All Signs Point to Natural Gas

A proposed energy plan working its way through Congress could change the energy landscape in America.

An energy stimulus
In April, a bipartisan group of lawmakers introduced a bill, the NAT GAS Act, to provide substantial tax credits to encourage the use of America's vast natural gas reserves as a transportation fuel.

The bill is currently stuck in committee, a place where most bills go to die. However, the NAT GAS Act has a good chance to leap over this legislative hurdle and go to the floor for a vote, where it has overwhelming support. 

The committees currently reviewing the NAT GAS Act are stacked with lawmakers who support the legislation. In fact, some of the lead co-sponsors of the bill hold high-ranking positions in these committees.  

President Barack Obama has also expressed support for the bill and recently appointed a panel to ease environmental concerns over the process of extracting natural gas. This further indicates his intention of using the vast resource to combat high oil prices.    

The recent activity in the private sector is cause for optimism as well.   

Nat gas believers
General Electric (NYSE: GE  ) is a prime example. GE recently acquired Dresser Industries, a company that manufacturers CNG fuel dispensers. If the U.S. shifts to natural gas, look for GE to provide the pumps.

And look for Chesapeake Energy (NYSE: CHK  ) to provide some of the stations. Chesapeake is planning to increase the availability of natural gas fueling infrastructure through agreements with gas station chains in the 17 states in which the company operates. The company has agreed to convert its entire fleet to natural gas provided gas stations install the natural gas pumps.

Essentially, Chesapeake is making a market for the natural gas it produces by agreeing to buy the natural gas it sells. And the strategy is working, as many other companies are converting their fleets to run on natural gas as the number of CNG stations increases. This activity will further accelerate in a favorable legislative environment.  

And as more companies turn to natural gas to fuel their fleets, Fuel System Solutions (Nasdaq: FSYS  ) will provide the necessary conversion equipment. Through multiple acquisitions over the past year, Fuel Systems Solutions is preparing to capitalize on legislation favoring the natural gas transportation industry.

The company still has an impressive war chest, so more acquisitions might be in the offing. However, management remains evasive with regard to the company's considerable cash position. 

Many car manufacturers are planning to offer natural gas vehicles in the United States. Currently, Honda (NYSE: HMC  ) is the only car manufacturer in the United States that offers a natural gas vehicle to the public, but competition is on the way as sales of the natural gas Civic have almost tripled so far this year.

Fiat, formerly known to Americans as Fix It Again Tony, has cleaned up its act and the company plans to re-enter the U.S. market with clean-burning natural gas vehicles. Fiat, which owns Chrysler, views natural gas as a natural fit for trucks like its Dodge Ram.

General Motors (NYSE: GM  ) sees natural gas vehicles as a perfect fit for company and government fleets. The automaker is expanding its offering of CNG vehicles as a response to increasing demand from fleet customers.  

Ford (NYSE: F  ) is looking to penetrate the fleet market as well. The company unveiled the Transit Connect Taxi at last year's Chicago Auto Show. The car can be easily retrofitted to run on natural gas.   

Big Oil recognizes the potential of natural gas as evidenced by its recent natural gas spending spree. Shell, Exxon (NYSE: XOM  ) , and Chevron have all acquired natural gas producers. In fact, Exxon is such a believer in the energy source that the company now holds more in natural gas than oil reserves.  

The bottom line
All signs point to natural gas. Congress is prepared to act, and many companies already have. Investors who believe in the future of natural gas should act as well.

Fool contributor Adam J. Crawford owns shares of Fuel Systems Solutions but does not own shares of any other company mentioned in this article.

General Motors is a Motley Fool Inside Value recommendation. Ford Motor is a Motley Fool Stock Advisor selection. The Fool owns shares of ExxonMobil and Ford Motor. Alpha Newsletter Account LLC owns shares of Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (15) | Recommend This Article (20)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 09, 2011, at 3:47 PM, jimmy4040 wrote:

    Not very likely. The prices for nat gas have been dropping like a stone for the year, with only a brief rally for the Japanese crisis. If things were really this close, it's more likely that there would have been some noticeable price appreciation, and more big positions taken on options.

    Until you see the out of the money options go a little nuts for at least a few traders placing big bets, nothing is on the horizon.

    Sorry to disagree.

  • Report this Comment On May 09, 2011, at 3:54 PM, tdowdy1 wrote:

    Combine this news with the announcement that Honda will sell a CNG car in all 50 states the mentioned companies should explode. Watch FSYS closely since they manufacture the Phill home refueling appliance that Honda uses with their CNG car.

  • Report this Comment On May 09, 2011, at 4:25 PM, trin6810 wrote:

    Extraction of Natural Gas - legacy of health problems - if companies had to claean up their mess - the industry would go bankrupt - people are starting to realize what a mess this is - to know hydrofracking is to hate it

  • Report this Comment On May 09, 2011, at 4:37 PM, TMFSarahGen wrote:

    how totally odd. An article about the NAT GAS act without a mention of CLNE or WPRT?

    huh

  • Report this Comment On May 09, 2011, at 4:59 PM, ACrawf wrote:

    @ jimmy

    You're right, natural gas prices have been sinking like a stone. However, the future outlook looks better. Gas for June delivery in 2015 is up 6% this year and the same contract for 2016 delivery is up 9%.

