At a luncheon hosted by Politico at the GOP convention in Tampa today, T. Boone Pickens said truck fleets will switch from diesel to natural gas without Congress approving the NAT GAS Act, legislation offering generous tax credits for the purchase of natural gas trucks (up to $64,000 per vehicle) and installation of natural gas fueling infrastructure. Pickens reportedly spent about $100 million over the past five years promoting his energy agenda, commonly known as the Pickens Plan.

Congress declined to pass either the NAT GAS Act or an earlier iteration of the Pickens Plan that would have required 20% of the nation’s electricity to come from wind, thus supposedly freeing up natural gas to be used to fuel both trucks and passenger cars.

Critics argued that if switching to natural gas vehicles makes commercial sense, private enterprise will bring about the transformation without Washington trying to pick energy market winners and losers. Pickens is now talking the talk. Politico‘s Darren Goode reports:

“You don’t have to have a tax credit; it’s going to happen,” he [Pickens] said. The choices to run 18-wheelers, he said, are between natural gas and diesel — and natural gas is “$2 a gallon cheaper.”

And Pickens strongly suggested that he doesn’t have any plans to try to push his plan anymore in the nation’s Capital.

“I will not go back to Washington again unless it’s for a social event,” he said.

The billionaire and former oil baron also lamented that while his plan initially promoted wind energy, that hasn’t worked out so well.

“I’ve lost my ass” to wind-energy investments, he conceded.

This afternoon the Senate will begin voting on highway bill amendments, which include the Burr/Menendez amendment, a.k.a. the New Alternative Transportation To Give America Solutions (NAT GAS) Act. Its chief lobbyist and beneficiary is billionaire T. Boone Pickens. If Congress were subject to truth in advertising laws, the amendment would be called the Pickens Payoff Plan or the Pickens-Your-Pocket-Boondoggle-Bill.

The Texas gas mogul’s lobbying for billions of dollars in tax credits for natural gas vehicles, fueling stations, and motor fuel is all about patriotism and energy security and has nothing to do with rent seeking or corporate welfare. Just ask him! “I’m sure not doing this for the money,” Pickens told the New York Times.

Only the Shadow knows what lurks in the minds of lobbyists, but the circumstantial evidence – Pickens’s huge investments in companies that would profit directly from Congress ramping up demand for natural gas vehicles, motor fuel, and infrastructure — is rather overwhelming. For some juicy details, see the commentary I posted on this site last year when the Boonedoggle Bill looked like it might actually go somewhere in the House.

None of this is to denigrate the potential of natural gas as a transportation fuel. Over the past few years, natural gas prices have fallen as petroleum prices have increased. Responding to this price disparity, GM and Chrysler plan to produce thousands of bi-fuel picks that can run on either natural gas or gasoline,  Rob Bradley points out today at MasterResource.Org.

Fracking has been so successful in increasing natural gas supplies that producers worry about prices being too low. Pickens’s corporate welfare “solution” is to empower politicians to screw consumers by artificially stimulating demand and taxpayers by increasing the deficit.

The better alternative, argues Bradley, are market-driven “self-help” strategies such as increasing U.S. gas exports to high-price markets and offering long-term pricing deals to companies with bi-fuel vehicle fleets.

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.

T. Boone Pickens went on Bloomberg to discuss the Pickens Plan:

Pickens claims that Koch is working for himself, while the pure hearted T. Boone Pickens is working for America. Now yes, Koch Industries has a financial incentive to not support federally built infrastructure for a fuel that competes with a product that he sells, but it also clearly aligns with a free-market perspective of not providing federal support for any particular energy sources. Furthermore, if it wasn’t obvious, Pickens would stand to make tons of money from increasing the use of natural gas in America, so its beyond disingenuous to pretend that he is solely “doing good.”

He takes a particular cheap shot in regard to ethanol. The Koch’s have repeatedly stated that they are against the ethanol program, but as refiners they are practically required to participate in order to stay competitive. They even fund numerous groups that have spent money in hopes of ending the ethanol tax credit (Pickens also hasn’t been following the news, as it seems the ethanol tax credit is likely going away). When Pickens resorts to taking cheap shots against opponents of his policy,  it seems clear that his proposals are without merit. When conservatives provide widespread support for the Pickens Plan, their resistance towards subsidizing other forms of energy is undermined.

