Sens. Michael Bennet (D-Colo.) and Richard Burr (R-N.C.) have reintroduced a bipartisan bill that would allow liquefied natural gas (LNG) to better compete with diesel with taxation based on energy output rather than per gallon.
Under the current federal highway excise tax, LNG is taxed by the gallon but because of its lower energy output, vehicles require more LNG to produce the same energy as diesel fuel. This makes LNG cost-prohibitive compared with diesel, the senators argue, and creates a built-in disincentive for fleets to use LNG.
"This bill would allow LNG and diesel to compete more fairly in the market while offering a cleaner fuel source to help keep our air clean," said Bennet.
Currently, LNG is cheaper at the pump than diesel but the excise tax rate for both LNG and diesel fuel is set at 24.3 cents per gallon. It takes about 1.7 gallons of LNG to equal the energy in a gallon of diesel fuel. This effectively results in LNG being taxed at 170% the rate of diesel fuel on an equivalent energy basis, according to the bill.
"This is a no-brainer," said Burr. "Our bill would eliminate a current tax disincentive for using LNG, a fuel that is not only environmentally cleaner but would also reduce our dependence on foreign oil."