Bill Would Equalize Tax Treatment to Put Competing Fuels on Fair Footing
Washington, DC - U.S. Senators Michael Bennet (D-CO) and Richard Burr (R-NC) reintroduced their bipartisan bill to put liquefied natural gas (LNG) on equal footing with diesel fuel under the federal highway excise tax. The bill will allow LNG to compete fairly with diesel by taxing LNG on energy output rather than per gallon.
"LNG could be a better and more economical fuel choice for Colorado's business owners, but the current tax system has built in disincentives that may prevent them from using it," Bennet said. "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."
"This is a no-brainer. Our bill would eliminate a current tax disincentive for using LNG, a fuel that is not only environmentally cleaner would but also reduce our dependence on foreign oil," said Senator Burr. "Energy security is absolutely vital to national security, and our bill will take steps toward decreasing our dependence on imported energy sources."
The current tax system for LNG can result in thousands of dollars of additional cost for companies choosing to use the fuel. For example, if a diesel truck travels 100,000 miles at 5 miles per gallon it consumes 20,000 gallons of diesel fuel. However, an identical LNG truck would require 34,000 gallons of LNG to travel the same distance. The current tax system would result in the LNG truck operator paying an additional $3,402 in taxes because of the 14,000 gallons more of fuel to travel the same distance.
The fuel has attracted the attention of fleet operators due to its low cost at the pump and reduced environmental impact. LNG produces significantly lower levels of toxic emissions than diesel fuel, including lower levels of carbon dioxide, nitrogen oxide and sulfur dioxide. Using LNG instead of diesel fuel also reduces pollution from so-called "black carbon," also known as soot. Black carbon is a major contributor to climate change, second only to carbon dioxide in the amount of heat it traps in the atmosphere once emitted.
In addition to the environmental benefits of the fuel, LNG is cheaper at the pump than diesel. Currently, the excise tax rate for both LNG and Diesel Fuel is set at 24.3 cents per gallon, however LNG produces less energy per gallon than diesel fuel. It takes about 1.7 gallons of LNG to equal the energy in 1 gallon of diesel fuel, resulting in LNG being taxed at 170% of the rate of diesel fuel on an energy equivalent basis. Taxing LNG based on energy output versus volume removes a disincentive to use the fuel.
A recent study commissioned by the Small Business and Entrepreneurship Council shows that increased international demand for LNG has had a positive impact on the nation's economy, particularly in Colorado. Colorado's natural gas production has risen by almost 45 percent resulting in large numbers of job growth particularly for small and midsize businesses in the state.
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