Finally, Pickens claims that a transition towards fueling vehicles with Natural Gas vehicles is already underway for trucks, and that it is economical. If this is true, great, let the market work and get out of the way. It’s certainly is being used commonly in vehicles where centralized infrastructure can be used, such as city buses. Let us hope that the T. Boonedoggle Pickens plan does not move forward. CEI has written more about the plan here, here, here,  and here.

Some GOP House Members may see no problem in pushing H.R. 1380, the Boonedoggle, Pickens-Your-Pocket Bill, which would hand out tax credits up to $64,000 apiece for the purchase of natural gas vehicles, because, after all, chief beneficiary T. Boone Pickens is a major donor to Republican candidates.

According to Investor’s Business Daily, however, H.R. 1380 would also confer windfall profits on the Left’s patron-in-chief, billionaire George Soros. IBD explains:

It so happens that a company called Westport Innovations is a leading provider of technology that allows engines to operate on clean-burning fuels such as compressed natural gas and would be expected to benefit from HR 1380′s huge allocation of taxpayer dollars.

According to the folks at gurufocus.com, which monitors the wheeling and dealing of major investors, George Soros, the Hungarian billionaire who has made a fortune manipulating currencies among other financial shenanigans, owned 5,547,604 shares of WPRT, valued at $122 million as of March 31. That represented 1.45% of his equity portfolio and his third-largest holding.

So Soros could once again profit handsomely from U.S. energy policy determined largely by a Democratic party whose causes he has supported over the years, just as he profited from his investment in Petrobras, the state-run Brazilian oil giant.

On the company’s Web site, Westport Innovations describes itself as “The global leader in natural gas engines.” It says: “The Westport group of companies has sold over 32,000 natural gas and propane engines to customers in over 20 countries.” So yeah, H.R. 1830 would enrich Westport and the Left’s Daddy Warbucks.

GOP House Members who are unwilling to oppose H.R. 1380 out of free market principle should consider doing so out of a sense of political survival.

Update on the Boondoggle Bandwagon

The controversy over the T. Boone Pickens Earmark Bill, H. R. 1380, continued to grow this week. Three more Republicans joined Rep. Steve Pearce (R-NM) in getting off the Boonedoggle Bandwagon and withdrew as co-sponsors.  They are Rep. Todd Akin (R-Mo.), Glenn Thompson (R-Pa.), and Tim Griffin (R-Ark.).  The complete list of 187 co-sponsors can be found here.

A joint letter organized by Heritage Action for America and signed by seventeen conservative organizations opposing the bill was sent to the Hill. Pickens himself published an op-ed co-authored by flack-for-hire Denise Bode in Politico that was full of his usual blend of self regard, bluster, and misinformation.  Pickens and Bode claimed in the op-ed that the House Republican Study Committee has endorsed his bill.  It has not, and Politico quickly corrected Pickens.  They also claimed that wind power is now cheaper than new coal-fired power.

Pickens continues to claim that he is not in this for the money, but only to reduce America’s reliance on foreign oil.  See my CEI colleague Marlo Lewis’s blog on GlobalWarming.org detailing Pickens’s BP Capital Management’s investments in a wide range of companies that would benefit by enactment of the Pickens-Your-Pocket Plan.

As readers of this blog are no doubt aware, I’m a big fan of ‘fracking,’ a.k.a. hydraulic fracturing, the American-made technological miracle in natural gas production that has roughly doubled known North American gas reserves in only the last five years. In previous posts, I’ve defended fracking from nonsensical attacks launched by ill-informed environmentalists. Quite contrary to what the alarmists would have you believe, we’re lucky for the fracking revolution. Not only has it dramatically increased our domestic supply of natural gas, but now it’s being used to extract oil, too, and it could prove just as revolutionary for that industry.

