House Votes to Restore Expired Incentives for This Year But Not Next
As Senate Subcommittee Takes Testimony from GNA and Industry Experts
Who Raise the Key Issue of Excise Tax Equitability for LNG as a Truck Fuel
The U.S. Congress has seen action on natural gas vehicles, with the House of Representatives voting to restore important incentives for NGVs that expired at the end of 2013. Separately, a Senate Finance subcommittee took testimony from industry experts, including Rich Kassel, senior VP with Fleets & Fuels publisher Gladstein, Neandross & Associates, at a hearing titled Natural Gas Vehicles: Fueling American Jobs, Enhancing Energy Security, and Achieving Emissions Benefits.
But while the attention is encouraging for NGV advocates, the fuel sale and infrastructure incentives have not been extended beyond the end of this year, and there has as yet been no firm action on the nagging excise tax issue that dogs liquefied natural gas as a truck fuel. Both diesel and LNG are taxed by the gallon. Because of LNG’s lower energy density, it’s at a fundamental disadvantage compared with diesel fuel.
“We have a huge opportunity to grow this market and increase the use of natural gas as a transportation fuel,” Senator Michael Bennett, the Colorado Democrat who chaired last week’s Energy, Natural Resources, and Infrastructure subcommittee hearing, said in a release. “We can level the playing field on fuel taxes so natural gas isn’t taxed at a higher rate than diesel.”
‘A Disincentive to Investment’
“On an energy equivalent basis LNG effectively pays 170% of the diesel rate,” according to an NGVAmerica statement provided to the Senate panel. “The current highway excise tax treatment of LNG is a disincentive to investment in new LNG trucks and fueling stations, and should be corrected to encourage capital investments,” the organization said. “The highway excise tax on LNG should be changed so that it is imposed on the energy content of a diesel gallon” (original emphasis).
Rich Kassel of GNA agreed: “We encourage you to update the value of the Alternative Fuel Excise Tax Credit for LNG so this credit is also based on the energy content of a diesel gallon, rather than on a per-gallon basis.”
Looking at the broader picture of NGVs in America, “The main challenge is to create mechanisms that accelerate (1) the retirement, retrofitting, or rebuilding of the millions of “dirty diesels” that remain in use, and (2) their replacement with cleaner engines that meet EPA’s most current PM and NOx standards in the most cost-effective manner possible,” Kassel said.
Polluting ‘Legacy’ Fleet Continues to Dominate
“According to our research, between roughly 7 and 8 million trucks are on the road today that predate EPA’s PM standard, comprising roughly two-thirds of the trucks in use nationwide.Choosing the most cost-effective approaches will accelerate the clean-up of these trucks by spreading the finite pool of investment dollars as widely as possible.”
“Accelerating the pace of replacing this ‘legacy’ fleet of engines and equipment is the critical factor in reducing the aggregate emissions from the transportation sector,” Kassel said. “Nobody drives an old, dirty truck because they prefer its smoking tailpipe or rattling engine. They do so because they cannot overcome the initial capital cost of a new truck.”
“Tax policies that incentivize and accelerate the purchase of natural gas engines or equipment will provide particularly important means of accomplishing the economic, energy, and environmental objectives that will be achieved by replacing the entire legacy fleet.”
Also at the Senate hearing,
- Natural gas from NGVs can be made from renewable sources and thus can “achieve a 90% greenhouse gas reduction compared to diesel,” said Harrison Clay, president of Clean Energy Renewable Fuels. He noted the inclusion this year of biomethane under the U.S. EPA’s system of Renewable Fuel Standard credits (F&F, July 5) and said, “Ensuring the long-term viability of the RFS is critical for the next chapter of this success story to be written… an amazing opportunity for our nation’s energy future.”
- The Greater Cleveland Regional Transit Authority has just taken delivery of the first of 240 compressed natural gas buses from Gillig, said general manager Joseph Calabrese. “We hope to eventually replace our entire fleet of nearly 500 diesel buses with CNG,” he toild the subcommittee.
- “Natural gas-powered trucks are perfect for short and regional-haul trucking,” said Bob Carrick, natural gas sales manager for Daimler Trucks North America (which includes Freightliner). “For companies that operate in that environment, for example at ports and in regional hub and spoke distribution, natural gas is both economical and efficient.
“Good examples of what I mean are package delivery companies,” Carrick said: “food and beverage distributors, utility vehicles, refuse and public transit vehicles that stay within a relatively compact radius and return to a dedicated depot of station to fill up.”
“The enormous expansion in U.S. natural gas production and natural gas reserves has created new confidence that natural gas prices will remain attractive as compared to diesel prices for the foreseeable future,” said Mike Whitlatch, global energy and procurement VP with UPS.
“This and other factors led UPS to increasingly shift to natural gas as a fuel and justify paying the considerable extra cost of limited production natural gas vehicles. New engine designs coming on the market today permit the heavy trucks to run on CNG with tolerable performance reductions, as compared to LNG powered trucks. Natural gas in LNG or CNG form remains the only widespread commercial alternative to diesel for heavy trucks,” Whitlatch said.
- “We need policies that help us sustain the momentum we are seeing in the adoption of natural gas vehicles and fueling infrastructure,” said Ron Jibson, president of Utah’s Questar utility. “The most important component of this is maintaining a level playing field that allows natural gas vehicles to compete fairly in the market.”
“Accelerating the use of natural gas vehicles provides an unprecedented opportunity to reduce reliance on imported petroleum while also spurring on economic activity here at home,” said NGVAmerica. “The U.S. has an abundant supply of clean, efficient, and economically-priced domestic natural gas. In fact, the U.S. is now the world’s number one producer of natural gas.
“Sadly the U.S. ranks fifteenth in the world in numbers of NGVs in operation. Expanding the use of this low-cost domestic fuel will save businesses and consumers money by lowering transportation costs while also helping communities address important environmental issues such as smog and greenhouse gas emissions.”
NGVAmerica and CNGVA, the Canadian Natural Gas Vehicle Alliance,
have scheduled the 2015 North American NGV Conference & Expo
for September 15-18 at the Colorado Convention Center in Denver.
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Source: Senate Finance Committee with Fleets & Fuels follow-up