Billionaire Texas oilman T. Boone Pickens is still fiercely championing legislation that would create billions of dollars in tax credits to encourage businesses and motorists to adopt natural gas powered vehicles — but his circle of fans on Capitol Hill is shrinking.
Four Republicans who had signed on as co-sponsors of the so-called Natural Gas Act withdrew their backing this month, even as conservative groups such as the Club for Growth and Americans for Tax Reform stepped up campaigns against the legislation they say is full of unwise “market-distorting tax credits.”
Three of the GOP lawmakers withdrew their sponsorship this week: Rep. Tim Griffin of Arkansas, Rep. Glenn Thompson of Pennsylvania and Rep. Todd Akin of Missouri. Rep. Stevan Pearce, R-N.M., asked to be removed as a bill cosponsor on May 10.
Griffin said his decision followed weeks of analysis about the bill. The measure “is well intentioned in that it seeks to promote natural gas as a clean burning, abundant and American energy source,” Griffin said in a statement. “However, I am concerned that (the bill) might be inconsistent with my goal of simplifying the tax code by lowering the overall tax rate and simultaneously ending industry-specific incentives.”
Fiscally conservative groups who support a fundamental rewrite of the U.S. tax code — including a wipeout of specific tax incentives, credits and deductions — have been arguing that the Natural Gas Act is an unfair giveaway to a single industry. Similar opposition also has been mounted against existing subsidies for ethanol, which critics say are designed mainly to benefit corn-growing farmers.
Grover Norquist, the head of Americans for Tax Reform, made his case against the natural gas bill in a letter to House members earlier this month. His chief argument: Tax policies for specific energy sources, be they natural gas or renewable power, skew the energy market away from the most reliable, cheapest options.
An energy market which most benefits consumers is one largely absent of government intervention,” Norquist wrote. “Conservatives must begin peeling back the numerous duplicative regulations and laws that facilitate or impeded certain types of energy. Unfortunately, HR 1380 takes the opposite approach — piling more rules, grants and tax policies onto America’s already encumbered energy sector.”
Chris Chocola of the Club for Growth added his voice to the chorus Thursday, when he posted a blog entry on Redstate.com decrying the bill. Chocola took issue with a provision in the measure that he says lends credibility to the Environmental Protection Agency’s ability to regulate greenhouse gas emissions. “Several fiscal conservatives in the House have been duped into thinking this is a good bill,” Chocola said.
The measure still has 187 co-sponsors in the House, with more than 100 Democrats on board. The sponsorship list looks like a who’s who of the nation’s shale plays, with plenty of supportive representatives hailing from Arkansas, Oklahoma, Texas, Pennsylvania and other areas where natural gas production is under way.
For supporters, the allure is building a stronger market for natural gas now being extracted from the dense shale rock formations nationwide — and at the same time helping the U.S. transportation sector transition away from dirtier burning petroleum-based fuels.
The legislation would offer a tax credit covering as much as 80 percent of the incremental cost of buying a natural gas vehicle (up to $7,500 for passenger vehicles and $64,000 for ultra heavy trucks). It also would provide tax credits to help cover the cost of building natural gas filling stations and other infrastructure to support the cars.
Some critics say that spending is unwise in the current fiscal environment, as Congress works to pare the federal budget deficit. And it could become increasingly difficult for backers of so-called “fundamental tax reform” to square their support for flattening the U.S. tax code with any endorsement of legislation to offer tax breaks for natural gas vehicle purchases.
Another big question for lawmakers who support the bill is how to pay for the added tax breaks. Some Republican lawmakers may be reluctant to offset new natural gas vehicle tax incentives by hiking taxes elsewhere, such as by slashing tax breaks for oil producers.
But there are other concerns on Capitol Hill, FBR Capital Markets analyst Benjamin Salisbury noted in a research note this morning. And they are tied to environmental concerns about the hydraulic fracturing process used to unlock natural gas.
Hydraulic fracturing injects mixtures of water, sand and chemicals deep underground and at high pressures to break up dense shale rock. The decades-old technique is being used in combination with horizontal drilling to extract previously unrecoverable natural gas from shale formations nationwide, but environmentalists have warned about the high water demands of the process as well as the risks that water supplies could be tainted by gas that escapes from poorly cemented wells.
“Many Democrats (are) ambivalent about shale gas,” and plenty of “environmentalists remain concerned about using resources to fund a program that encourages hydraulic fracturing,” Salisbury said. “We see potential support for natural gas sector incentives as hindered by the controversy. We would expect progress of the Nat Gas Act to be used as an opportunity to attach environmental regulation of hydraulic fracturing.”