Liquefied natural gas (LNG) as a transportation fuel option is back on the competitive race track, thanks to a part of the temporary (three-month) highway funding bill passed by the U.S. Senate Thursday, according to natural gas vehicle (NGV) advocates. The House-passed version had a similar provision.
Under the provisions of the bill, beginning Jan. 1, LNG for transportation will be taxed based on a diesel gallon equivalent (DGE), something the NGV sector leaders have been urging for several years (see Daily GPI, Jan. 16).
At a Congressional hearing last December, the global energy and procurement director for Atlanta-based UPS called for "removing barriers" to NGVs, adding that if Congress really wanted to accelerate the adoption of LNG use in heavy-duty trucks and more use of U.S.-produced natural gas supplies, it needed to eliminate "disproportionate taxing of LNG compared with diesel fuel."
Noting that President Obama was expected to sign the latest measure, Newport Beach, CA-based Clean Energy Fuels Corp. said the new leveling provision will effectively lower the tax on LNG by 14.1 cents/gal. Twenty-six state legislatures have already taken similar action, a Clean Energy spokesperson told NGI.
Clean Energy CEO Andrew Littlefair said the use of LNG in heavy-duty trucks, locomotives and large marine vessels has been growing steadily in North America, and "anyone who cares about a cleaner environment and energy independence should be very grateful for what the U.S. Congress has done, making LNG much more competitive."
Executives with America's Natural Gas Alliance (ANGA), and the NGVAmerica and American Gas Association (AGA) trade associations echoed Littlefair's sentiments.
"We applaud Congress for including language to equalize the federal highway excise tax on LNG," said ANGA CEO Marty Durbin. "This provision has garnered strong bipartisan support over the years, and we are thrilled to see it become law."
Calling the action a "common-sense change" that will mean greater fuel cost savings, NGVAmerica President Matt Godlewski said the passage of the LNG provision is great news for trucking fleets that are looking for clean-burning fuels. His calculation places the excise tax on LNG at 24.3 cents/DGE, compared to its current 41.3 cents/DGE level, Godlewski said.
"Currently, fleets operating LNG-powered trucks are effectively taxed for their fuel at a rate 70% higher than that of diesel fuel," he said.
An AGA spokesperson clarified the number to point out that the current federal excise tax on both diesel and LNG is 24.3 cents/gallon, but because LNG does not have the same energy content/gallon of fuel, it takes 1.7 gallons of LNG to equal a gallon of diesel. "Since the excise tax is based on volume (gallons) -- not energy content -- LNG is taxed at 170% of the rate of diesel on an energy equivalent basis," he said.
"This provision provides the level playing field that natural gas has needed to reach its full potential as a transportation fuel," said Kathryn Clay, AGA vice president for policy strategy.
Each of the trade groups has been lobbying Congress for some time to take this corrective action on LNG. Under the new provision, the energy equivalent of a diesel gallon of LNG is defined as having a Btu content of 128,700, which AGA said is equal to 6.06 pounds of LNG.
Separately, the new measure defines the energy equivalent of a gallon of compressed natural gas (CNG) as having a Btu content of 115,400, or 5.66 pounds of CNG.
"The shale revolution is creating new opportunities for natural gas fuel in all sectors of our economy, and this legislation ensures that more vehicles can take advantage of clean, abundant and American natural gas," Durbin said.