Fracking does, however, have one major drawback: it has caused rampant rent-seeking. While gas supply has exploded, American consumption increased only 9 percent from 2005 to 2010. The sagging economy has further increased this disparity between gas supply and demand. For consumers, this is great, as it should usher in a period of relatively stable, low prices in the historically volatile gas market. For gas producers, it could be great. The low prices should make their product more attractive relative to other forms of energy. In turn, this could lead to whole new sectors of demand.The problem is that a couple major players in the gas industry refuse to wait for market forces to work their magic.  Instead, these impatient industry titans are trying to convince politicians to enact policies that force Americans to use natural gas.

Consider, for example, Chesapeake Energy CEO Aubrey McClendon, who is leading a nationwide charge to force Americans to use more gas for electricity. As I’ve explained, McClendon has been traveling around the country trying to convince eco-friendly governors to switch from “dirty” coal to “clean” gas. So far, he’s scored one major success. In Colorado, Governor Bill Ritter pushed through a law requiring fuel switching from coal to gas for almost 1,000 megawatts of electricity. If McClendon gets his druthers, other states will follow suit. As I understand it, McClendon’s next targets are Texas and Arkansas.

Then there’s natural gas mogul T. Boone Pickens. He’s trying to get the Congress to enact H.R. 1380, a.k.a. the “Pickens Your Pocket Boondoggle Bill” or the “T. Boone Pickens Earmark Plan,” which would have taxpayers finance the use of natural gas as a transportation fuel, in particular for the trucking industry.

At the very least, these policies are special interest rip-offs. But they could be much, much worse, due to unintended consequences typically wrought by such massive market manipulations.

It’s a welcome development that fracking has increased gas supply; it’s an equally unwelcome development that it has also increased rent-seeking.

I just finished watching the Sunday morning political talkies, and the second biggest ad buy of the day was in support of H.R. 1380, the NAT GAS Act, legislation that was produced by billionaire T. Boone Pickens to benefit the natural gas industry. T. Boone Pickens is a major player in the natural gas industry, so he basically made H.R. 1380 to make himself richer. That’s why this blog has referred to H.R. 1380 variously as the “Pickens Your Pocket Boondoggle Bill,” and the “T. Boone Pickens Earmark Plan.”

The advertisements I saw left me troubled. They indicated that T. Boone Pickens is less tone deaf, and therefore potentially more successful, than the last time he tried to get the Congress to enact legislation that he wrote to further enrich himself.

That was the 2008 “Pickens Plan,” and it was even bigger rip-off than H.R. 1380. The “Pickens Plan” was a simple four-step strategy: (1) subsidize wind produced by T. Boone; (2) subsidize transmission towers to deliver T. Boone’s wind power to cities; (3) force Americans to buy wind power produced by T. Boone; (4) force American motorists to fill their cars with T. Boone’s “leftover” natural gas, the stuff that was displaced by T. Boone’s wind power.

The first time around, T. Boone Pickens thought he had all his bases covered. He’d long been a big GOP donor, so he had that going for him. He relied on Democrats’ reflexive support for unreliable, expensive “green” energy like wind. Just to be sure, he supported their campaign coffers, too. Finally, he had a great public relations hook: “energy independence.” He could show videos of American flag burning in the Middle East and promise to wean the U.S. off Saudi crude with T. Boone’s wind and gas.

It was a great plan…with one fatal flaw. T. Boone Pickens branded his Plan with his face! He actually labeled his self-enrichment scheme the “Pickens Plan.” A lot gets past the American electorate, but they are intrinsically suspicious of legislation written by billionaires. It was too obvious a huge special interest payoff. And so it failed.

The ads I saw this morning were ALL burning flags, and ZERO T. Boone Pickens. This worries me, because it’s a much more effective pitch than, “billionaire T. Boone Pickens deserves even more money.”

One hundred eighty-six Members of Congress have signed on to H.R. 1830, the New Alternative Transportation to Give Americans Solutions (NAT GAS) Act of 2011, better known at this Web site as the Pickens-Your-Pocket Boonedoggle Bill, in honor of its chief lobbyist and beneficiary, billionaire T. Boone Pickens.