    @tdowdy

    The only problem is the Phill is outrageously priced even after the tax credit. It does have potential though.

    @Sarah

    Yes, CLNE and WPRT companies will do well and most investors know it. I thought I'd give investors some different ways to play the legislation.

  • Report this Comment On May 09, 2011, at 7:26 PM, mlrinc10 wrote:

    'Extraction of Natural Gas - legacy of health problems - if companies had to claean up their mess - the industry would go bankrupt - people are starting to realize what a mess this is - to know hydrofracking is to hate it'

    We've been doing it safely in Oklahoma for 70 years. It's the operator stupid not the industry!

    We clean up our own wells in Oklahoma with a small tax on all royalty owners. This is entirely the way to go .....without OPEC in our lives.

  • Report this Comment On May 10, 2011, at 12:05 AM, jimmy4040 wrote:

    acrawf:

    That makes not ready for prime time in my book. I'm not saying this won't be a good trade at some point, but there are a lot things that will make you more money in the meantime. When the move begins, you'll have plenty of time to jump onboard.

  • Report this Comment On May 10, 2011, at 4:41 AM, tsvieps wrote:

    " to know hydrofracking is to hate it'

    We've been doing it safely in Oklahoma for 70 years. It's the operator stupid not the industry!"

    Lots of emotion showing up on this health issue. What are the real facts? Contaminated water is no joke. Also leaking methane from filling cars or crashing them puts greenhouse gases in the sky. And what about energy density for NG as translated into range for workable size, economical tank?

    Anyone with good links that are straight shooting for these issues?

  • Report this Comment On May 10, 2011, at 4:45 AM, KurtEng wrote:

    The reason natural gas prices are dropping is because the supply is high. Some investors will never grasp basic economics.

    Because supply is high, it only makes sense that we should try to use it, and transportation simply makes sense as a use for natural gas. I think there is a bright future for a lot of natural gas developers and distributors.

  • Report this Comment On May 10, 2011, at 10:50 AM, IRielly wrote:

    Great article, and all valid points. The natural gas industry needs to overcome the environmental concerns, but that will happen as time goes on and the facts (rather than spin) actually emerge. Fracking for natural gas certainly needs to be done carefully, but when compared to the huge human toll and environmental devastation of coal mining, and when compared to the amazing cost (financial and military) of importing middle eastern oil, shale gas production is by far the best resource for America's future. For what it's worth, I don't have a personal interest in the natural gas industry, but I've watched fracking up close many times. It's a sound and safe process, when conducted prudently. We shouldn't reach conclusions based on hype, but rather facts.

  • Report this Comment On May 10, 2011, at 4:03 PM, mikecart1 wrote:

    All signs point that natural gas won't rise much in this lifetime. Bad prediction is bad.

  • Report this Comment On May 10, 2011, at 5:35 PM, IRielly wrote:

    There is a fine line on the price of natural gas. It needs to rise slightly to keep the producers producing, but if it rises too far, then it becomes unattractive as an alternative fuel. Even if it rises by 50% or so, it will still me much cheaper than importing petroleum at $100 per barrel.

  • Report this Comment On May 11, 2011, at 2:59 AM, tsvieps wrote:

    Natural Gas has smaller carbon footprint than coal or gasoline. But it itself is a green house gas, though with a much shorter lifetime than CO2. Wind and solar are intermittent and still much more expensive than Natural Gas for generating electric power. Natural Gas raises some environmental questions I ask about above. But its abundance here and worldwide certainly make it extremely attractive while we wait for alternate "renewable" methods to become economically viable.

    CO2 for sure is a green house gas, but when one tries to separate out the politics from the science, there is still great uncertainty about its degree of impact on warming. The elephant in the room is water vapor. It increases with warming oceans. No one yet knows if more water vapor causes cooling or warming. Pulling trillions out of the economy to cut back on carbon now is really too expensive an insurance policy. Hundreds of billions for research on low carbon energy and its implementation and understanding climate better may make sense between govts and companies world wide. Wise risk balance is the name of the game. Natural Gas seems to be a wise choice for more serious implementation soon, but with good environmental engineering restrictions...exactly what that means is out of my field.

  • Report this Comment On May 11, 2011, at 4:15 PM, 5143682 wrote:

    putting a natural gas tank in a car adds a lot of weight. I did this with my pickup several years ago. Wasn't much of a problem to solve, but it did take considerable space in the bed of my truck. I think it's a viable solution, but not a lot cheaper to do.

  • Report this Comment On May 20, 2011, at 9:59 PM, msroadkill612 wrote:

    Yay - have been advocating this for years - great its getting momentum

    Its an indictment on DC that the push seems to have to come from home fillers & private enterprise movements. Seem to be still mucking around w/ a vital subsidy to; early adopting (loss making initially), pump stations. Range anxiety is of course a big thing

    Yeah wiki reckons the cng civic is 250lbs heavier than the regular one, still, bet they could improve if they built from the ground up. If the heavy rank became part of the structural strength of the car, this could be halved. Carbon fiber reinforced lighter tanks are also being used.

    Re roadfreight trailers, make substitute sort of, the I beam chassis for a tube/pipe/tank. The tractor has a small tank but big one is in trailer.

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