Pickens Plan for Natural Gas Returns

Brian Hicks

Written By Brian Hicks

Posted April 15, 2013

Natural gas has become the hottest commodity in energy as it is more and more prevalent throughout the world each day. It can be used in such a wide array of ways: generating electricity, powering home appliances, transportation, aviation, farming, and in the production of products such as glass, plastics, steel, and paint. Its uses are endless.

Plus, it burns cleaner than other fossil fuels, producing less carbon dioxide and pollutants than conventionally used forms like coal and oil. So why, then, is the United States — with more natural gas than anywhere else in the world — not taking full advantage of this precious resource?

T. Boone Pickens, American businessman and billionaire, has a few ideas. His proposed “Pickens Plan” from 2008 is an energy policy that would reduce the U.S. dependency on imported oil. And now, in 2013, Pickens feels as strong as ever about those ideals.

T Boone PickensHe’s taken it upon himself to call out the folks on Capitol Hill in an article he wrote for Bloomberg Businessweek, using rather aggressive language to denote U.S. lawmakers and saying, “It’s just amazing to me that [they]…don’t see this opportunity and try to capitalize on it.

In his plan, the U.S. would focus on wind for power, and natural gas usage would shift from power generation to fuel for the transportation sector.

According to Pickens, this energy plan would wipe out the annual $300 billion the U.S. spends on foreign oil.

And it all starts with transportation – that’s the key! When Pickens first proposed his plan in 2008, there were 200,000 NGVs (natural gas vehicles) in the world, but since then that’s risen to over 16 million. So the world is definitely taking notice.

China alone, according to Businessweek, already has 40,000 trucks running on LNG (liquefied natural gas), and the nation’s importing most of its supply.

But right here at home, where the stuff is practically pouring out of our ears, Pickens believes we’re not properly utilizing one of our greatest resources.

And it’s simple. To get the ball rolling and the wax out of our ears, Pickens says focus needs to be put solely on heavy-duty trucks by giving them a tax break. Start with that, and make it a pay as you go kind of deal. In Pickens’ plan, a break would be given to initiate the conversion of trucks to natural gas, and then a tax would be imposed on the natural gas as it’s used.

The main competition for natural gas is diesel fuel. If the 8 million or so heavy-duty diesel trucks all converted to natural gas with a little incentive, that right there would boost consumption by about 15 to 20 billion cubic feet a day.

The extra demand generated from fueling those trucks with natural gas would boost prices, and that, in turn, would jumpstart drilling that has stalled due to the low prices.

And even with a tax imposed on the use of natural gas, it would still come out cheaper than diesel. Pickens estimates that at today’s prices, natural gas fueling would cost about half the price of diesel while allowing the driver to burn a much cleaner fuel.

A Look Around

NGV Global provides a great indication as to where the U.S. stacks against the rest of the world in relation to NGVs, and the findings are rather sad.

In data collected from year ending 2011, Iran and Pakistan led the way with nearly 3 million NGVs on the road; Argentina, Brazil, China, and India all had at least a million. And then there is Uzbekistan, the Ukraine, Thailand, and Colombia, who all more than double that of the U.S.

The U.S. has a measly 123,000 NGVs in operation – a number far too low for a country that now produces roughly 20 percent of the world’s natural gas.

U.S. Efforts

Maybe Mr. Pickens is right to call out Congress the way he has done; actually, he’s pretty dead on with his comments, and while his plan seems to fall on deaf ears year after year, there’s no doubt that the U.S. can do much more. There are currently some efforts being made.

Honda (NYSE: HMC) released a passenger Civic last year that runs completely on natural gas. And this year Ford (NYSE: F), General Motors (NYSE: GM), and Chrysler all have vehicles that will be fueled by gasoline and natural gas.

Consumers can also invest in a conversion kit to allow a vehicle to run on natural gas. Such a kit starts at around $1,000.

And while it may be moving at a snail’s pace, and while the numbers are far less than the countries listed above, fueling stations are increasing in numbers, a sign that natural gas is on the rise here in the states.

Clean Energy Fuels Corp (NYSE: CLNE) is leading the charge in fueling station construction this year as it plans to put up 150 new stations across the country – mostly at Pilot Flying J truck stops – located off major highways.

The U.S. most definitely isn’t adopting the NGV as quickly as one T. Boone Pickens may like, but natural gas is on the rise, and it will likely gain steam heading forward.


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