US chemical firms critical of new natgas vehicle stimulus bill

06 April 2011 21:58  [Source: ICIS news]

WASHINGTON (ICIS)--US chemical producers on Wednesday warned that a new bill in Congress to stimulate use of natural gas as an automotive and truck fuel could distort the nation’s natural gas market and drive prices higher for consumers and industry alike.

The Industrial Energy Consumers of America (IECA) said that a bill introduced on Wednesday to stimulate use of natural gas as a transportation fuel “is not sound economic or energy policy”.

About half of IECA’s 39 corporate members are chemical producers, along with steel, glass, paper and brick makers - all of whom are major consumers of natural gas, electricity or both.

US petrochemical producers and downstream chemical makers are heavily dependent on natural gas as a feedstock and as an energy fuel.

Introduced by a bipartisan group of House members, the bill, titled “New Alternative Transportation to Give Americans Solutions” (NAT GAS Act), would provide tax incentives for the purchase of natural gas-fuelled vehicles (NGVs), construction of natural gas retail fuelling stations and use of natural gas as a vehicle fuel.

The bill also would provide a new tax credit for auto manufacturers to produce more NGVs, and would provide incentives for conversion of large commercial vehicle fleets - such as service companies, utilities and taxis - from gasoline to natural gas.

But Paul Cicio, president of IECA, warned that Congress should not intervene in what should be market-driven energy choices.

“Greater demand of natural gas in the transportation sector is the responsibility of markets, not Congress, subsidies or mandates,” he said.

“Subsidising natural gas demand is not sound energy or economic policy and will have the long-term effect of increasing the price of natural gas to all consumers,” he added.

He said that if natural gas provides added value to vehicle owners and fleet operators, “private sector investments will be made and demand for natural gas will increase”.

“Given the reported abundant supply of natural gas and the high price of existing transportation fuels,” he said, “natural gas should be able to compete without subsidies.”

But Congressman John Sullivan (Republican-Oklahoma), chairman of the House Energy and Power Subcommittee, said his bill “contains zero government mandates and zero subsidies”.

“What the bill offers is incentives in the form of limited tax credits to give American businesses and families fuelling options in light of 30-month-high gasoline prices”.

Sullivan noted that US domestic natural gas supplies are increasingly abundant, and that “it costs one-third less to fill up a vehicle with natural gas than traditional gasoline”.

The bill's backers also argue that substituting natural gas for gasoline in the US transportation fuel mix would lessen US dependence on foreign oil imports and reduce pollution.

The bill has 76 bipartisan cosponsors and also has been endorsed by President Barack Obama, so its chances of passage by Congress and approval by the president appear to be good.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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