The bill would provide targeted tax breaks to subsidize the manufacture and purchase of natural gas vehicles, installation of natural gas refueling infrastructure, and production of compressed and liquefied natural gas for use as motor fuel. The bill includes no overall budget authorization. Moreover, many of the provisions modify current sections of the tax code, which in turn refer to other sections, and the Congressional Research Service inexplicably has yet to provide a bill summary. So the total amount of the tax breaks is anybody’s guess.

Nonetheless, the final tab has got to be huge even by Washington standards. Each manufacturer could claim credits of $4,000 per vehicle up to an overall amount of $200 million per year. Each purchaser could claim credits ranging from $7,500 to $64,000 per vehicle depending on how much the vehicle weighs. Each property installing natural gas fuel dispensers could claim a credit up to $30,000 (or $100,000 – it’s unclear). Each maker of compressed or liquefied natural gas could claim a credit of 50¢ per gallon for every gasoline-equivalent gallon sold. With anywhere from 225,000 to 400,000 18-wheelers sold in the USA each year, the vehicle purchase credits alone could cost billions.

T. Boone’s lobbying for these tax subsidies is all about patriotism and energy security and has nothing to do with rent seeking or corporate welfare. Just ask him!  “I’m sure not doing this for the money,” the Texas Gas Mogul told New York Times columnist Joe Nocera.

Only the Shadow knows what lurks in the minds of lobbyists, but the circumstantial evidence is rather overwhelming. Pickens and his wife have a 41% ownership stake in Clean Energy Fuels (CEF), the Wall Street Journal reports. CEF installs natural-gas-vehicle fueling stations. The company describes itself as the “leading provider of natural gas fuel for transportation in North America.” The NAT GAS Act would reduce CEF’s tax liability while pumping up demand for its services. 

Anyone who can’t see rent-seeking in this picture presumably also believes that none of the bill’s 186 co-sponsors ever got a campaign contribution from T. Boone Pickens.

Investment analyst Todd Shriber finds that Pickens’s main company, BP Capital Management, held multi-million dollar stakes in several firms with major natural gas exposure at the end of last year. Below is a list of the firms, excerpts from their Web sites indicating their financial interest in natural gas, the dollar amount of BP Capital Management’s holdings, and the number of shares held.

Apache Corporation (“an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids”): $20.6 million, 165k shares

British Petroleum (“one of the world’s leading international oil and gas companies”): $48.2 million, 1.1 million shares

Chesapeake Energy (“America’s Champion of Natural Gas”): $31.0 million, 923.5k shares

Canadian Natural Resource (“one of the largest independent crude oil and natural gas producers in the world”): $15.7 million, 317.5k shares

Devon Energy (“a leading independent natural gas and oil exploration and production company”): $14.4 million, 157.2k shares

EOG Resources (“one of the largest independent [non-integrated] oil and natural gas companies in the United States”): $25.5 million, 215.0k shares

McMoran Exploration (“an independent public company engaged in the exploration, development and production of oil and natural gas in the shallow waters of the Gulf of Mexico Shelf and onshore in the Gulf Coast area”): $21.0 million, 1.2 million shares

 Murphy Oil (“produces oil and natural gas in the United States, Canada, the United Kingdom, Malaysia, and Republic of the Congo and conducts exploration activities worldwide”): $14.7 million, 205k shares

Noble Energy (“broadbased assets include both crude oil and natural gas resources, with exposure in the U.S. and internationally”): $35.6 million, 781k shares

National Oil Well Varco (“worldwide leader in providing major mechanical components for land and offshore drilling rigs”): $14.3 million, 180.0k shares

Occidental Petroleum (“an international oil and gas exploration and production company”): $22.5 million, 215.3k shares

Plains Exploration & Production Company (“primarily engaged in the activities of acquiring, developing, exploring, and producing oil and natural gas”): $22.9 million, 631.7k shares

Sandridge Energy (“diversified oil and natural gas company”): $26.2 million, 2 million shares

Suncor Energy (“In Western Canada, across the East Coast of Canada and internationally, Suncor explores for, develops and produces conventional oil and natural gas — from both onshore and offshore developments”):  $16.2 million, 360.5k shares

Weatherford International (“one of the largest global providers of advanced products and services that span the drilling, evaluation, completion, production and intervention cycles of oil and natural gas wells”): $25.1 million, 1.1 million shares

In total, then, in Dec. 2010, BP Capital Management held $354.9 million worth of stock in companies that would profit handsomely from a politically-contrived surge in natural gas demand. Pickens stands to gain hundreds of millions – perhaps billions — of dollars if Congress enacts his scheme to rig the motor fuel market in favor of natural gas.

