AOG chief optimistic despite stalled NATGAS bill

Mike Callan remains optimistic about proposed federal legislation that encourages the use of natural gas as a fuel in fleet and personal vehicles.

Callan, the president of Fort Smith-based Arkansas Oklahoma Gas Corp., was an early proponent of the New Alternative Transportation to Give Americans Solutions (NAT GAS) Act introduced April 1, 2009 by U.S. Rep. Dan Boren, D-Okla. NAT GAS is designed to make it easier to buy natural gas vehicles, refuel them, and convert existing cars to use natural gas. The bill would extend and expand tax credits — up to 80% of the incremental price to buy a CNG vehicle — and encourage through tax credits the construction of more natural gas fueling stations. For light-duty vehicles, the tax credit cap increases from $5,000 to $12,500. The bill also proposes to increase the refueling property tax credit from $50,000 to $100,000 per station.

In a memo Callan wrote as part of an August 2009 story in The City Wire, the critical need in promoting the use of domestic natural gas over foreign oil is to develop public infrastructure. Callan noted: “The lack of CNG fueling stations and the unavailability of CNG vehicles creates a conundrum. The investment necessary for both is substantial, and one cannot effectively develop without the other. Simultaneous development of this ‘symbiosis’ is critical to expanding the use of CNG as an alternative to petroleum-based automobile fuels. The federal government’s role in creating this symbiotic relationship is of paramount importance.”

“That hasn’t changed. That’s still it,” Callan said Wednesday (June 16) of the infrastructure problem. “It’s the classic ‘chicken and egg’ problem.”

Something else that hasn’t changed is the status of the federal legislation. It’s been stuck in committee since April 2009. Supporters continue to gather cosponsors, but no hearings or markups are scheduled. The bill fell victim to the fights over health care reform, cap and trade and other legislative agendas pushed by President Barack Obama during his first year in office.

“Since we talked last (August 2009), I think things just went into a holding pattern,” Callan said, adding that many companies interested in building the infrastructure or converting their fleets are waiting to see what Congress does. “That’s where everybody’s uncertainty comes in, with nobody knowing what Congress is going to do with that.”

AOG is spending money on compressor facilities to take advantage of some existing incentives. The company also is working with tribes in Oklahoma to get them to convert their fleets. AOG is also talking with the city of Fort Smith about what it will take to convert city vehicles.

“They are interested. … But we’re in the very early stages,” Callan said of talks with Fort Smith officials.

Costs to convert a vehicle range between $7,000-$8,000. Advocates of natural gas and studies show that the costs — especially for vehicles expected to remain in the fleet for many year — of conversion are made up in lower maintenance costs and much lower fuel costs. Natural gas now costs about $1.35 for a gasoline-gallon equivalent.

Callan said the relatively low cost of gasoline has also reduced interest in converting vehicles to natural gas. But he thinks the stability of natural gas prices will win out over time.

“I don’t see that we can sustain low gasoline prices for an extended period of time, but I think natural gas prices will remain stable,” Callan explained.

NATGAS received recent support from the U.S. Conference of Mayors. The group approved a resolution calling on Congress to move on the legislation, and asked to expand “federally funded Research, Development, and Demonstration (RD&D) programs to expand product offerings of natural gas engines to meet a wider range of applications in the United States transportation sector.”

The Mayors’ resolution included the following points:
• According to the Energy Information Administration (EIA), the transportation sector accounts for 69 percent of United States oil consumption.
• Natural gas is cleaner and cheaper than gasoline and diesel, and 98% of natural gas consumed in the United States is produced in North America.
• Recent shale discoveries and technology developments are increasing the American
supply of natural gas, creating more than 100 years of supply abundance.
• Natural gas vehicles utilization is growing exponentially in Europe, South America, and in other global markets.

Boone Pickens, the wealthy oil man who has been on a crusade to end the country’s reliance on foreign sources of energy, praised the Mayors’ resolution and also called on Congress to move the legislation.

“I applaud this group for recognizing the many benefits of using natural gas in transportation, including that it is cleaner, cheaper and can stimulate jobs and the economy,” Pickens noted in a statement. “America is still waiting for the energy plan it is has been promised for more than 40 years. But no energy plan will be complete unless it focuses on transportation, which is 70 percent of our foreign oil problem. I’m for American resources, and natural gas in heavy duty fleet applications leads the way in using a clean, abundant and domestic resource to replace dirty foreign oil.”