Fuel Smarts

Bill Would Reduce Tax Burden on LNG Users

May 24, 2013

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NGVAmerica says new legislation addresses one stumbling block to wider LNG adoption.
NGVAmerica says new legislation addresses one stumbling block to wider LNG adoption.

New bipartisan legislation in the U.S. Congress would change the way liquified natural gas is taxed as a transportation fuel, making it more equal to the diesel fuel tax by using diesel-gallon equivalents as a measure.

Representatives Mac Thornberry (R-Texas) and John Larson (D-Conn.) have introduced the LNG Excise Tax Equalization Act of 2013 (H.R. 2202) in the U.S. House of Representatives. Senators Michael Bennet (D-Colo.) and Richard Burr (R-N.C.) will introduce a similar bill to the Senate when it returns from recess.

Currently, the federal highway excise tax on both diesel and LNG is set at 24.3 cents per gallon, as set by Internal Revenue Code 4041. However, it takes about 1.7 gallons of LNG to equal the energy content of one gallon of diesel. The result is the taxation of LNG at a rate 70% higher than diesel on an energy equivalent basis.

This legislation changes the way LNG is taxed, from a volume (gallon) to an energy content (diesel gallon equivalent) basis.

To better understand the problem with the current excise tax, explains NGV America, consider a diesel truck traveling 100,000 miles per year at 5 mpg consumes 20,000 gallons of diesel fuel. An identical LNG truck would require 34,000 gallons of LNG to travel the same distance. While the LNG truck uses a cleaner form of fuel, it would pay an additional $3,402 per year in taxes for using LNG.

“This bill provides a fair, market-centered solution to fix the tax disparity between diesel and LNG,” said Rep. Thornberry. “I think this change will encourage more private sector investment in LNG infrastructure and production, and that will be a real positive effect on our economy.”

NGVAmerica applauded the step, which it says will "remove one of the significant artificial barriers to the greater use of domestic natural gas as a transportation fuel."

This effort by Congress is being matched by efforts in a number of states.  Already this year legislatures in six states have passed bills that adjust the tax on LNG so that it is based on an energy equivalent basis.


  1. 1. GREG FOREMAN [ May 26, 2013 @ 07:45PM ]

    So now the natural gas proponents want to “equalize” the tax on natural gas versus the tax paid on diesel. The equivalency presented in paragraph three, line two, that “it takes about 1.7 gallons of LNG to equal the energy content of one gallon of diesel” appears a bit conservative. Information provided by POINTS AND FIGURES indicates natural gas has ¼ the energy of natural gas. “Diesel has more energy density than natural gas, by a lot- 129btu vs 37btu.” (http://pointsandfigures.com/2011/04/27/natural-gas-vs-diesel) The btu factors would indicate 3.49 gallons of natural gas would be required to provide the equivalent energy provided from one gallon of diesel. The overall conversion spin applauding natural gas conversion is totally without foundation or justification. Though neither propane or natural gas provide the efficiency nor cost effectiveness of diesel, when viewed in terms of fuel conversion, propane is a “no brainer”.(and no, I don't work for nor in anyway associated with the propane industry) Why? First, the country already has a propane distribution structure in place. One can find propane in almost every nook and cranny in the US and Canada. Second, equipment required to pump natural gas could range from $350K to almost $1 million dollars, per station, for the mechanical systems alone. Third, one can fuel a propane truck in the same amount of time it takes to pump diesel. Natural gas would require special equipment for a “fast fuel”, however, in as much as natural gas produces 1/3 the power of propane, the driver would receive less mileage per gallon of natural gas requiring more frequent tank ups.

  2. 2. GREG FOREMAN [ May 26, 2013 @ 08:00PM ]

    The last point is the production of GTL, gas to liquid, fuel something of a well kept secret among natural gas proponents. Current technology allows natural gas to be converted into a liquid fuel superior to diesel in every respect. The resultant fuel can be used the same as diesel, but provides 25% higher C-tane rating which translates in to more power producing better fuel economy providing better economy of scale. GTL fuel produces 50% lower fuel emissions than comparable diesel. GTL fuel will be readily available within the next two to four years. The cost estimates are GTL fuel will be priced more in line with unleaded super gasoline in other words less than comparable diesel fuel. Currently, SASOIL and SHELL OIL both have refineries under construction in Louisiana to produce the fuel. SASOIL has a 21 billion dollar refinery under construction in Lake Charles, LA and SHELL OIL has an 18 billion dollar refinery under construction in Norco, LA. Production from these two refineries is "pegged" at between 750K to 1.25 million gallons of GTL fuel daily. For some reason, proponents of natural gas have avoided this “tid-bit” of information. Because of these four facts, the push to convert trucks to natural gas should be considered the 21st century equivalent of a 19th century “snake oil” sale. The trucking industry should realize it is being sold a bill of goods that will NEVER produce the return necessary to capitalize on whatever natural gas conversions or adjustments will be ultimately required of the industry.

  3. 3. Nopane [ May 27, 2013 @ 04:09PM ]

    Propane is insanely dangerous

  4. 4. Larry [ May 28, 2013 @ 04:02AM ]

    Stop the discussion.
    Tax all road fuel based on btu content, and let the market determine which technology works best. Gasoline, Diesel, Ethanol, Methanol, Propane, Biofuels, Electric, all fuels.
    If you use it on our roads, it pays its fair share.
    Our legislature should get out of the business of deciding what is best for us, when we should have that right.

  5. 5. GREG FOREMAN [ May 28, 2013 @ 07:29AM ]

    NOPANE: Are you employing the “chicken little” defense against propane? What fuel is not “insanely” dangerous? Even natural gas is insanely dangerous. Gasoline is “insanely” dangerous. Why are there “no smoking” signs posted prominently around fuel islands? Because gasoline has a flash point of -35 degrees FH. How about atomic energy? What ever “danger” attributed to propane can/has been mitigated and can be protected against. Otherwise why would we have propane distributorships from one end of this country to the other. The very nature of fuel is that it is called fuel for a reason, it goes “boom!” in an engine and gets us from one point to another point. So far, the energy industry has managed to remarkably “contain” the risk associated with any/all fuels usage.


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