NGV-Related Provisions in Highway Bill (HR3)

Since 1992 the NGVC has been working with the U.S. Congress to pass a series of financial incentives, programs and studies in support of the NGV industry. In the 107th and 108th Congresses, many of these provisions were included in the comprehensive energy bills the Congress was considering at the time unfortunately those bills did not get enacted. It was not until President Bush signed the 2005 Energy bill (HR 6) and the 2005 Highway bill (HR 3) that the NGVC was successful in getting enacted into law a broad package of financial incentives, programs and studies that support the NGV market. The following is a description of those provisions included in the Highway Bill (H.R. 3):

Sec. 1121. Use Of High Occupancy Vehicle Lanes:
Permits states to allow petroleum hybrids in HOV lanes with only one passenger. This provision was not supported by NGVC.

Sec. 1308: Freight Intermodal Distribution Pilot Grant Program:
Establishes a DOT grant program to facilitate and support intermodal freight transportation initiatives at the State and local levels and provide capital funding to address infrastructure and freight distribution needs at inland ports and intermodal freight facilities. The bill appropriates $5 million for each of six specific project located in Oregon Georgia the ports of Los Angeles and Long Beach, California Fairbanks, Alaska Charlotte Douglas International Airport, N.C. South Piedmont Freight Intermodal Center, N.C. The monies will be allocated over the five-year period FY2005 through FY2009. Alternative fuel vehicles are not explicitly mentioned. However, they could play a key part as an emission reduction strategy in the creating or expanding these facilities.

Sec. 1808: Addition To CMAQ-Eligible Projects:
Adds certified and verified diesel retrofit technologies to list of eligible technologies for coverage under the CMAQ program. The eligible diesel retrofit technologies would include natural gas repowers. Also permits the States of Missouri, Iowa, Minnesota, Wisconsin, Illinois, Indiana, and Ohio to use CMAQ funds to purchase biodiesel.

Sec. 6015. Clean School Bus Program:
Establishes a program to provide grants to school districts and related organizations for the replacement, repower or retrofit of school buses, the purchase of alternative fuels for school buses and alternative fuel infrastructure. The program will have the following characteristics:

EPA is directed to “achieve an appropriate balance” between spending for replacement buses retrofitting existing buses and alternative fuels. For replacements, grantees may receive the following for the purchase of alt fuel and “clean diesel” school buses:

  • 50 percent of the cost of the new bus if they meet tight emission standards, namely:
    – For MY2005 and 2006, 1.8 grams NOx plus NMHC and 0.01 PM
    – For MY2007, 2008 and 2009, 0.2 NOx plus NMHC and 0.01 PM (the 2010 EPA emission standards)
  • 25 percent of the cost of the new bus if they meet less strict emission standards, namely:
    – For MY2005 and 2006, 2.5 grams NOx plus NMHC and 0.01 PM (which is the minimum standard for diesel engines)
    – For MY2007, 2008 and 2009, “regulatory requirements” by EPA. This is assumed to mean the phase-in requirement to 2010 which is 1.8 grams NOx plus NMHC and 0.01 PM.

Funding for fueling infrastructure may represent up to 25 percent of the total cost of the grant. No state can receive more than 10 percent of the monies made available each year. The legislation authorizes $55 million for FY2006, $55 million for FY 2007 and “such sums as are necessary” for fiscal years 2008-2010.

Sec. 11113: Volumetric Excise Tax Credit for Alternative Fuels:
Provides an excise tax credit (referred to as VEETC) to the seller of CNG or LNG. This credit is different than the fuel credit that had been included in previous versions of the CLEAR ACT. The credit is 50-cent per gasoline-gallon-equivalent for CNG and 50-cents per liquid gallon for LNG for the sale of CNG and LNG for use as a motor vehicle fuel. It begins on October 1, 2006 (delayed for budget reasons) and expires on September 30, 2009. Partially offsetting the value of the excise tax credit, however, is an increase in the motor fuels excise tax rate for both CNG and LNG. The CNG rate would increase from 4.3 cents per gee to 18.3 cents. The LNG rate would increase from 11.9 cents to 24.3 cents on a LNG gallon basis. The increased tax rate will go into effect on October 1, 2006. Under this approach, CNG and LNG will pay the same rate of tax into the Highway Trust Fund as all other transportation fuels, but then CNG and LNG would receive an excise tax credit paid out of the general fund. The credit will be paid to eligible recipients on a regular basis without regard to the actual amount of excise tax paid. Propane, hydrogen and some minor fuels also are eligible for this credit.

Sec 11144 Treasury Study of Highway Fuels Used by Trucks for Non-Transportation Purposes:
Requires the Secretary of the Treasury to undertake a study regarding the use of highway motor fuel by trucks that are not used for the propulsion of the vehicle.