Bipartisan legislation was offered in the Senate last Wednesday that seeks to extend and expand federal tax credits for natural gas vehicles (NGV) and refueling infrastructure.

The credits, which would be extended by 10 years, would equal as much as 80% of the additional cost of an NGV over a conventional gasoline-fueled vehicle, and would be capped at $12,500 for passenger cars and light trucks and at up to $64,000 for heavier-duty vehicles.

And for the first time, the bill would make all bi-fuel vehicles, which use natural gas, eligible for a tax credit equal to 50% of the additional cost over that of a conventional vehicle. It also increases the refueling property tax credit to $100,000 from $50,000 per station.

On the manufacturing side, the Senate measure would allow the entire cost of a NGV plant that is placed in service before Jan. 1, 2015 to be expensed and treated as a deduction in the taxable year in which the facility was placed in service.

Congress first made NGVs eligible for tax credits in the Energy Policy Act of 2005. Under that bill, tax credits equaling 80% of the incremental cost for NGVs ranged from $4,000 to $32,000. The existing tax credits expire either at the end of the current year or at year-end 2010.

Other measures seeking to increase the tax credits for NGVs have been offered in the House and Senate this year.

“By making it easier and cheaper to own a vehicle that runs on natural gas, we can help families save money on energy, create new manufacturing jobs and clean our air,” said Sen. Robert Menendez (D-NJ), who introduced the bill along with co-sponsors Senate Majority Leader Harry Reid (D-NV) and Sen. Orrin Hatch (R-UT).

“Each day our nation consumes about 21 million bbl of oil — more than 25% of the world’s oil supply. Nearly 70% is imported from outside our borders. With only 3% of the world’s oil reserves, we cannot produce our way to a safe and secure energy future,” Reid said. “I’m proud to join…in introducing legislation that will help encourage the development of natural gas vehicles.”

T. Boone Pickens, a proponent of NGVs, was on hand for the legislation’s unveiling. “This bill will accelerate the use of natural gas in vehicles and is the only way I know to quickly and effectively reduce our dependence on foreign oil,” Pickens said.

The independent oil billionaire declared last Wednesday “Energy Independence Day,” which marked the one year anniversary of the launch of the Pickens Plan (see NGI, July 14, 2008). He said the energy plan could reduce America’s dependence on foreign oil by more than one-third within 10 years by shifting the national energy mix toward domestic renewable sources and using more natural gas as a transportation fuel.

Also last Wednesday Colorado Gov. Bill Ritter said his state was seeking $10 million in federal money to expand the use of NGVs in industries such as waste disposal and public transit (see related story).

More local and state governments and businesses are adding NGVs to their fleets, thanks to financial incentives adopted by municipal planning or air quality agencies, according to a study conducted by Emisstar LLC and commissioned by NGV America, which promotes vehicles powered by natural gas or hydrogen.

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