Taxpayers Can't Afford Natural Gas Subsidies
05-11-2012 at 01:33 pm - David Williams - Posted in: Taxpayers Protection Alliance, Subsidy, Natural Gas, NAT GAS Act, Energy, David Williams - 0 Comment

Usually when the government offers your hard-earned tax dollars to an energy company, the money goes to a start-up company in a “promising” industry.  The logic, albeit flawed, is that the company requires only a minuscule amount of seed money to catapult it beyond the valley of death and make it commercially competitive in the marketplace.  The fact of the matter is this sort of subsidy rarely works.  Either the industry is hooked for life on government dollars or it fails and your tax dollars go down the drain with it.  If subsidies were truly successful, the country would be filled with cars running on hydrogen. 

Even though Solyndra has received all the attention lately, don’t be fooled into thinking that the government only distributes subsidies to nascent industries. When it comes to distributing your tax dollars to pet interests, the government is an equal opportunity dispenser.  And, by no means does it discriminate against those sectors that are already very profitable and have no need for government funds.  Rest assured that the government spreads your wealth – that is rightly yours – among many industries.  One of its favorites du jour is the natural gas industry.

To begin, let’s set the record straight about what the potential special interest carve outs for natural gas entail.  Despite how some may spin it, they are not widely available tax credits that most industries receive. No, these are specialized and targeted and meant to benefit the natural gas industry.  The most popular subsidy for natural gas that Washington is currently considering is the NATGAS Act, which is a preferential tax credit intended to increase the production, use, and purchase of natural gas vehicles. 

Supporters claim that this credit is necessary to encourage companies to begin transitioning their fleets to natural gas trucks.  The biggest problem is that the price of natural gas is at a 10-year low.  Yet despite its near-record low price, converting fleets to natural gas is still not the most economical option at this time.  If converting to a natural gas fleet becomes the most cost effective option, the company won’t need a government carrot to encourage it to make the change.  Translation: consumers and the free market are capable of determining the best product to meet their needs at the lowest cost. 

The federal government would better serve all Americans by creating an atmosphere where industries can compete on their own merits, in an environment void of cronyism and favoritism.  Subsidies harm consumers by artificially raising prices and forcing them to pay more for what are likely inferior products.  Because by their very nature, subsidies often go to things that are not commercially viable on their own, they end up creating a market that disappears as soon as its handout does.  An excellent example is the panic in the wind industry.  Even with twenty years of subsidies under its belt, the industry still can’t stand on its own two feet and is crying for more subsidies since its tax credits will disappear at the end of this year unless Congress acts.

Just like other industries that receive handouts, the only type of jobs that natural gas subsidies may create are those for lobbyists to ensure its tax credit continues through the end of time.  Rather than pushing industries or technologies that are not ready for primetime into the marketplace, perhaps the government could better spend its time rolling back regulations that are not only unnecessary, but create disincentives for new companies from entering the marketplace. 

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