'll get away with it, playing the guileful melodrama as long as it runs.
Senate Majority Leader Harry Reid (D-Nev.), who said before the latest vote that Republicans "can continue to defend the oil companies or recognize that we have to do something about the deficit," has promised to revive the effort in a new format.
Not subsidies?
So into this vat of political acid splashes an effort to expand markets for natural gas at taxpayer expense. Sponsors of the bill insist the tax credits don't represent subsidies.
Are they serious?
It's an election year in the US. Barack Obama is president. Democrats control the Senate. Anything that can be seen as benefiting oil and gas companies in any way will be called a subsidy and twisted to flog the industry.
Gas producers, processors, and pipelines don't need the abuse. Gas doesn't need the help. And taxpayers can't afford the cost.
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