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Green Energy: Nat Gas Vehicle Plays

Given the importance of the natural gas vehicle subsidy, it's understandable why stocks like Westport Innovations and Clean Energy Fuels rally on any sign of increased support from Washington D.C. These are not stocks that trade on current profits -- there aren't any -- and the quick path to profitability will rely on the U.S. adopting policy that spurs fleet purchases of natural gas trucks and vans. But that doesn't change the complex Capitol Hill equation.

Shawn Severson, who covers the natural gas vehicle sector for Think Equity, said that support from Obama doesn't change the legislative end game: They still need to get a specific bill for nat gas vehicles to get anything done quickly.

"Natgas has always had a lot of support but it keeps getting dragged down with bigger energy bills," Severson noted.

A second clean energy analyst who has watched the fortunes of these stocks rise and fall based on legislative gambles said it's still "so hard to tell" what will happen.

"Certainly the Middle East situation renews calls for energy security and nat gas support, but I won't be holding my breath on actual legislation passing," said the analyst.

The analyst noted that Clean Energy Fuel's Littlefair said during the company's recent earnings call that another version of the Nat Gas Act would be re-introduced in the Senate this spring.

"As of now, nothing has changed," he said.

Pavel Molchanov, analyst at Raymond James, who covers Clean Energy Fuels, concurred with the analyst skepticism, and thinks that as far as any legislation specifically in support of natural gas vehicles, the odds are still 50/50 in 2011. He added, "If it passes, it will not be because of this speech. The good news is that there is no real opposition to this -- it's purely a matter of getting on the (busy) legislative calendar. The bad news is that, unlike corn farmers and ethanol, there is no politically powerful lobby pushing in favor of NGVs."

Raymond James wrote in a research note on Wednesday, "the speech contains a combination of useful but small steps together with some typical PR elements. So, who benefits from all this? At this point, no one, because this purely in the realm of rhetoric."
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