Fill ’er Up

Soros, T. Boone pull up to the subsidy pump

February 8, 2012

The Obama administration and Congress have renewed a push for increased natural gas production in the U.S., but behind their claims of reduced oil consumption and pollution are a network of financial interests, cozy relationships, and wealthy investors.

In his State of the Union address and in a Jan. 26 speech, President Obama touted natural gas as the next big thing in American energy. Obama called the U.S. the "Saudi Arabia of natural gas" and said expanding natural gas production could create up to 600,000 jobs over the next decade.

Congress is working on legislation that would turn Obama’s plan into a reality. The New Alternative Transportation to Give Americans Solutions Act of 2011, or NAT GAS Act, would provide tax breaks and financial perks for the natural gas industry, as well as companies and municipalities that convert trucks and buses to natural gas.

The bill includes infrastructure credits for installing fueling stations, along with tax credits good for up to $7,500 for passenger trucks and $64,000 for commercial trucks that run on natural gas fuels.

All told, the NAT GAS Act amounts to about $5 billion in new handouts to the natural gas industry while not expanding natural gas exploration.

The company that stands to benefit the most from the NAT GAS Act is Clean Energy Fuels, a company founded by oil tycoon T. Boone Pickens.

Pickens has aggressively lobbied the legislative and executive branch to expand natural gas production in the U.S. since 2008, when he introduced his Pickens Plan. Pickens claims to have spent $100 million educating "the public and Washington policymakers on the need to address the OPEC oil threat."

The billionaire claims that increased natural gas production will reduce pollution and dependence on foreign oil. His motives aren’t entirely altruistic, however: Pickens is also protecting his investments. He is the single biggest shareholder in Clean Energy Fuels. He owned options to buy 15 million more shares of Clean Energy at $10 a share. Those options expired on Dec. 28, but not before Pickens bought one million shares of Clean Energy stock.

By conservative estimates, the passage of the NAT GAS Act or similar executive policy could be worth tens of millions of dollars to Pickens. But if the legislation fails, it will be a hard blow to the company.

In a filing with the Securities and Exchange Commission, Clean Energy Fuels admits its success is subsidy-dependent: "Our business plan and the ability of our business to successfully grow depends in part on the extension of the federal fuel excise tax credit for natural gas vehicle fuel, the reinstatement and extension of the federal income tax credit for the purchase of natural gas vehicles and the passage of legislation providing for additional incentives for the sale and use of natural gas vehicles."

The market is aware of this: When the NAT GAS Act was introduced in the Senate on Nov. 15, stock prices in Clean Energy Fuels jumped from $11.73 a share to close the day at $13.50.

The bill was expected to reach the floor of both chambers sometime in December, but Congress ground to a halt in a fight over the payroll tax extension. Clean Energy Fuels share-prices dipped in mid-December back down to around $11. Since Congress has come back in session, stock prices have risen to $16 a share.

Another company that stands to profit handsomely from the passage of the NAT GAS Act is Westport Innovations, a provider of technology that allows engines to operate on clean-burning fuels. According to his latest SEC filings, billionaire investor and liberal philanthropist George Soros owns more than 3 million shares of Westport, making it one of his largest holdings.

Pickens was also a shareholder in Westport until late 2008 or early 2009, and then sold his entire stake—just under 800,000 shares—in early 2009, when the NAT GAS Act was first introduced.

Pickens and the natural gas industry have curried the support of House Minority Leader Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.), as well as other influential Democrats like Oklahoma’s Rep. Dan Boren.

In the last election Pickens’ wife gave Reid the maximum contribution, according to the Center for Responsive Politics. Reid invited Pickens to his 2009 National Clean Energy Summit in Las Vegas.

Pelosi has a more concrete stake in the bill. In 2007, Pelosi snatched up to $100,000 worth of shares of Clean Energy stock in the company’s initial public offering. Since then, she has been a cheerleader for natural gas. For example, she included the NAT GAS Act in her "Make it in America" initiative.

Then there’s Boren, the co-chair of the House Natural Gas Caucus and a member of the House Natural Resources Committee.

The New York Times reported that Pickens and Clean Energy executives have given at least $24,000 to Boren’s campaigns, and the American Gas Association sponsored an "Energy Industry Breakfast" for Boren in 2010 at its Washington headquarters. Boren co-sponsored legislation drafted with Pickens three times in the past three years.

Both Boren’s father and stepfather are in the gas industry. Boren partially owns two businesses that have made lucrative deals with Chesapeake Energy.

Chesapeake Energy is the second-largest natural gas producer in the U.S. and a top donor to Boren’s campaigns.

"There’s zero conflict," Boren told the New York Times. "It’s like if you are living in a timber community and your parents are working for the local mill. You should go and advocate for your local mill, even if you derive some benefit from it."

Pickens has been busy on the executive side, too. According to visitor logs, Pickens has visited the White House seven times since Obama took office, twice to meet with former White House chief of staff Rahm Emanuel and once to meet with former senior advisor David Axelrod.


The NAT GAS Act is also supported by a number of Republicans, including House Speaker John Boehner.

Supporters, like the Senate Democratic Policy Committee, cite natural gas industry projections that the "program will create more than 100,000 direct manufacturing and labor jobs and more than 450,000 indirect jobs."

The Center for American Progress produced an analysis arguing that a transition to natural gas trucks and buses could reduce oil use by at least 1.2 million barrels per day by 2035 or sooner if the NAT GAS Act were adopted and implemented. That analysis is suspect, however, as Soros—who stands to profit handsomely if the bill is passed—is one of CAP’s major funders.

Unlike the NAT GAS Act, Obama’s proposal would also make approximately 38 million acres of land available in a lease sale that could result in production of 1 billion barrels of oil and 4 trillion cubic feet of natural gas.

Opposition to the bill and the president’s plans has come from the oil industry and free-market groups, who argue that the bill would distort markets by giving special handouts to the natural gas industry.

Americans For Prosperity, along with other groups such as the Heritage Action for America, Club for Growth, and the National Taxpayers Union, sent a letter to Congress urging members to oppose the NAT GAS Act

"We believe that evenly applying low taxation across the board allows market participants to make choices that are not manipulated by Washington policymakers," the letter reads. "By targeting tax preferences toward one type of transportation fuel—natural gas—the NAT GAS Act does the exact opposite. America’s tax code is already overburdened with too many carve outs for special interests that raise compliance costs, distort decision making, and advantage the politically well connected. The last thing Congress should be doing is making the tax code more complex."