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Producers, engine-makers, and distributors in the gas sector could all stand to benefit from the introduction of another bill championing natural gas.
By Robert Sullivan – Exclusive to Gas Investing News
With the Henry Hub spot price for natural gas opening the week at a paltry $2.50 per MMBtu, investors have found it difficult to find value in the gas sector.
The ongoing shale gas boom has continued to ramp up the output of gas in the US, but with an economy still hobbled by sluggish job growth and consumption, demand has not been able to keep pace with supply.
Some in Washington, on the other hand, are giddy at the prospect of a cheap, abundant, and domestic source of energy, and a new bill set to be introduced in the US Senate by Senator Bob Casey could be a boon for companies operating in the gas sector in the coming years.
The Senator from Pennsylvania, home of the most prolific shale gas reserves in the US, unveiled his Natural Gas Energy and Alternative Rewards (NGEAR) act on February 3.
According to Casey, the proposed NGEAR act would:
- Establish a rebate of 30 percent, up to $15,000, for the purchase of natural gas school and transit buses;
- Extend the Alternative Fuel Tax Credit of $0.50 a gallon for the retail sale of natural gas fuel for everyone who uses it to power vehicles through 2016; and,
- Extend a tax credit for installing commercial natural gas refueling infrastructure through 2016, totaling 30 percent of the system, up to $30,000.
Making his case for a move towards natural gas as a fuel for vehicles, Casey stressed that his legislation would “help businesses in a variety of industries grow, expand, and sustain much needed economic growth.”
NGEAR soon to join the NAT GAS act in Congress
The prospect of an increasing proportion of the nation’s fleet running on natural gas should sit well with gas producers, even though any resulting shift in consumer demand is likely to take years.
Gas producers have also been tracking the progress of another bill, the New Alternative Transportation to Give Americans Solutions (NAT GAS) act.
Introduced last year, the NAT GAS act is a far more comprehensive piece of legislation than the NGEAR act, and includes billions of dollars in subsidies and grants for natural gas infrastructure and refueling facilities, as well as tax credits to help offset the steep costs of converting vehicles to run on natural gas.
The NAT GAS act has yet to make it out of the House of Representatives though, so gas producers will be eager to see if Senator Casey is able to rally more support for his new bill.
Leading natural gas engine makers and distributors
If and when either of the gas bills is passed by Congress, companies that design, produce, and retrofit natural gas engines could also do well as the auto sector begins its shift away from oil.
Westport Innovations Inc. (TSX:WPT)
Westport is a leading designer of natural gas fueled engines, and owns one of the largest portfolios of gas-related technology patents. The company typically enters partnerships with diesel engine and vehicle original equipment manufacturers to develop, manufacture, and distribute natural gas engines.
Clean Energy Fuels Corp. (NASDAQ:CLNE)
The largest distributor of vehicular natural gas in North America, Clean Energy Fuels designs, builds, and operates compressed and liquefied natural gas fuelling stations for public transport, and commercial and municipal fleets across the US and Canada.
Caterpillar Inc. (NYSE:CAT)
Best known as the world’s largest manufacturer of construction and mining equipment, Caterpillar’s oil and gas arm is also one of the leading producers of natural gas engines. However, Caterpillar’s gas engines are primarily geared towards heavy industry rather than commercial or passenger vehicles.
Securities Disclosure: I, Robert Sullivan, hold no direct investment interest in any company mentioned in this article.