NAT GAS Act hurts Manufacturing Sector

In Congress’s never-ending quest to provide subsidies to claim they’re working for the American people, they often (let’s say never) think about the consequences of such handouts. When we talk about picking winners and losers, we often focus on who is being classified as a “winner” and broadly discuss the “losers” as the taxpayers who are footing the bill for the “winners.”

But aside from taxpayers, there are other “losers” when the government decides who gets to succeed and who doesn’t. A perfect example is currently taking place with regards to the NAT GAS Act, which would provide subsidies for all aspects of the transportation side of the natural gas industry – including the production of the vehicles to the purchase and installation of fuel pumps to the purchase of the vehicles and fuel itself.

In addition to taxpayers, the manufacturing industry will also be a “loser” in the government’s eyes, as the industry will suffer due to a rapid and market-distorted increase in demand, as the president of the Industrial Energy Consumers of America (IECA), Paul Cicio, explains in testimony:

“Higher demand places upward pricing pressure on natural gas and raises manufacturing costs of natural gas and electricity directly impacting competitiveness. In this case, the transportation sector, including corporate fleets, is a winner and manufacturing and other natural gas and electricity end-users lose.


“IECA is becoming very alarmed at the ever increasing potential demand and overreliance on natural gas. While we have an abundant supply, it appears that we also have explosive potential demand due to the suite of EPA regulations on the electric utility generators that could shut down up to 81,000 MW of coal-fired power generation according to one Federal Energy Regulatory Commission report, EPA regulations on industrial boilers; one approved and fourteen applications to export natural gas, and increased use of natural gas by the industrial sector. Total potential demand could increase 45 percent over the Energy Information Administration base case for the period of 2012 to 2020.

“While it appears that we have an abundant supply of natural gas, manufacturing is concerned about the growing threats to continued robust and economic production of natural gas. There are at least three potential major barriers: 1) Public opinion concerns regarding drilling and hydraulic fracturing; 2) government regulation and 3) actions by environmental organizations. Regarding government regulation, we note that the Bureau of Land Management (BLM) has proposed to regulate hydraulic fracturing on federal lands and that the EPA has regulated drilling emissions. The EPA gives every indication that it intends to regulate drilling and hydraulic fracturing on public lands where most of the natural gas supply is being currently produced. This must be done carefully so that environmental objectives are achieved while allowing economical production without drilling delays.”

A gradual increase in demand, as would come naturally when the government is not involved at the level the NAT GAS Act would impose, is something the manufacturing industry can handle. As demand grows at a steady pace, manufacturing would be able to accommodate, but if demand suddenly lurches forward and doubles or even triples, that would require the manufacturing industry act accordingly, which could mean job losses. See…winners and losers.

Mr. Cicio goes on to explain that the natural gas transportation industry doesn’t even need taxpayer help (something we’ve been saying for well over a year):

“The favorable economics and environmental advantages between natural gas and transportation fuels such as diesel and gasoline is driving the market toward greater use of natural gas in the transportation sector. The market is working and government legislation and/or incentives are not needed.”

Mr. Cicio concludes that the best way to pick winners and losers is to simply get out of the way, allowing the free market to take its course:

“If Congress ‘is’ going to get in the business of picking winners and losers – we urge you to ‘pick’ manufacturing. Remove barriers that may prevent the manufacturing sector from using our nations’ abundant supply of natural gas to build or expand factories and use more natural gas to fuel cogeneration facilities that would increase competitiveness, capital investment, economic growth and jobs.”

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