President Obama’s budget proposal on 4th March was met with scepticism on Capitol Hill. Prior to the announcement, members of Congress and the press had already stated that the President’s budget was dead on arrival in Congress due to partisan disagreements over spending levels and policy disagreements. However, despite scepticism, it is important to note that the President did include NGVs provisions within his budget request.
- Provide a tax credit for dedicated medium and heavy duty alternative fuel vehicles (AFV) including compressed natural gas (CNG) and LNG vehicles.
- Lower the 24.3 cents/gal. LNG highway excise tax to 14.1 cents/gal.
There is currently no tax credit for dedicated medium and heavy duty AFVs other than fuel cell vehicles. The President’s 2015 budget would modify the existing fuel cell credit and expand it to include AFCs including CNG and LNG powered vehicles among others. The credit would be increased from the current US$ 20 000 – 25 0000 for dedicated AFVs weighting between 14 000 and 26 000 lbs, and the proposal maintains the US$ 40 000 credit for dedicated AFVs weighing more than 26 000 lbs. The credit would be available for 2015 – 2020, with lower amounts offered for 2020.
The American Public Gas Association (APGA) has been actively supporting the second NGV provision listed above, which will bring parity between the highway excise tax on LNG and diesel. Under current law. LNG used by motor vehicles is taxed at 24.3 cents/gal., which is the same rate at which diesel is taxed. However, because LNG is less energy dense than diesel, more LNG must be used to accomplish the same work. This means that LNG is also taxed more, in fact at 170% of the rate of diesel on an energy equivalent basis. This is a significant disincentive for heavy duty fleet owners to switch to clean burning LNG.
To remedy the inequality, Obama proposes to lower the highway excise tax on LNG to 14.1 cents/gal. This would provide equal taxation between LNG and diesel on an energy content basis.
The APGA believe that both proposals are important despite the lack of viability of the budget as a whole. They serve as a signal that the administration continues to support NGVs, which is one of the few issues that continue to receive bipartisan support and APGA will continue to push for passage of these important policies.
Adapted from a press release by Claira Lloyd.
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/07032014/us_ngv_provisions_in_budget249/