North Carolina Proves No Need for NAT GAS Act

In mid-March, the Senate rejected an amendment to the Highway bill that would have enacted the long-delayed and reputed NAT GAS Act (H.R.1380). The bill would provide generous subsidies for all segments of the natural gas vehicle industry – from production of the vehicles to the purchase and installation of fuel pumps to the purchase of the vehicles and fuel itself. Heritage Action has opposed this bill since it was introduced last April because it tried to pick winners and losers, Solyndra-style.

But unlike solar, the natural gas vehicle industry has been doing just fine this past year, without the new subsidies. Why?  Because natural gas is cheaper than gasoline and abundant. For many, switching to natural gas just makes market sense, which is why the industry is moving forward. But that’s not enough for some Members of Congress, who want to help their states by tilting the playing field with support for the NAT GAS Act.

One perfect example is North Carolina.

Last week, the North Carolina legislature passed a measure that would direct schools to purchase buses that run on compressed natural gas, because it’s cheaper than diesel. Presumably, this measure has obviously been in the works for some time and makes sense for the state. It also illustrates why the NAT GAS Act is not needed. North Carolina was planning on converting their school buses to natural gas without the subsidies provided by the NAT GAS Act. The state didn’t need those subsidies to boost their decision, which is one of the main arguments in favor of H.R.1380. Proponents claim the bill is needed to jumpstart the nascent industry (a claim used for all new subsidies), but it’s clear that this industry is moving along without the help.

You see, when a product is available (like natural gas) that is cheaper, cleaner and more abundant than another, more prominent product (like oil), then free market forces (consumers) switch to the new product because it makes economic sense. This is how the market is supposed to work.  However, when the government gets involved, expensive products are made artificially cheaper (like wind and solar) and can never compete on their merits.

What you may not know is that 62% (including 2/3 of Republicans and a majority of Democrats) of North Carolina’s House delegation signed on to the NAT GAS Act. It is impossible to say if these lawmakers were pushing the NAT GAS Act as an incentive that their state didn’t need or with the intention of rewarding their state for something it was already planning to do.

North Carolina made a rational decision based on local concerns – the need to save money. They’re switching to natural gas because that will save them money, not because they will be getting a new round of federal subsidies. This is how the market works, and is exactly why the NAT GAS Act is so unnecessary.

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