Cronyism Chronicles: Who Would Have Benefited from the NAT GAS Act?

Before the Senate rejected the NAT GAS Act (H.R. 1380), we warned that the bill would engender cronyism and distort the free market in favor of a select few and at the expense of taxpayers.  The cherry on top was that it would do nothing to help consumers; in fact, natural gas infrastructure investment was already taking off before this bill existed.  We explained in our key vote against this counterproductive legislation:

The free market does not need taxpayer-funded subsidies to choose the next winning technology.

According to recent news reports, one of Senator Robert Menendez’s (D-NJ) most generous donors stood to gain financially if the bill became law.  Menendez, of course, was one of the bill’s primary backers in the Senate:

GFS, as the company is known, designs, manufactures and sells products to convert diesel-fuel fleets to natural gas. 

At the same time, Menendez emerged as a principal supporter of a natural gas bill that would boost tax credits and grants to truck and heavy vehicle fleets that converted to alternative fuels. The bill stalled in the Senate Finance Committee, and after it was revived in 2012, the NAT GAS Act failed to win the needed 60 votes to pass.

While the bill was under consideration between 2009 and 2011, the former consultant for GFS spent $220,000 lobbying Menendez’s staff and other congressional and federal officials on the act’s provisions as well as other regulatory issues, according to interviews and Senate records.

There is no evidence that Menendez offered direct help or intervened on behalf of the company or Melgen. Instead, the connection between the two men’s interests in natural gas is the latest example of the close symmetry between the senator — who recently rose to become chairman of the Senate Foreign Relations Committee — and his millionaire backer. It illustrates the way Menendez’s political clout has at times overlapped with Melgen’s financial investments.

It was evident that the motives were political and that cronyism was at play.  In fact, the bill was entirely nonsensical:

Why would these Members of Congress want to both subsidize natural gas vehicles while making their fuel more expensive?  After all, the allure of natural gas vehicles is the abundant supply of low cost of fuel.

[I]n reality, the legislation is a solution in search of a problem.

This is the problem when politicians pick winners and losers: the appearance – real or not – of impropriety.  Americans look at Washington and see politicians unconcerned with helping citizens, businesses, taxpayers or consumers.  They think support for legislation springs, instead, from lawmakers’ desire to gain political favor with cronies.  The industry and investor support for the NAT GAS Act has many layers, some of which are unfolding precisely as we warned.

We don’t have a crystal ball; we just have common sense.

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