PYLE: Natural gas subsidies a boon for T. Boone

Wealthy investor predicted his own bad behavior

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Billionaire tycoon T. Boone Pickens Jr. recently has stepped up efforts to press for Congress to pass a sweeping natural gas subsidy package known as the NAT GAS Act of 2011. The Pickens-backed proposal would enact a host of goodies for the industry: subsidies totaling $11,500 per car; $64,000 for commercial natural gas trucks, depending on their size; and up to $100,000 for retailers to install natural gas infrastructure at filling stations.

By Mr. Pickens‘ own estimate, the cost to taxpayers to put 140,000 commercial natural gas trucks and the necessary fueling stations into operation would be $5 billion over five years. However, add in the cost of the passenger-vehicle subsidy at an assumed sales rate of 1 million natural gas cars and 100,000 small natural gas trucks each year, and the price tag would be $13.8 billion per year, without counting the bigger subsidies for large trucks and filling stations.

Mr. Pickens presents the subsidies as a patriotic alternative to buying oil from the bad guys at the Organization of Petroleum Exporting Countries. An oil insider himself, Mr. Pickens is the spokesman who is here to impart sage advice about a subject he knows all too well.

Admittedly, Mr. Pickens is convincing in his turn as the concerned citizen - no one likes buying oil from bad guys. However, pull back the curtain on his substantial financial investments in the natural gas transportation fuel industry, and it becomes obvious that Mr. Pickens probably isn’t getting up on the soapbox just for your benefit. Most tellingly, Mr. Pickens even has gone so far as to accuse anybody who opposes the measure as self-serving: A recent Pickens op-ed column speculates, “Could [U.S. Representative Mike] Pompeo’s opposition to the NAT GAS Act be driven by his campaign donors?”

Perhaps Mr. Pickens hasn’t taken a look at his portfolio lately.

As the founder and biggest shareholder of Clean Energy Fuels, the largest provider of natural gas transportation fuel in North America, Mr. Pickens stands to profit significantly from federal natural gas subsidies. Furthermore, as chairman of BP Capital Management, a hedge fund that invests in energy companies, Mr. Pickens has put a lot of skin into the natural gas game. In fact, BP Capital’s August 2010 filing with the Securities and Exchange Commission shows that the company doubled down on natural gas stocks, adding 314,865 shares of the onshore shale-gas driller Chesapeake Energy and nearly 1.2 million shares in several other large natural gas firms.

Mr. Pickens‘ confidence in natural gas is understandable; advances in drilling technology have made it a booming commodity, and it has a promising future as a cheap, efficient energy source. He has invested accordingly, and should everything pan out, he will reap substantial rewards.

However, his large financial stake in natural gas also means that the public can, and probably should, question his motivation for wanting taxpayers to subsidize his investments. It very well could be the case that Mr. Pickens has done some soul-searching and has dedicated himself to promoting natural gas for the good of the republic. But where there’s smoke there’s fire, and the more plausible explanation for Mr. Pickens‘ involvement probably can be found by looking at how it benefits his bottom line.

Nor should the public be immediately convinced of Mr. Pickens‘ argument that he is simply putting his money where his mouth is and that he, as an already wealthy businessman, has less of a profit-driven motivation. Mr. Pickens addressed this very issue in his 1987 book “Boone,” in which he wrote, “I believe the greatest opportunity lies in a free marketplace. There are powerful forces afoot trying to restrict that freedom in the interests of the vested and already wealthy. I am talking about a relatively small collection of corporate executives who would use the engine of American commerce for their own narrow ends.”

Just how prescient those words would turn out to be, Mr. Pickens himself could not have known.

Indeed, rather than asking the taxpayer to subsidize the “vested and already wealthy,” Congress should act to eliminate subsidies for all energy sources, which only serve to create an artificial market for uneconomic products. Furthermore, subsidies encourage risk-taking by producers in allowing them to gamble with taxpayer funds while insulating them from the cost of failure. Mr. Pickens summed it up best in 1987 when he said, “The government doesn’t step up and say, ‘Now, how much do you need for giving it a try, fella?’ “

Thomas Pyle is president of the American Energy Alliance.

© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.

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