How Congress Saved Fuel Cells, Ethanol And the Pickens Plan
With the first wave of mass-marketed plug-in hybrids just two years away, lithium ion batteries and electric drivetrains are looking more and more like the short-term winners of the technology race to replace gasoline in the United States. But proponents of hydrogen fuel cells, ethanol, and compressed natural gas aren’t yet ready to give up—and their influence in Washington doesn’t appear to be shrinking. In the past few weeks, Congress defended the three technologies from detractors in the Environmental Protection Agency, the Department of Energy, and the environmental lobby, ensuring their continued survival in the national budget.
Competing industries and technologies are fighting over new federal dollars aimed at energy independence and reduced emissions. Since 2007, the alternative energy sector has incurred more than $50 million in lobbying expenses, including at least $2 million in direct contributions to candidates. With billions of dollars in subsidies and tax exemptions hanging in the balance, the industry’s presence on Capitol Hill is likely to persist and grow.
Four Miracles and a Reprieve
In May, shortly after the Department of Energy decided to cut federal funding for hydrogen fuel cell research, Energy Secretary Steven Chu told The MIT Technology Review that fuel cells were still too far off to be an immediate priority for funding.
“Right now, the way we get hydrogen primarily is from reforming gas. That’s not an ideal source of hydrogen…The other problem is, if it’s for transportation, we don’t have a good storage mechanism yet. What else? The fuel cells aren’t there yet, and the distribution infrastructure isn’t there yet. In order to get significant deployment, you need four significant technological breakthroughs. If you need four miracles, that’s unlikely. Saints only need three miracles.”
Nevertheless, the House Appropriations Committee voted last week to restore $40 million in fuel cell funding that the Department of Energy had stripped from its budget proposal. The Senate Water and Energy Appropriations Committee has also recommended increasing spending on the technology increase to $190 million for 2010.
Committee Chairman Byron Dorgan has long been one of the technology’s biggest cheerleaders, so it’s no wonder that four of the senator’s top 20 campaign contributors are involved in some way in fuel cell research. Joining Dorgan were New York Senators Kirsten Gillibrand and Chuck Schumer, whose state is an apparent beneficiary of the research. “Companies in New York are at the cutting edge of fuel cell research,” said Gillibrand. “It is a significant contributor to our local employment, and I am committed to fighting for jobs throughout New York.” Senator Schumer called the fledgling industry “a critical component of our economic recovery.”
“Get Over it”
With sales of E85 ethanol-blended gasoline down this year and the EPA holding the alternative fuel to increased scrutiny, hundreds of millions of dollars in subsidies have become threatened. Ethanol opponents, ranging from the environmental lobby to the oil industry, were glad to see the change of fate for ethanol. The EPA proposed a more holistic method for calculating the relative emissions of gasoline and ethanol—one that takes emissions from ethanol production and land use into account. The change could be the first nail in the coffin of corn-based ethanol.
But House Agriculture Committee Chairman Collin Peterson led a group of lawmakers from agriculture states who threatened to kill the climate bill if more protections for ethanol producers and farmers weren’t added. They apparently got their wish. The EPA’s proposed rule change has been pushed back by at least five years so that land use issues can receive “further study” from the Agriculture and Energy departments.
Ethanol’s influence extends far beyond politicians whose districts contain more acres of corn than people. Three major lobbying coalitions employing several prominent former politicians exist to defend ethanol interests in Washington. Throw in the more than $1.1 billion that agriculture corporations like Archer Daniels Midland and Monsanto have spent on lobbying activities over the course of the last decade, and it’s easy to see why there are so many sympathetic ears on Capitol Hill.
“The EPA’s got to get over their absolute rejection of ethanol. They’ve just got to get over it,” Senator Tom Harkin told The New York Times. “And we’re going to force them to get over it.”
The Pickens Plan Shows Renewed Signs of Life
One year ago, energy industry legend T. Boone Pickens launched an ambitious $60 million campaign to reinvent America’s energy infrastructure. Central to the Pickens Plan were compressed natural gas (CNG) vehicles, which Pickens believes are capable of drastically reducing carbon emissions, transportation costs and America’s dependence on foreign oil.
In theory, Pickens may very well be correct on all three counts. But questions over the cost and wisdom of rebuilding the US’s entire fuel infrastructure to replace one non-renewable energy source with another—and controversies surrounding Pickens’s extensive investment in the technologies he was promoting—led to costly early defeats.
Most notably, California voters roundly rejected Proposition 10 in November. The legislation would have provided $5 billion dollars in state funds for alternative energy technologies. More than half of this money would have gone towards helping California citizens and businesses purchase alternative fuel vehicles. With the language of the legislation clearly favoring CNG vehicles—and no guarantee that these CNG vehicle owners would have sufficient access to the fuel—Californians sent Pickens a firm rebuke.
But despite this and a litany of other setbacks including the collapse of the capital markets and billions of dollars in loses for Pickens and his investment firm, the 80-year-old billionaire remains optimistic about his plan—and some members of congress seem to agree.
First introduced in the House of Representatives in April, the NAT GAS Act may find its way into the final version of the Senate climate bill, which would greatly increase its chances of becoming law. Backed by Senate Majority Leader Harry Reid and key Senate Republican Orrin Hatch, the legislation would create a long list of tax credits for natural gas vehicle purchases and conversions. Among the highlights:
- All dedicated natural gas vehicles would receive at least an 80 percent reimbursement of their incremental cost over conventional gasoline equivalents. This is crucial to Pickens’ vision of a trucking industry—and just about every other business with a fleet of vehicles—powered by compressed natural gas.
- Bi-fuel and converted CNG vehicles would be eligible for tax credits for the first time.
- Refueling stations would receive a $100,000 annual property tax credit for ten years, essentially creating a $1 million dollar incentive toward the construction of each natural gas station.
AT&T appears confident in the bill’s chances. The company recently pledged to spend $350 million on 8,000 CNG vehicles and build 40 refueling stations. How much of that money comes from corporate coffers and how much of it comes from Washington remains to be seen.