Two years ago, amidst the height of the 2008 spike in oil prices, energy investing giant T. Boone Pickens announced his Pickens Plan to dramatically reduce US dependence on imported oil.
The plan, which was largely based on dramatically increasing the country’s use of natural gas and wind power – both of which the US has in abundant supply - got off to a strong start, with massive media coverage, commercials paid for by billionaire Pickens himself, and to date more than 1 million people who have registered as supporters of the plan.
After the heady beginning, however, the Pickens plan ran into headwinds of its own. With the financial collapse came a dramatic drop in oil prices, and energy costs were largely removed as a pressing issue for US consumers. In 2009, Pickens was forced to indefinitely delay plans for a massive wind turbine farm on Texas for a variety of reasons, which included issues transmitting the electricity from the farm to metro areas.
But somewhat behind the seasons, the Pickens plan has been roaring back, with bills proposed in both the US House and Senate that would have a huge impact on the US trucking industry by using subsidies to push carriers to make the switch from diesel to natural gas powered trucks.
House Bill 1835 (New Alternative Transportation to Give Americans Solutions Act of 2009), and Senate Bill 1408 both propose to use a variety of incentives to push adoption in the trucking industry of natural gas (or alternative fuel) vehicles.
Today on the CNBC channel, Pickens said the idea is to give carriers subsidies of some $65,000 per new Green trucks purchased – the approximate difference between a diesel based vehicle and one built to run on natural gas.
Pickens told CNBC that he thinks “these bills could pass by Memorial Day, and if not before Memorial Day then shortly after that.”
Though the bills have not been voted out of their respective committees, Pickens says they have strong bi-partisan support in both houses of Congress.
“This has to happen because it is a key security issue for our country,” Pickens said, adding that “The US is the Saudi Arabia of natural gas. In fact, we have more than twice as much natural gas as the Saudies have oil.”
Pickens said he believes the plan would phase in over 7-10 years, after which the some 8 million over-the road commercial trucks in the US would be run almost completely on natural gas instead of diesel.
Impact on Shippers
Pickens has been focused more on the big picture economic and security issues of importing hundreds of billions of dollars worth of oil each year into the US, but if these bills are passed by Congress and signed into law, the impact on shippers could be quite important.
 First, how this will play out from a cost perspective is not clear. On a mile-to-mile basis, compressed natural gas (CNG) may be about 30-60 cents cheaper than diesel today, a gap that some predict could widen if the CNG industry scales to meet this much higher level of demand. On the other hand, experience to date has shown gas-based trucks might need much higher levels of maintenance, which would offset some of those operating cost benefits – though truck manufacturers would likely solve many of those issues over time. The fuel surcharge landscape would likely change dramatically, and if there still a surcharge it should be more stable than today diesel environment.
Second, companies running private fleets will be equally impacted by the legislation, and would need to understand its ultimate provisions in detail and make their own plans for conversion.
Third, gas-based trucks emit about 20% fewer greenhouse gasses than diesel-based trucks. This would support existing corporate Sustainability goals, and could come into play if we see Cap and Trade legislation by reducing a company’s direct and indirect carbon footprint.
Fourth, there will be a bit of a “chicken and egg” conundrum here, as the infrastructure for refueling CNH trucks will likely lag, especially outside of major metro areas, so logistics managers at shippers and carriers will have to plan accordingly.
Legislation tied to Cap and Trade?
While the House and Senate bills are focused specifically on the incentives for natural gas-based vehicles, some fear that ultimately the proposals will be tied into a larger “Cap and Trade” bill that will be harder to pass and may be opposed by many inside and outside Washington who would otherwise support the standalone legislation.
Pickens, who was in Washington today to meet with key legislators in both houses about the bills, says he doesn’t think that will happen.
“I will bet you we will get the Pickens plan without Cap and Trade,” he said. “I do think Cap and Trade can make it, and we need this bill now.”
What are your thoughts on these bills that should dramatically move natural gas-powered trucking forward? What impact do you think it will have on carriers and shippers? What will be some of the unforeseen consequences? Let us know your thoughts at the Feedback button below.
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