NatGas Act's Latest Failure About to Be Sealed

NEW YORK ( TheStreet) -- The NatGas Act's latest defeat should be announced some time on Tuesday. Expectations among Capitol Hill energy policy experts are that the attempt to attach the incentive for natural gas vehicles to the larger and "must pass" highway bill will fail as the Senate votes on amendments.

Christine Tezak, an energy policy analyst at Robert W. Baird, expressed the prevailing pessimism when asked at what time a vote on the NatGas Act should be in: "I haven't even checked. It's not worth worrying about. Even the proponents seem to have thrown in the towel."

If it does fail on Tuesday, it's likely that the NatGas Act won't have any legislative hope until at least next year. Senate Majority Leader Harry Reid (D-Nev.) a proponent of the NatGas Act -- though a proponent who has been quick to throw in the towel in the past -- is expected to open debate after 2 p.m. EDT on energy policy amendments.
The NatGas Act drives towards its latest legislative stall on Tuesday.

In an analysis of the latest, likely, failed effort to find the votes on Capitol Hill for the NatGas Act, FBR Capital Markets analyst Benjamin Salisbury wrote, "The struggling effort to extend 'must-pass' highway bill funding (scheduled to expire March 31) may be the last opportunity before the November elections to pass energy tax policy like the Nat Gas Act or renewable energy incentives. After the highway bill, we detect little appetite and few opportunities for compromise in this presidential election year. "

A lame duck piece of legislation is always a wildcard at year-end. However, the energy policy analysts seemed to think this would be a long shot, even if it can't be ruled out. An extension of the wind energy production tax credit before year end -- which is scheduled to expire -- is seen by energy policy experts as the most likely alternative energy measure to receive a last minute reprieve.

The NatGas Act would provide roughly $3.4 billion in incentives for natural gas vehicles focused on the heavy-duty and fleet market by providing tax incentives for vehicles and fueling equipment funded through a tax on natural gas fuel. A change in the act's language this year included the tax pay-for to appease fiscal conservatives who will oppose the measure as wasteful government spending, or in the least, spending that places the government in the position of "picking winners and losers" in the market.

Between the Republicans withdrawing support because President Obama is in favor of it, the fiscal conservative wing of the Republican party, the environmentalists who remain concerned that an increase in natural gas consumption would encourage hydraulic fracturing, and the industrial lobby which has warned against artificial demand raising prices, FBR Capital's Salisbury put the chances of the NatGas Act making it into law this year at less than 50%.

If this analysis is right, it would be the third-straight year that the NatGas Act has failed.

The stocks most acutely exposed to the NatGas Act's fortunes are Clean Energy Fuels ( CLNE), the natural gas refueling infrastructure company, and Westport Innovations ( WPRT), the natural gas engine maker.

Both stocks have rallied sharply this year. However, the rally has been less fueled by the specific NatGas Act outlook than growing consensus that natural gas transportation has a future as natural gas prices hit a decade low and more companies, from GE ( GE) to Royal Dutch Shell ( RDS.A), step up to support the concept.

In the previous two years, these stocks traded on a tether tied to every comment made by T. Boone Pickens about when the NatGas Act would pass, so it's a silver lining that the stocks are more insulated today by the market conviction on the nat gas transport story, even if Congress remains a dead end and T. Boone's promises remain empty.

Westport shares were up 3.5% on a bullish day for equities on Tuesday, while Clean Energy Fuels was down by less than 1%, a trade likely linked to the company's earnings release on Tuesday morning as a convenient profit-taking "sell on the news" event for a stock that is up 60% this year. Clean Energy Fuels and Westport are not stocks that investors typically buy for the current earnings profile.

There might be some short-term pain in one more negative NatGas Act headline, but given the pessimistic view even before the actual death knell is (again) sounded, it seems that legislative failure is already baked into the market view of these companies. Logic, on the other hand, continues to favor the act.

In fact, in news more important to the nat gas transportation story on Tuesday, natural gas prices hit yet another 10-year low.

-- Written by Eric Rosenbaum from New York.

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