Boone Pickens May Be Close to Winning the Gas War

Jim Brown
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Pickens claims he is close to getting a bill passed by Congress by year-end that would help convert over the road trucks and busses to natural gas.

The 82-year old Pickens has been pushing the conversion process for several years in order to cut our dependence on foreign oil and boost prices on natural gas. I don't think he is actually calling for a boost in gas prices but you can bet converting 50,000 trucks to that fuel would add a lot of demand and that would help prices.

Our oil imports cost the U.S. consumer $1 billion per day. Switching to clean burning natural gas would also cut down on emissions but that is a side benefit.

Senate Majority Leader Harry Reid said today he has support from both Republicans and Democrats. This may be the first legislation to be passed under the Obama administration with support from both parties. He expects it to pass in the lame duck session.

The legislation targets oil imports by developing non-petroleum vehicles and create more than 100,000 factory and construction jobs. Reid is requesting $4.5 billion in aid for natural gas vehicles and $2 billion in loans for companies that build natural gas vehicles. The legislation also included $3.5 billion for electric vehicles.

Consumer rebates would run from $8,000 to $64,000 and would be funded in part by increasing the U.S. Oil Spill Liability Trust Fund Fee on production companies from 8-cents per barrel to 21-cents.

The problem with converting trucks is not the actual modifications but upgrading all the highway truck stops with natural gas fueling stations. Most are in the country and not on natural gas pipelines. That means pipelines have to be laid and compressors installed at the stations. This is a very long-term project. It won't happen in the next couple of years but it should eventually be done.

This will also decrease the range on the trucks, which means more fillups and more stops.

Pittsburg Drilling Ban

In other news Pittsburg Pennsylvania passed an ordinance that prohibits drilling for natural gas within the city limits. No wells currently exist but leases have been signed on 1,500 acres. The ban is the result of the hydraulic fracturing problems. Ground water all over Pennsylvania has been polluted by fracturing and Pittsburg does not want that problem in their city. Other towns in the Marcellus Shale area are considering passing bans.

However, the ordinance is in conflict with Pennsylvania's 1985 Oil and Gas Act, which asserts the right of the state to preempt local bans on oil and gas drilling. This sets up a constitutional test in Pennsylvania over the rights of cities to prohibit acts, which are considered dangerous and contrary to the public good within the city. I suspect more cities are going to follow suit and will join with Pittsburg in jointly contesting the1985 law. This is bad news for companies trying to drill in the Marcellus Shale. I believe a few have seen this coming for many months and have been selling or partnering out their acreage in order to reduce their risk.

Jim Brown

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