Media Gift: Republicans, Pickens' New Subsidy and the 'Circular Firing Squad'

The Wall Street Journal has a long piece about the prospect of using the state to move part of the U.S. transportation fleet from oil-derived fuels to natural gas. It gives prominent voice to the massive public affairs campaign of T. Boone Pickens, undertaken in the apparent quest for a legacy, locking in subsidized billions for his natural gas fortune as a swansong to a prosperous career.

This campaign takes the form of a bill embraced by ostensible fiscal hawks, causing an uproar and enabling the media to describe the Republicans ‘circular firing squad’, of a base taking umbrage at Members abandoning their pledges of fiscal sobriety at the drop of a billionaire’s phone call. Well played, gentlemen.

The vehicle was not Pickens’ first choice. His first choice was a windmill mandate, transparently pushed by a handful of gas interests, including Chesapeake Energy’s Aubrey McClendon, to put a green hat on their efforts to use the state to displace coal’s market (one of McClendon’s group’s first television ads stated up front, “more wind means more gas”: windmills don’t work that often, so they need ‘backup’ to run wastefully all the time, cycling up and down, and for various reasons inevitably this means gas-fired electricity).

Coal was difficult to budge, what with centuries of it domestically, so some gas folks have been helping the greens’ war against coal for about two decades. This is their latest foray.

And, astroturfers, please hold the mail. I happened to be in the room in 1997 with the American Gas Association, BP, and Enron as they worked with green pressure groups, as radical as the Union of Concerned Scientists as well as more mainstream, anti-coal activists like NRDC, to get a global warming treaty and a domestic cap-and-trade scheme. I couldn’t believe my ears and said so, which in a matter of weeks led to us parting ways.

When Pickens was pitching his Plan A in a particular off-the-record meting a few years ago, I congratulated him on discovering my old boss Ken Lay’s business plan: he had some gas interests, bought a bunch of windmills on the cheap because they aren’t economic investments, then set about to use his lobbying muscle to make them — not economic, but as President Obama says over and over — “the profitable kind of energy”.

The windmill mandate belly flopped. So Pickens unloaded his windmills and reached up another sleeve. It entails keeping his conservative friends close, and the left-wing pressure groups even closer. All of which is fine, except the nominal conservatives going along with it.

Now, the argument goes, we have lots of natural gas domestically so, with oil at a high price we should move transportation onto natural gas; although this cannot happen without robbing taxpayer Peter to pay gassy Paul, according to anyone cited in the WSJ article.

Of course, we also have vast quantities of oil, likely all of it recoverable at a per-barrel price around half of where it stands today. So that’s not really much of an argument for such wrenching, expensive, uneconomic intervention, now is it?

But this is the sort of advocacy that bad ideas are forced to employ. As my CEI colleague Myron Ebell wrote:

Why are billions of dollars of taxpayer-funded subsidies needed? According to T. Boone Pickens’s web site, it’s because natural gas vehicles are cheaper to operate than gasoline or diesel vehicles: “Even with higher initial costs (which will disappear as manufacturing ramps up) the life-cycle costs of NGVs [natural gas vehicles] are significantly lower. Fuel costs are at least 15 percent less using natural gas rather than gasoline or diesel.”

So people need to be paid in order to make them want to buy vehicles that will save them money. Yes, that makes sense: I always prefer the more expensive product unless there is a government rebate for the cheaper one.

Given all of this, we have three takeaways from today’s Journal piece.

First, here is the chart of countries this idea seeks to have us be more like.

Message: be more like Third-World countries. But for Italy, which has long directed nearby North African gas into its economy, no other OECD country is big into this old idea. I know that history of saying “look at Spain” didn’t work out to well about the windmills, but countries without oil, like, say, über-green Germany, aren’t on the list. Why?

Second, the article acknowledges these countries have been doing this for a long time. And they all still operate as a government program because it is not economic.

Yet the pull-quote gives us the $5-$9 Billion Quote of the Day: “T. Boone Pickens on subsidies for natural-gas truckers: The government should provide five years of subsidies, ‘and then get the hell out of it. It flies by then, or it’s a bad idea.'”

Yeah. Once you build a subsidy, and the constituencies dependent upon it, even if it doesn’t work Washington is pretty good about letting it expire. It hasn’t worked anywhere with decades of support. A clever man, Mr. Pickens.

Finally, the story admits that this very scheme was one of the ‘stimulus’ schemes. Mr. Pickens is calling for the ‘stimulus’ to continue, for his investments in the uneconomic, for 5 more years.

Stimulus. Subsidy. Can’t say it too many times. That’s what this is. Republicans, wise up.


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