Senate Introduces the LNG Excise Tax Equalization Act

June 10, 2013

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The U.S. Congress introduced bipartisan legislation to equitably tax liquefied natural gas as a transportation fuel.
The U.S. Congress introduced bipartisan legislation to equitably tax liquefied natural gas as a transportation fuel.

Recently, the U.S. Congress introduced bipartisan legislation to equitably tax liquefied natural gas as a transportation fuel. Senators Michael Bennet (D-CO) and Richard Burr (R-NC) introduced the legislation, titled the “LNG Excise Tax Equalization Act of 2013” (S.1103). 

The bill makes a simple but important modification in the way LNG is taxed as a transportation fuel. Currently, the federal highway excise tax on both diesel and LNG is set at 24.3 cents per gallon (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.

LNG is an attractive fuel for large trucks and other heavy-duty applications that use a large amount of fuel per year. This makes the current LNG tax penalty a significant barrier to wider LNG use in these applications. 

For example, consider that a diesel truck traveling 100,000 miles per year at 5 miles per gallon would consume 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.

Two weeks ago, Representatives Mac Thornberry (R-TX) and John Larson (D-CT) introduced similar legislation, H.R. 2202, in the U.S. House of Representatives. Since then, Representatives Jim Matheson (D-UT), Leonard Lance (R-NJ) and Lee Terry (R-NE) have co-sponsored the bill.

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




  1. 1. GREG FOREMAN [ June 10, 2013 @ 03:44PM ]

    Natural gas is the “dog and pony” show of the new millennium. Natural gas is not the panacea its proponents have made it out to be-here is why. I have made this comment before and until the industry participants wake up to the fact that this proposal is literally “all show and no go”-except for those who will ultimately profit from it's acceptance. More so, there are more efficient alternatives from both a cost and environmental standpoint than natural gas. However in addressing this proposed legislation let me present the following: in order for this “piece” of legislation to be completely effective, the respective states would have “equalize” their excise taxes on natural gas as well. The states-just like the federal government-would have to agree to a 70% hit, reduction on natural gas excise tax charged in each respective state. I dare say the states will be willing to suffer the loss of such revenue in the name of a fuel that is 70% less efficient than diesel, a fuel that is as detrimental to the environment as diesel(one part methane is equal to 25 parts carbon dioxide-another way to view this is think of one gallon of natural gas will do as much damage to the environment as 25 gallons of diesel), and a fuel requiring an exorbitant capital outlay for CL-8 trucks(average increase in cost equates to $100K-$150K) and pumping facilities(estimated installation cost pegged at between $500K to $1KK dollars per unit). So I have to ask, is it me, or does the math just not add up here? Natural gas is a blunder, a bust, a pie in the sky proposal that should never have seen the light of day, at least so far as the transportation industry is concerned.

  2. 2. Kennon Guglielmo [ August 09, 2013 @ 04:57PM ]

    Greg - you are WAY off on your negative data regarding NG as a truck fuel:
    1) NG is not 70% less efficient than diesel - it is about 5%-10% less efficient in a CL-8 application.
    2) One gallon of NG does not do as much damage as 25 gallons of diesel - you have to look at the exhaust concentration of methane in the NG truck. There are only trace (ppm) levels of methane in NG truck exhaust. A massive fraction - in fact the majority - of diesel exhaust is CO2 - not just a trace ppm amount.
    3) CL-8 truck cost for a spark-ignited Cummins NG engine (not a "Westport" micro-pilot diesel ignited NG engine) is about a $50K increase today - not a $100K-$150K increase. Those very large cost increases are for a "Westport" 15L application - not a Cummins ISXG-12L application.
    In addition, those incremental costs are dropping precipitously as the cost of tankage comes down with volume and competition.


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