The Pickens Plan & Crony Capitalism

By Ned Ryun
American Majority Action

I still find it strange when those who claim they believe in free enterprise, limited government, reducing government intervention in the marketplace and fiscal responsibility, suddenly take an “Everywhere but in my house” approach. I am referring to the more than 80 House Republicans, many of whom claim to be conservatives, who are co-sponsoring H.R. 1380, otherwise known as the Pickens Plan after Texas energy tycoon, T. Boone Pickens.

The bill revolves around several main arguments, the first of which is that America must become energy independent. I fully agree with those sentiments: America only produces 5 million barrels of oil a day, yet consumes 20 million, meaning 75% of our oil comes from other producers, some of whom have no love for this country. The second argument builds off the first: we must tap into American energy sources to gain more independence. Again, I completely agree with that argument. The third argument is that natural gas is one of the best American energy resources, therefore we must tap into it, as we have more than 100 years of natural gas that we can produce domestically. There is of course nothing wrong with any of the above arguments.

But where the Pickens Plan starts to go awry is when you look at the nuts and bolts of how the Plan would work. First, as many know, American cars and big rigs don’t currently run on natural gas, so there would have to be a massive overhaul of vehicles.

The plan calls for each big rig to get a $64,000 subsidy for the conversion from diesel to natural gas. With around 8 million large trucks on American highways right now, you can do the math and figure out what the price tag is. It’s one thing to convert big rigs to natural gas. Once that happens, you then have to overhaul thousands of fuel stations across the country that would need to have natural gas available. But don’t worry: the Plan gives a $100,000 tax credit for every station that converts to natural gas. I won’t even really touch on the conversion of cars to natural gas, but there are provisions in the plan that have, by the time it’s all added up, a $11,500 subsidy for every natural gas car.

What is really being discussed with the Pickens Plan is a complete overhaul of our transportation system, which will cost hundreds of billions of dollars, as National Review has pointed out, for very minimal profit; $4 billion by one estimate. And the person who just happens to benefit the most? Someone heavily invested in the natural gas business by the name of T. Boone Pickens.

Now I define crony capitalism, or political entrepreneurship, as someone rigging the political system and trying to use government and the taxpayer, for personal profit. I have a fundamental problem with that: the free enterprise system is not about the government picking winners and losers, or about individuals manipulating the system to take a shortcut to profits off the backs of the American taxpayer. The Pickens Plan is about all of those things.

As the Dallas News reports, Pickens is the largest shareholder in Clean Energy Fuels (CEF), which owns and operates 200 natural gas stations across the country. CEF owns BAF, a Dallas-based company that just happens to convert vehicles to run on natural gas. And Mr. Pickens also owns mineral rights to almost 200,000 acres believed to have significant natural gas resources. So he wants to have legislation put in place that would create a demand for natural gas that would then create a need to convert cars and big rigs to run on natural gas which would of course need stations to refuel as well. He’s got all the bases covered.

While I again applaud the idea of energy independence, and of more domestic production of our own energy, I have a hard time buying any of the arguments of the Pickens Plan except the energy independence one. First, and I mean this somewhat facetiously, any plan or bill that Al Gore, Barack Obama and Harry Reid support, I’m probably against (yes, all are for the Pickens Plan). On a more serious note, is natural gas the most logical starting point for energy independence? I have a very hard time believing that. Converting much of our cars and big rigs for hundreds of billions of dollars, with taxpayers and consumers taking the lions’ share of that burden, does not make sense.

A far better and simpler approach, and one that is far more realistic, is for Congress and the Administration to lift the ban on domestic offshore drilling, and increasing onshore permits instead of manipulating the market with the Pickens Plan. You want more jobs? Well, I’ll go with Occam’s razor and say the simplest answer to us getting energy independence right now is this: get more oil rigs opened up. I know that will horrify the poor environmentalists out there, but the norm over the past decades with oil drilling has been responsible and environmentally friendly, not Exxon Valdez or Deepwater Horizon. Each oil rig brings with it somewhere in the neighborhood of 800-1400 jobs. New rigs means more domestic oil, moving us towards energy independence, and with enough production, will drive the costs of fuel down (you don’t think more domestic production won’t cause international producers to sell cheaper oil?).

We have billions of barrels of oil on (or rather, under) American territory and right off our shores. While I’m realistic in understanding that America probably can’t produce 20 million barrels of oil a day to meet our needs, think about this: we used to, roughly 40 years ago, produce 10 million barrels a day domestically. Now we only produce 5 million, leaving a 15 million gap. We can significantly close that gap in 5 years if Congress is truly serious about this country becoming less dependent on foreign oil. The answers and solutions are very simple, if our elected officials will use their heads and have just a touch of political courage.

The answer to our dependence on foreign oil is not the Pickens Plan in its current form. If Mr. Pickens believes that there is a demand and market for natural gas, and a profit to be made, then he should be encouraged to take that risk, and not burden the American taxpayers with both the risk and cost. In many ways, this plan encapsulates why the tea party rose up in 2009 complete frustration with government spending, fiscal gamesmanship, and too much government interference in the marketplace. Many Americans, of which the tea partiers are the early adopters, want less government intervention, not more. The Pickens Plan calls for more government intervention and a solution that is shortsighted when it comes to achieving our ultimate goals.

The Republican co-sponsors of this bill, if they truly believe in free enterprise, and less government, need to reject the crony capitalism and corporate welfare of the Pickens Plan. They need to remove themselves from the bill and take a far broader, more effective, less expensive approach to energy independence, and I’d encourage those reading this to give the Republican co-sponsors a call and ask them to get off the bill.

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