What are we talking about here? The report fails to

   
• Lay out, openly, serious issues like cost to the taxpayer for pursuing this option and the carbon emissions implications of the concept;
   
• Place this concept against other alternatives (in cost to taxpayer/economy, oil use reduction levels achieved, cost per barrel of oil saved, reduction in carbon emissions, etc ...);
   
• Engage forthrightly many issues surrounding such a plan, from security risks to the potential for it to lead to higher pollution loads.

It is, in fact, hard to figure out where to start with this report's problems ...

Why such a stove-piped discussion?

Perhaps its greatest problem is how stove-piped the discussion is, without any serious suggestion of viable alternatives and seemingly blind acceptance of business as usual statistics.  Thus, when it comes to transportation, the table on vehicles simply presents  the Energy Information Administration's and Federal Highway Administration's figures on the number of trucks/large vehicles in 2009 and projections for 2035.  What do these projections have? A significant increase in fleet numbers, working off an assumption that there is not meaningful move to (for example) smart growth and increased cargo transport on rail -- both of which are the sort of policies which would drastically reduce the demand for those additional vehicles.

Or, when it comes to technology, there are many concepts and paths for improving fuel efficiency in trucking fleets that doesn't require transition to natural gas.  See, for example, the sections on trucking in the Rocky Mountain Institute's Winning the Oil Endgame.  Essentially equivalent fuel savings could occur, faster, via their paths toward improving large truck fuel efficiency.  Electrification of rail offers a serious path to far greater oil demand reduction in part through offering a path to move cargo from fossil-fueled truck to electric powered trains.

In other words, our energy system and its climate impacts are incredibly complex, systems-of-systems challenges and opportunities that examining a policy option in isolation from a larger set of options almost certainly leads down faulty paths.

Why not cost analysis?

The report points to a variety of Congressional legislation for subsidizing natural gas in transportation but does not provide any cost estimates for those bills.  From the report

These bills would create economic incentives to boost investments in heavy-duty  vehicles powered by natural gas and the necessary refueling  infrastructure. It does this by increasing and extending several key tax  credits:

Alternative Fuel Tax Credit: Allows  natural gas users to receive a 50-cent credit per 121 cubic feet (for  CNG) or gallon (for LNG) of natural gas they purchase through at least  2019

Alternative Fueled Vehicle Tax Credits: Makes all dedicated natural gas vehicles eligible for a credit equal to  80 percent of the vehicle's incremental cost; Makes all bi-fuel natural  gas vehicles eligible for a credit equal to 50 percent of the vehicle's  incremental cost; And increases the light duty vehicle purchase tax  credit by 150 percent--from $5,000 to $12,500--and doubles the vehicle  purchase tax credits for all other vehicle weight classes

Alternative Minimum Tax applicability: Allows the natural gas vehicle and fueling infrastructure tax credits  to count against the alternative minimum tax provisions and makes them  transferable under certain conditions

Refueling Property Tax Credit: Creates an incentive to build CNG or LNG refueling facilities by  increasing the refueling property tax credit from 50 percent or $50,000  per station to 50 percent or $100,000 per station.

Research and development grants: Provide grants through the Department of Energy to light- and heavy-duty  engine manufacturers for research and development of better natural gas  engines

The "alternative fueled vehicle tax credit" might cost in the range of $60,000 per heavy truck (based on estimated incremental $75k cost). With a target of 3.5 million, that would be $210 billion dollars dedicated to subsidizing moving from one fossil fuel use to another.  

If we assume that there is reduction of 300,000 barrels/day equivalent usage in a decade (including existing natural gas fleets), that 50 cent "Alternative Fuel Tax Credit" would cost $6.3 million per day or over $2 billion per year in subsidy for burning natural gas in transportation.  Again, per year ...

Let's assume 25,000 refueling facilities: that would be another $2.5 billion.  

Etc ...

Eventually all those $billions add up to real money ...

What about analyzing the cost-benefit ratio in comparison to other policy options?

Initial analysis of The Pickens' Plan supports a conclusion that it is not a cost effective path for reducing US oil demand (and, by the way, is simply not effective in reducing emissions) when compared to other options.  A reasonable standard is:

How many dollars of Federal investment would it take for each barrel reduction in US oil demand?

While the proposal to support natural gas in transportation with (massive) federal subsidies should (could) be examined against a vast array of potential policy options from subsidizing telecommuting to mandating smart growth to alternative fuel development, let us just briefly consider three options:

1. natural gas for truck transport;
   
2. electrification of rail; and
   
3. installing dashboard feedback systems in all automobiles.  

• Natural Gas for Truck Transport: $75k per barrel cut from daily oil demand + additional costs for natural gas + additional costs of refueling infrastructure + the cost of the alternative fuels' credit + pollution impacts of drilling and natural gas burning + ...
   
• Electrification of rail: $36k per barrel/day cut from oil use  w/other benefits
   
• Feedback systems in cars: $10k per barrel cut from daily oil demand  w/other benefits

   
• Electrification of rail has the potential for reducing oil demand by some 2.5 million barrels a day by 2020, some 15 years faster than the 1.23 million barrels a day reduction that the CAP report projects for 2035.  Electrification of rail would, as well, significantly cut actual carbon emissions rather than simply lead to a reduction in carbon intensity per mile driven. It would also improve safety and reduce highway infrastructure costs due to reducing, significantly, the number of truck miles on America's highways.
   
• Putting feedback systems in America's car fleet is a program that could be executed in just a few years and could contribute to a reduction in US oil demand by some 1 million barrels per day. This would also foster actual carbon emissions and would improve safety as feedback systems lead to safer driving habits. (Note: feedback systems in commercial fleets also contribute to improving fuel efficiency and vehicle safety though that benefit is not included in this figure.)

