Tax Fairness For Liquid Natural Gas: Goal Of Bill In Congress

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2012 Honda Civic Natural Gas

2012 Honda Civic Natural Gas

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Congress has taken an important step to advance cleaner transport with the introduction of new, fairer taxation for natural gas.

The 'LNG Excise Tax Equalization Act of 2013' is designed to equalize the discrepancy between taxation of diesel and liquefied natural gas (LNG).

Currently, both are taxed at the same federal rate of 24.3 cents per gallon.

The issue, now corrected by the Act, is that diesel has a higher energy content than natural gas--1.7 gallons of LNG are roughly equal to a gallon of diesel--yet LNG is taxed at the same rate. The result is that LNG is taxed at a rate 70 percent higher than diesel, on an energy equivalent basis.

The new legislation taxes LNG on energy content in relation to diesel, rather than on volume.

Natural Gas Vehicles for America, an organization promoting the market for natural gas on behalf of more than 200 parties, illustrates the disparity in taxation with the example below:

"To better understand the problem with the current excise tax, consider a diesel truck traveling 100,000 miles per year at 5 miles per gallon consumes 20,000 gallons of diesel fuel. An identical LNG truck would require 34,000 gallons of LNG to travel the same distance. While the LNG truck uses a cleaner form of fuel, it would pay an additional $3,402 per year in taxes for using LNG."

The example does also illustrate just how much extra LNG a truck would use over the same distance compared to a diesel truck--but the emphasis here is on cleaner emissions and reducing dependency on foreign oil.

Introduced by Representatives Mac Thornberry (R-TX) and John Larson (D-CT), Senators Michael Bennet (D-CO) and Richard Burr (R-NC) will introduce a similar bill to the Senate when it returns from recess.

Six U.S. states have already introduced a similar bill at a local level this year.

“This bill provides a fair, market-centered solution to fix the tax disparity between diesel and LNG,” explained Rep. Thornberry.

“I think this change will encourage more private sector investment in LNG infrastructure and production, and that will be a real positive effect on our economy.”

The effect will be strongest in the commercial sector for the time being, with no LNG passenger vehicles on sale in the U.S, and few LNG stations. Only one CNG, or 'compressed natural gas' car is currently on sale--the Honda Civic Natural Gas.

Even so it's positive news, showing that cleaner fuels are finally starting to attract bipartisan support, with both economic and environmental benefits.


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Comments (4)
  1. In the larger context of funding our highways, they could have taken this opportunity to increase the tax on diesel to "equalize" the tax burden. But, instead, they are reducing the tax on LNG and once again kicking the highway funding issue down the road.

    But sure, LNG should be taxed equivalent, or less for the matter.

  2. What the US really needs is a much higher tax on gasoline. If we had done this decades ago, imagine where we would be today! Every vehicle would be more efficient, we would not have gone to war for oil, we would not have lost so many lives, we would not be so far in debt, and we would not have as much a problem with global warming.
    We need to increase the incentives to drive with natural gas, diesel, hybrids, and plug-ins. This promotes a better situation for the environment, national security, quality of life, and our economy.

  3. Underlying question…

    Should *Fuel Excise Taxes* be based on
    • 1. volume,
    • 2. energy content
    • 3. carbon content, or
    • 4. none of he above

    Or, are Fuel Excise Taxes outdated? Should we start looking at an alternative fundng system as U.S.'s 50 year-old highway infrastructure crumbles? How many bridges have failed in the past month? Currently ~85,000 of 600,000+ bridges in U.S. are functionally deficient, or functionally obsolete: … 8000 in need of critical funding listed on

    Remember bridges & highways are not just used for commuting & holiday travel; but an integrated infrastructure enabling a vast economy via commercial transportation of goods & services. How should we pay to maintain it?

  4. We should instead steadly increase taxes on gasoline and diesel, put sticker taxes on vehicles getting under 30 MPG, and tax pickup trucks and SUVs extra, but provide tax breaks to those who need them for work (such as a farmer).

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