NGVAmerica Celebrates the Passage of LNG Tax Fix by Congress
On Friday, the President signed legislation extending funding for the Nation’s highway programs for three month (H.R. 3236). Both the House, by a vote of 385-34, and the Senate, by a vote of 91-4, had passed this legislation earlier in the week. For the NGV industry, passage of the legislation means that NGVAmerica’s long term ongoing efforts to correct the inequity in the way liquefied natural gas (LNG) is taxed stands corrected and will further expand the use of clean-burning, domestic natural gas as a transportation fuel. Currently, fleets operating LNG-powered trucks are effectively taxed for the fuel at a rate 70 percent higher than that of diesel fuel. This is an unfair penalty on those using domestically produced LNG in their trucking fleets.
The provision modifies the excise tax on LNG to be based on energy content, rather than volume, and thus brings the tax on LNG into parity with that of diesel. Starting Jan. 1, 2016, LNG will be taxed based on a diesel gallon equivalent (DGE) that is defined as equal to 6.06 pounds of LNG. The highway excise tax on LNG is reduced from approximately 41.3 cents per DGE to equal that of diesel fuel at 24.3 cents per DGE.
To illustrate the significance of the change, consider that a natural gas truck traveling 100,000 miles per year at 5 miles per DGE consumes 20,000 DGE per year. Prior to the passage of the new law, the LNG truck would have a highway fuel tax bill of $8,262. With this change, the LNG truck will now pay $4,860 a year in highway fuel taxes, a savings of $3,402 per year.
In helping to pass the tax equalization language, NGVAmerica commends the efforts of Senators Richard Burr (R-NC) and Michael Bennet (D-CO) as well as Congressmen Mac Thornberry (R-TX), John Larson (D-CT), Todd Young (R-IN), Ron Kind (D-WI), Mike Kelly (R-PA) and their staffs, as well as Mr. Ken Kelley of GTM Manufacturing and all NGVAmerica members.