Fresh off a nod from President Obama’s State of the Union speech, T. Boone Pickens has again began to circle the country touting the alleged benefits of providing subsidies for the transportation sector to convert more vehicles to natural gas power. Today, he writes in The Chicago Tribune:

If you are going to transform American energy to address the national security and economic risks associated with our OPEC oil dependence, there is only one solution: move our natural gas reserves into transportation, with an emphasis on the heavy-duty truck and fleet-vehicle markets.

Free-market advocates argue that’s bad public policy. They fail to understand that OPEC is far from a free market. They’ll tell you we shouldn’t pick winners and losers in the transportation fuel segments. I say it’s time to pick America over OPEC. Let’s go with anything American. I’m fine with the battery, but remember, it won’t move an 18-wheeler.

Imagine the impact natural gas could have in solving our energy problem. Targeting heavy-duty trucks and fleet vehicles — about 8.5 million in all — could cut our OPEC oil dependence in half in 10 years or less.

Fortunately, while we wait for Washington policymakers to lead, the move to replace more expensive, dirtier OPEC oil, diesel or gasoline with cheaper, cleaner domestic natural gas is gaining private-sector support. At an event in Chicago last week, two leaders in the natural gas vehicle industry — Navistar and Clean Energy Fuels — announced a plan to aggressively develop a comprehensive system to build natural-gas truck engines and provide the infrastructure to fuel them.

Over-the-road trucks tend to run the same routes on the same schedule. Drivers stop in the same places to rest, eat and refuel. Putting natural-gas refueling stations along the major travel routes is a relatively minor logistical issue. Building natural-gas engines for those trucks will be a major job creator.

The fact that OPEC isn’t a “free market” does not allow one to conclude that the U.S. should further distort markets without further argumentation, which Pickens does not provide, deciding to go the “national security” route that so many arguments deviate towards when they run out of good points.

The primary way in which OPEC could “harm” America is by colluding to keep prices higher. However, higher oil prices help to make the use of natural gas for transportation more appealing. Because this hasn’t been adopted on a wide scale, its clear that the economic harm from relying on oil imports should be less than switching to natural gas in situations where it doesn’t make sense.

However, as Pickens notes, it does make sense in many situations because natural gas is quite cheap. But rather than praise companies for their patriotism or whatever nonsense he’s referring to, the companies are making this decision because its a profitable one.

Pickens will continue to push his “plan,” and politicians will continue to listen because when you are willing to shower politicians with millions of dollars, their ears instinctively perk up. Here is Pickens on CNBC hoping for higher natural gas prices, so wind power is profitable again.

Get with the Plan

In The National Review, T. Boone Pickens again makes the case for The NAT Gas Act of 2011. I slept through the first few paragraphs (the piece began with a constitutional argument).

There isn’t a whole lot of new information in here, its more of a response to the ongoing attacks on the legislation. He reminds us that Americans get all antsy when gas prices go up, but when prices drop again we are lulled back into indifference.

Near the end:

Congress is considering a bill named the NAT GAS Act (H.R. 1380). It provides targeted tax credits (“lay and collect Taxes”) for companies to replace their current fleets burning imported diesel with vehicles running on domestic natural gas. Keep in mind, a tax credit means someone gets to keep more of the money he’s earned, rather than give it to the government to spend on who knows what. It is not a government grant. And this tax credit, unlike many others, has a sunset provision of five years.

Why do we need a tax credit at all? Because there is almost no manufacturing capability for natural-gas vehicles in the United States. Rather than support manufacturers in China and India, this credit would help jump-start that industry here, adding jobs up and down the supply chain.

There are people and companies — and think tanks they fund — that oppose the NAT GAS Act for a variety of reasons, most of them self-serving. There is no greater believer in free markets than I, but if you think OPEC is a free market, I have a bridge in Brooklyn to sell you. Absent a plan of their own, critics of my plan are for the status quo, which is to continue sending billions of dollars to OPEC nations, many of which, in return, are helping to fund terrorism.

As a member of a think tank opposed to the Pickens Plan (though its unclear how our reasons are self-serving), I think that a couple of points should be made. It is true that this is a tax credit, allowing people to keep more of their hard owned money. However, we can only get that tax credit back if we purchase a natural gas vehicle. This is right-wing economic engineering. Perhaps we should ask Newt Gingrich’s opinion on it.

