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T. Boone's Natural Gas Crusade

Pickens Looks to Profit from Compressed Nat Gas (CNG)

Written by Brian Hicks
Posted February 4, 2010

While flipping through channels a few nights back, I came across T. Boone Pickens on John Stossel's new show (scroll down for the clip).

The Texan billionaire was pitching his revised "Pickens Plan" for energy independence. The latest version advocates compressed natural gas as a replacement for diesel fuel.

Stossel — a libertarian — thinks T. Boone's plan is nothing more than dressed-up corporate welfare; Pickens says that CNG needs "help" from the government to get off the ground. The contrast made for a good show.

Pickens' plan relies on a big expansion in federal tax credits. The aim is to get trucking companies to switch their fleets from diesel to CNG. His goal — to eliminate America's dependence on imported diesel — seems like a pipedream... but I have to admit that the concept is compelling.

What's not to like?

Energy independence, less pollution, and cheaper fuel. The new Pickens Plan looks great on paper, at least. Major players are lining up behind it, from Harry Reid to Orrin Hatch. There's a bill floating around Capitol Hill to fund the tax credits (H.R. 1835), and Pickens says it could pass by May 2010.

Risks, Pitfalls, Conflicts of Interest

There are plenty of CNG critics out there. We heard from them last month, responding to a CNG article by my colleague Christian DeHaemer (founder and editor of Crisis and Opportunity).

Here are some thoughts from an Energy and Capital reader, Lou:

Do not hold your breath on CNG vehicles in general usage. Because of the high pressure tanks, such vehicles are or should be limited to use by fleets where trained technicians can fuel and maintain them. Ford and GM both gave up on their programs when 2 vehicles blew up during the fueling process because of tank failures. 6000 PSI gas, even inert nitrogen, is not something the general public is qualified to play with. Any new program for such vehicles will be instantly aborted when the first one blows. I know, because I was involved in those programs, trying to design fuel injectors for some. Very tricky business because one is dealing with a gaseous media.

Pickens may be smart, and he may be rich, but he's just proven that he does not understand the issues of alternate sources of energy. I knew the minute I first read of his scheme that he had not even been reading the papers re the NIMBY issues with wind turbines. Rich liberals that want this transition scream the loudest when anyone mentions wind turbines in their back yards. See: Teddy Kennedy.

Reader Wallace Henderson shared his first-hand experience running a fleet of CNG-powered airport shuttles:

Before you jump fully on the CNG bandwagon check the New Zealand experience. On my first tour of the country in 1988 almost every filling station had a CNG pump. On my last trip in 2007 very few had such pumps.

Personal experience trying to run an airport shuttle van service with CNG powered vehicles adds to my skepticism. To get about half the range of a tank of gasoline required a very large CNG tank pressurized to 3000 psi which was once the favored component in IEDs in the Middle East. Also filling time added about an hour of unproductive time on the clock for the drivers. After a very sincere try at being green we gave up after 9 months. Only government fleets where cost effectiveness is not a requirement are compatible with CNG.  

Lou and Wallace highlight some of the biggest hurdles CNG needs to overcome. But with dozens of cities around America running fleets of CNG buses, the safety issues seem manageable — at least for larger fleets.

So far I'm not sold either way. Both sides make good points.

My biggest problem is that success of the plan hinges on tax breaks, at a time when the government is near-broke.

Conflict of Interest?

T. Boone could get even richer if his plan succeeds, thanks in part to the massive tax credits he's pushing. For example, he's the largest shareholder in Clean Energy Fuels Corp (NASDAQ: CLNE), a company poised to profit from the buildout of CNG fuel stations. Filling stations that add natural gas would also get up to $100,000 in tax credits under H.R. 1835.

This conflict doesn't mean the Pickens Plan is a scam, or that it won't work. But it does raise questions about T. Boone's partiality. So while the Pickens Plan is sometimes sold as humanitarian effort, we should remember that big business is the real driving force behind it.

Chesapeake Energy (NYSE: CHK), a natural gas giant, is also working with Pickens to promote CNG. They run, which promotes expanded use of the fuel. They're also running TV ads in support of Pickens.

Like Stossel, I generally don't like the government meddling in markets. T. Boone argues that a tax credit is different from a handout, since it technically just reduces a company's tax liability... But it still comes down to the government playing favorites.

Here's the clip from Stossel's show. It's worth a watch.



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