The Wall Street Journal has a long piece today about the prospect of using the state to move part of the U.S. transportation fleet from oil to natural gas. It gives prominent voice to the massive public affairs campaign of T. Boone Pickens to add billions to his natural gas fortune as a swansong to a prosperous career.

This campaign takes the form of a bill embraced by ostensible fiscal hawks, causing an uproar from those conservatives who took umbrage at Members abandoning their pledges of fiscal sobriety at the drop of a billionaire’s phone call. This enabled the media to describe the Republicans’ ‘circular firing squad.’ Well played, gentlemen.

The vehicle was not Pickens’ first choice. His first choice was a windmill mandate, transparently pushed by a handful of gas interests, including Chesapeake Energy’s Aubrey McClendon, to put a green hat on their efforts to use the state to displace coal’s market. In this effort, they found natural allies in environmentalist special interests.

I happened to be in the room in 1997 with the American Gas Association, BP, and Enron as they worked with green pressure groups, as radical as the Union of Concerned Scientists as well as more mainstream, anti-coal activists like NRDC, to get a global warming treaty and a domestic cap-and-trade scheme. I couldn’t believe my ears and said so, which in a matter of weeks led to us parting ways.

When Pickens was pitching his Plan A in an off-the-record meting a few years ago, I congratulated him on discovering my old boss Ken Lay’s business plan: he had some gas interests, bought a bunch of windmills on the cheap because they aren’t economic investments, then set about to use his lobbying muscle to make them not economically viable, but rather, as President Obama is given to saying, “the profitable kind of energy.”

The windmill mandate flopped. So Pickens unloaded his windmills and reached up another sleeve. Now, the argument goes: (1) we have lots of natural gas, thanks to the hydraulic fracturing revolution in production; (2) oil is expensive; (3) therefore, we should move transportation onto natural gas, although this cannot happen without robbing taxpayer Peter to pay gassy Paul, according to anyone cited in the WSJ article.

Of course, we also have vast quantities of oil, likely all of it recoverable at a per-barrel price around half of where it stands today. So that’s not really much of an argument for such wrenching, expensive, uneconomic intervention, now is it?

But this is the sort of advocacy that bad ideas are forced to employ. As my CEI colleague Myron Ebell wrote:

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.

Given all of this, we have three takeaways from today’s Journal piece.

First, here is the chart of countries this idea seeks to have us be more like.

Message: be more like Third-World countries. But for Italy, which has long directed nearby North African gas into its economy, no other OECD country is big into this old idea. I know that history of saying “look at Spain” didn’t work out to well about the windmills, but countries without oil, like, say, über-green Germany, aren’t on the list. Why?

Second, the article acknowledges these countries have been doing this for a long time. Yet the Wall Street Journal’s pull-quote gives us the $5-$9 Billion Quote of the Day: “T. Boone Pickens on subsidies for natural-gas truckers: The government should provide five years of subsidies, ‘and then get the hell out of it.  It flies by then, or it’s a bad idea.’”

Yeah. Once you build a subsidy, and the constituencies dependent upon it, even if it doesn’t work Washington is pretty good about letting it expire. It hasn’t worked anywhere with decades of support. A clever man, Mr. Pickens.

Finally, the story admits that this very scheme was one of the ‘stimulus’ schemes. Mr. Pickens is calling for the ‘stimulus’ to continue, for his investments in the uneconomic, for 5 more years.

Stimulus. Subsidy. Can’t say it too many times. That’s what this is. Republicans, wise up.