Congress fuels around

Once again, Congress is playing with fuel. Proposals sloshing around in both the highway reauthorization bill and the energy bill could spill over into trucking. The most explosive provision was added to the House version of the highway bill. A little-advertised amendment would force companies to pass fuel surcharges on to the person or company who paid for the fuel. Operationally, there would be

Once again, Congress is playing with fuel. Proposals sloshing around in both the highway reauthorization bill and the energy bill could spill over into trucking.

The most explosive provision was added to the House version of the highway bill. A little-advertised amendment would force companies to pass fuel surcharges on to the person or company who paid for the fuel.

Operationally, there would be numerous problems with the provision. Determining the correct surcharge for each shipment would be messy. So would handling timely collection of payments from shippers and remittance to the actual buyer of the fuel. Most important, the provision would set a dangerous precedent for mandating other forms of price control and government intervention into private contractual arrangements.

As for the energy bill, the House version includes a tax change to encourage blending diesel fuel with water. The bill would lower the federal Highway Trust Fund (HTF) tax rate on diesel-water emulsions to 19.7¢/gal. from the 24.3-¢ rate for pure diesel. The reduced rate is not actually an incentive, however. Instead, it puts the diesel-water blend on an equivalent basis when measuring the energy content of each fuel. Nevertheless, enactment of the provision could finally make “watered diesel” an economically viable alternative after years of unfulfilled assertions for it.

Another fuel that could benefit from the energy bill is ethanol. The energy bill that stalled last year would have mandated production of five billion gallons of ethanol a year by 2012. Despite the bill's failure, ethanol production is soaring. Rather than accepting their good fortune and abandoning the legislative mandate, ethanol supporters are hoping to raise the ante to 8-billion gallons in the new version of the bill.

Nobody has found a way to blend ethanol with diesel, but diesel-powered trucks might still benefit marginally from higher ethanol production. That's because blending ethanol with gasoline to make gasohol would slightly reduce the demand for gasoline and thus free up more crude oil to make diesel fuel instead of gasoline.

The highway bill might also become a vehicle for changes in fuel taxes, as well as other HTF taxes. The House version contained no changes other than an extension of expiration dates. But the Senate could make changes.

Truck dealers and others hope the Senate will exempt tractors with GVWR of 26,000 lb. or less from the 12% excise tax on first-time sales. Currently, trucks with a GVWR of 33,000 lb. or less are exempt, but all tractors are taxable. Dealers are “secondarily liable” for tax on vehicles they sell if the customer doesn't pay the tax directly. Dealers argue that they often sell Class 6 trucks that later are converted to tractors, making the dealer liable for the tax even though it may not know about the conversion. They want protection from this liability without significantly undermining the HTF tax base.

A couple of standalone bills, which might be added to either the energy or the highway bill, provide an income tax credit for the cost of PTO or idling-reduction equipment.

The bottom line: The highway and energy bills have both run out of gas repeatedly, and may again. But this year, the House and the President are more closely aligned on both bills. Meanwhile, the Senate has become more Republican, though not necessarily closer to the House or White House on these bills. The upshot is that fleet owners have more reason than before to take these bills seriously and expect that at least one of them will become law, perhaps as soon as this summer.

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