Fuel's Gold

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For years, the center has taken a lead role in forcing the state and the U.S. Environmental Protection Agency to enforce clean-air laws. Hogan says the tax credits and rebates that will come out of the state general fund could have been better spent on other clean-air programs, including subsidizing the cost of emissions testing and improving public transportation.

"We are spending money on the wrong things and eliminating the wrong programs," Hogan says.

State budget analysts are scrambling to determine the fiscal impact of the law but can now only guess, since they don't know how many people plan to take advantage of the hefty tax credits and rebates.

"There is no way of knowing exactly what the cost will be," says an analyst with the Joint Legislative Budget Committee.

Hull's budget analysts also are just beginning to scour the data to try to anticipate the impact on this year's and next year's budget.

"Obviously, the marketplace has responded in a way that was not anticipated when this legislation was passed," says Tom Betlach, director of the governor's Office of Strategic Planning and Budgeting.

Not everyone is surprised by the public reaction to the program.

"We all anticipated a very strong reaction from the public," says Southwest Gas lobbyist Dick Foreman. "That was the purpose of the sponsor of the bill. The sponsor wanted to create demand."

The bill's chief sponsor was Groscost, a Republican from Mesa who two years ago held a consulting contract with a wholly owned subsidiary of Southwest Gas. The contract was worth more than $10,000 a year. Under the contract with LNG Energy Inc., Groscost worked in neighboring states promoting the use of natural gas to cities and towns.

Groscost did not return several calls placed to his office. Foreman says Groscost no longer works for LNG Energy.

Foreman says the Arizona law is an important first step in getting alternative-fuel vehicles on the highway and creating a demand for alternative fuels that will lead to more natural gas and propane fueling stations. (Foreman says Southwest Gas has no investments in natural gas fueling stations. Southwest Gas, however, is a distributor of natural gas.)

While public fueling stations are limited, the state is also providing financial incentives for Arizonans to install natural gas refueling stations at their homes. The state -- once again, through a tax credit -- will pay 100 percent of the cost to install a low-pressure, natural gas compressor that will refill a vehicle's tank overnight. The system -- manufactured by a Canadian company called Fuelmaker -- costs about $7,000 to install and can be used in any home that receives natural gas or is within 100 feet of a natural gas line.

Fuel from the home station costs only about 60 cents a gallon.

The state also is providing up to $400,000 in tax credits to businesses that construct natural gas or propane refueling stations open to the public.

There is no question that natural gas vehicles have fewer emissions than even the best gasoline-powered engines. Honda claims that its natural-gas-powered Civic will reduce emissions by 98 percent versus the cleanest-burning gasoline engines.

The law requires the state to pay up to 50 percent of the sales price of a "super ultra low emissions vehicle" -- such as a natural-gas-powered Honda Civic. The payment is made either through a grant, if the money is available from a $4 million fund at the state Department of Commerce, or a tax credit that can be collected on next year's taxes or applied to future state tax liability.

In addition, the state will provide a tax credit to cover 100 percent of the cost of the alternative-fuel system installed in the vehicle -- either by the manufacturer or with an after-market conversion.

That's not all. The state sales tax is waived and license plate fees slashed to $8 per year. The purchaser also receives up to a $2,000 income-tax deduction on federal taxes. Finally, the vehicles are allowed in freeway car-pool lanes while carrying only one occupant.

A $21,000 Honda Civic would cost only about $6,000 after the tax credits and rebates, says Jerry Polick, alternative fuel manager at Honda Cars of Mesa.

The sweetheart deals also are offered on large vehicles, with tax credits of more than $30,000 on Ford's F-450 -- a 12-ton behemoth flatbed truck.

A wide array of vehicles is eligible for the program, including, from Dodge, the Club van and wagons; from Ford, Crown Victoria, F-150 series, Ranger pickups and Econoline vans and wagons; from Chevrolet, Silverado, medium-duty pickups and Cavalier; and from GMC, Sierra pickup.

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John Dougherty
Contact: John Dougherty