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.