Second, while OPEC’s control over the international oil market does not constitute a completely free-market, this doesn’t strengthen the argument for the Pickens Plan. On the contrary,  it weakens it.

Assume that OPEC is currently capable of (or engaged in) restricting petroleum production such that the price is artificially higher than it would be. This creates an even larger incentive for vehicle manufacturers to consider the feasibility of using natural gas as a fuel rather than petroleum, to capture some of the profit headed towards OPEC. That they haven’t done this likely indicates that they don’t believe consumers will switch over at this point in time, given the costs of converting vehicles on the road, building infrastructure, etc. This market could assuredly start up on its own. Being that it hasn’t, aside from certain niches like city buses, it seems as if the Picken’s Plan has failed the market test.

It’s true, the status quo isn’t perfect, though nothing is. But two wrong’s don’t make a right. Doubling down on natural gas subsidies will further distort the use of resources in our transportation sector, and lock in infrastructure that likely shouldn’t be built in the present. As far as a 5 year sunset, look at some of our other energy subsidies. Did they sunset after 5 years? Have we even been able to get rid of any of them? No.

Republicans in the House of Representatives are flocking to support a bill to extend and create a number of taxpayer-funded subsidies for manufacturers and buyers of vehicles powered by natural gas.   Nearly eighty House Republicans (and a hundred Democrats) have signed up as sponsors of H. R. 1380, the New Alternative Transportation to Give Americans Solutions Act (or NAT GAS Act).  Just call it the T. Boone Pickens Earmark Bill.

Many conservative Republicans in the House, particularly a number of new Members with Tea Party connections, have sworn that the fiscal and economic crisis confronting America requires a radical change in federal policies.  Out-of-control spending must be stopped; spending earmarks must be abolished; crony capitalists on the prowl for corporate welfare must be sent packing; subsidies for special interests must be abolished; government must stop interfering in the economy and let free markets work.

That big talk doesn’t seem to apply when the spending is being earmarked for a crony capitalist who is one of the biggest contributors to Republican candidates in history–billionaire T. Boone Pickens.  Apparently, some subsidies are good if they benefit the right special interests.  And government interference in the economy is wonderful if it is done in the name of reducing oil imports.

H. R. 1380 would extend the tax credit of 50 cents per gallon of liquid natural gas (or its equivalent of compressed natural gas) when used for fueling vehicles and provide purchasers of natural gas vehicles with credits ranging from $7,500 to $64,000.  The lower end is for passenger cars and the upper end for big trucks.  There are also credits for natural gas vehicle manufacturers and for installing natural gas fueling stations.

Why are billions of dollars of taxpayer-funded subsidies needed?  According to T. Boone Pickens’s web site, it’s because natural gas vehicles are cheaper to operate than gasoline or diesel vehicles:  “Even with higher initial costs (which will disappear as manufacturing ramps up) the life-cycle costs of NGVs [natural gas vehicles] are significantly lower.  Fuel costs are at least 15 percent less using natural gas rather than gasoline or diesel.”

So people need to be paid in order to make them want to buy vehicles that will save them money.  Yes, that makes sense: I always prefer the more expensive product unless there is a government rebate for the cheaper one.  Call it the Boonedoggle bill.

As for getting us off foreign oil, this claim is trotted out to support every payoff to special interests in the energy sector.  It’s a claim for which little evidence is ever produced.  What will reduce our dependence on foreign oil is producing more of it in this country.  What the bill will do is increase demand for natural gas, which will tend to increase prices for natural gas, which means a big payoff for T. Boone Pickens, who has invested heavily in–you’ll never guess–natural gas.

It’s sad to look at the list of conservatives who claim to be principled who have signed up to support the Boonedoggle.  Here’s the complete list of Republican sponsors as of today.  The chief sponsor is Rep. John Sullivan of Oklahoma.  Most surprising and perhaps most disappointing is Rep. Ron Paul of Texas, who claims that he votes against everything that isn’t in the Constitution.  I seemed to have missed the section of the Constitution that allows taking billions of dollars from taxpayers to give to fatcat billionaires and corporate welfare queens.  Call it the Pickens-Your-Pocket bill.

This stampede by conservatives, including several freshmen who identify with the Tea Party, to support the T. Boone Pickens Earmark Bill makes a mockery of their claims to want to cut federal spending, eliminate subsidies to special interests, and get government out of people’s lives.  We’re very close to returning to business as usual in Washington.