LNG excise tax equalisation bill

On 11 February, the Senate Committee on Finance passed legislation S.344, introduced by Senators Bennet and Burr that would equalise the tax treatment of LNG with diesel. Under the current law, the federal highway excise tax on both LNG and diesel are taxed on a volumetric basis at 24.3 cents/gal. LNG is less energy dense than diesel, as it requires 1.7 gal. of LNG to equal the energy content of 1 gal. of diesel. Based on this fact, LNG trucks are likely to consume more fuel than their diesel counterparts and therefore will pay more in federal highway taxes than their diesel counterpart.

The American Public Gas Association (APGA) has said that this additional tax burden provides a strong disincentive for consumers to purchase the LNG powered truck. Taking into account the incremental cost of an LNG truck, which can be up to an additional US$60 000, the additional fuel tax burden may be sufficient to prevent fleets from using cleaner burning LNG.

In order to remedy this disincentive, Senators Bennet and Burr introduced S.344, which changes the way LNG and propane are taxed on a volumetric basis to an energy content basis, which parallels the current treatment of CNG. In effect, this would lower the taxation of LNG to 14.1 cents/gal. diesel equivalent. The Senate Committee on Finance supported the Bennet-Burr legislation along with 16 other tax measures that will now potentially see floor time. There are two key obstacles to full Senate enactment of the Bennet-Burr legislation though. The legislation will score approximately US$54 million through 2025. Though that is a very minor cost, finding the means to offset the cost is not easy outside of the context of comprehensive tax reform. The reform also presents its own complications as making changes to the tax code now, while ostensibly working on comprehensive tax reform, only makes the reform effort more difficult.

The APGA has said that it appreciates the good work of Senators Bennet and Burr, and the Finance Committee as a whole and will continue to push Congress to pass this common sense legislation.

Edited from press release by Claira Lloyd

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/20022015/lng-tax-bill/