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Patience pays off for Pickens Plan

White House impetus gives new drive to natural gas for transport

BILLIONAIRE T Boone Pickens has gained an important ally in his campaign to curb US oil imports by converting the country’s diesel-guzzling 18-wheelers to domestically abundant natural gas.

In announcing his new energy policy on 30 March, President Barack Obama called for reducing oil imports by one-third over the next decade, in part by switching to more fuel-efficient vehicles. He also urged Congress to pass the Nat Gas Act, a refreshed version of last year’s unsuccessful legislative proposal to promote the production and sale of natural gas-powered cars and trucks. Pickens was one of the bill’s most ardent backers.

Almost three years have passed since the Texas financier unveiled his plan to halt what he called “the greatest transfer of wealth in history” – a reference to the vast sum of money being paid to Opec nations and others to meet the US’ immense need for oil imports. In 2008, oil prices soared to $140 a barrel, putting the annual price tag for US imports at about $0.7 trillion. Analysts say the bill is once again creeping up to similar levels.

The Pickens plan

The original Pickens proposal called for private-sector industry to invest about $1 trillion to build wind farms with a total capacity of 200 gigawatts. The government would pay for transmission lines to connect the facilities to the power grid. The natural gas that was being used for power generation would then be diverted to the transport sector to fuel thousands of trucks and other heavy vehicles. These measures, Pickens claimed, could reduce oil imports by about 43% within a decade.

A few months later, Pickens tweaked his plan to focus almost exclusively on natural gas, which was becoming more abundant and less expensive, thanks to development of the country’s huge shale-gas reserves. To underscore his personal commitment, the entrepreneurial octogenarian initiated a $58m national promotional campaign, which he financed himself.

The plan, however, relies heavily on expansion of federal tax credits. Almost a year after Pickens announced his proposal, the New Alternative Transportation to Give Americans Solutions (Nat Gas) Act of 2009 was introduced into the US House of Representatives. The bill, which offered tax breaks for natural gas-powered vehicles and fuelling stations, had significant bipartisan support. A similar measure was submitted to the Senate.

Congress, however, had to contend with other, more-pressing issues, ranging from health-care reform to offshore drilling issues raised by the Deepwater Horizon disaster in the Gulf of Mexico. As a result, both bills died from lack of action.

Meanwhile, critics hammered the Pickens Plan, citing obstacles such as the high cost of converting trucks to compressed natural gas and the shortage of refuelling stations around the country. The plan also attracted questions about Pickens’ motives; he founded the predecessor company to Clean Energy, a California firm that operates more than 200 natural-gas filling stations in 20 states.

Undaunted, Pickens has continued promoting his plan at venues ranging from TV talk shows to college campuses, and now the tide may have turned in his favour. Political unrest throughout the Middle East and North Africa has highlighted the vulnerability of foreign oil-supplies. Crude-oil prices above of $100/b and gasoline prices that have risen by 30% over the past year have encouraged the pursuit of alternative fuels, just as low natural gas prices have made this option especially attractive.

In this more natural gas-friendly environment, the revamped Nat Gas Act was expected to be submitted to the House on 6 April. In addition to the two Republicans and two Democrats who are introducing it, the legislation has 76 co-sponsors.

But the battle for passage has just begun. As legislators struggle to reduce the staggering federal deficit, authorising another subsidy may not be popular.

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