Let's look at this a different way?  What could $10 billion of Federal funding "buy" on each of these three paths?

• Natural Gas Transportation:  Less than 5 years just of the Alternative Fuels Tax Credit (not the subsidies for vehicles, for refueling stations, for drilling, for ...) at a level of 300,000 barrels a day equivalent.


• Electrification of Rail:  Roughly 10% of the total required Federal resources to transition 35,000 of America's rail (the key rail lines) from diesel to electric while upgrading the lines for (somewhat) faster and more efficient service of both cargo and passenger uses.


• Feedback systems in cars:  Fully funding a program to put  feedback systems in 100% of America's (post-1996) light vehicle fleet and could be done in a few years resulting in somewhere between 500,000 to 1,000,000 reduction in daily US oil demand ... again, by 2015 or sooner.  

Very simply, the natural gas option is higher cost, lower impact in reducing oil demand, takes longer to achieve its impact, and results in higher carbon emissions than these two other options. And, again, there are many, many other options out there that also look to be lower cost and higher positive impact across multiple domains than pursuing a "clean natural gas" transportation future.

Who are they listening to?

Perhaps the study team should be credited with doing comparative cost-benefit analysis.  As they write

The lifecycle costs of natural gas fueled trucks are already competitive  with diesel. A California Natural Gas Vehicle Coalition report found  that these trucks and buses are highly  competitive with their diesel counterparts, and "the relative  average annual cost difference of owning, maintaining, and operating  comparably equipped vehicles was found to be small over the range of  expected fuel prices, vehicle technology costs and vehicle fuel  economy."

In fact, reasoned analysis suggests that subsidizing natural gas for transportation as a path to reduce US oil imports (and, below, reduce carbon emissions) is a far more costly and far less effective policy option than many other viable technological and social opportunities that already exist.

What are the real carbon emissions impacts of this policy construct?

Repeatedly, the report states

natural gas vehicles emit up to 25 percent  less carbon dioxide pollution than their diesel or gasoline  counterparts.

   
• Methane is has 23 times the greenhouse gas (GHG) impact (in the near term) than CO2 emissions. A 1.1% leakage rate in the system for natural gas delivery into natural gas vehicles would obviate the "25 percent less" immediately. (Note that the EPA has estimated that 1.4% of natural gas transported in pipelines leaks in that delivery system.)  Can that leakage be avoided? Probably but this is a serious risk. (The report includes this issue, calling for an EPA study even while endorsing moving forward with subsidizing natural gas into the transportation infrastructure.)

   
• While the report states concludes that transitioning heavy-duty trucks would, by 2035, lead to a 1.01 million barrels/day reduction in demand from the BAU case, the carbon load would still represent an increase from 2009's 1.625 million barrels of oil burned to the equivalent of burning 1.981 million barrels (rather than 2.230 in the "BAU" case).  In other words, the projected case still represents an over 20% increase in heavy truck carbon emissions (and the situation is worse with medium-duty trucks). While this represents a reduction in carbon/GHG intensity per truck mile (if there is not methane leakage), the United States must have significant absolute reductions in carbon emissions well before 2035 rather than simply a slowing of growth in emissions for a polluting business-as-usual baseline.

Coming from an institution that has published multiple items challenging "Fracking" (also here, here, ...) as a path for natural gas production, the following sentence rings false:

Of course, there are polluting ways to go about producing shale gas and there are sustainable ways.

Are there other issues?

Sadly, there are too many including the following:

   
• Supply and demand implications for other natural gas uses.  The report simply asserts that increasing natural gas demand by a projected 12% would have no meaningful impact on the cost of natural gas for other uses from electricity production to water heating to fertilizer production.  Evidently the supply/demand curves are meaningless ...

   
• LNG's potential risks:  The report supports the creation of a large and dispersed liquid-natural gas (LNG) infrastructure around the United States, with heavy trucks having LNG tanks.  LNG can be dangerous and LNG facilities are already a potential terrorist target.  The security and safety risks of such a widely dispersed LNG infrastructure merited flagging and discussion.

   
• LNG's energy cost:  The report, again, suggest LNG use in a distributed system. To 'produce' LNG requires significant energy (to cool it to about negative 260 degrees F) and a significant additional infrastructure. What are the energy, fiscal, and pollution costs for that additional LNG infrastructure?

   
• Ignoring other technology options: The report writes-off the potential for electric or plug-in hybrid electric drive to be viable for "heavier vehicles" including buses. In fact, hybrid and electric public transit buses are already working well in actual service. Plug-In Hybrid Electric School Buses (PHESBs) are already in service in number of communities across America in a test program. (An interesting twist: what might the impact be of a PHENGSB: plug-in hybrid electric natural gas school bus?)  There are even hybrid tractor trailors, with some 30 percent improved fuel efficiency. Hydraulic hybridization works well with some heavy vehicles, like trash trucks. Again, all of these options provide better oil savings per $ invested, with (significant) other benefits, than investing in subsidizing natural gas transit.

As per the above, this report is backing a program that would be bad for the taxpayer, bad for the nation, and bad for the climate. Putting massive amounts of public funding into supporting increasing natural gas usage in transportation would, however, be quite good for T Boone Pickens who has expended significant resources in seeking to sell it and who has been embraced by (too) many Democratic Party leaders in the past several years.  It is time to look past the sales job and examine the snake-oil for what it is. It is regretful that CAP's team failed to do such an analysis.