Fee proposed to help fund NGV investment

Nov. 18, 2011
A temporary “user fee” is being proposed within a new Senate-sponsored bill to help fund tax credits for natural gas vehicles (NGVs) and the construction of refueling infrastructure to support them.

A temporary “user fee” is being proposed within a new Senate-sponsored bill to help fund tax credits for natural gas vehicles (NGVs) and the construction of refueling infrastructure to support them.

That’s the key difference between the New Alternative Transportation to Give Americans Solutions or “NAT GAS” Act of 2011 (S. 1863) introduced by Sen. Robert Menendez (D-NJ), Majority Leader Harry Reid (D-NV) and Sen. Richard Burr (R-NC), and H.R. 1380, a similar bull introduced in the House of Representatives back on April 6, which currently has 181 bipartisan co-sponsors.

Both include an extension and expansion of income tax credits for the purchase of natural gas vehicles and the installation of natural gas fueling infrastructure, and production tax credits for auto, truck and bus makers to manufacture NGVs, with all of these incentives lasting for five years.

However, there are key differences. First, H.R. 1380 includes a 50 cent per gallon excise tax credit for each gallon of compressed natural gas (CNG) or liquefied natural gas (LNG) sold, whereas S. 1863 includes no similar tax credit.

Second, under S. 1863, the users of NGVs would pay back the federal Treasury for the cost of the incentives via a surcharge on the natural gas fuel used by their vehicles. The surcharge would ramp up by steps over a 10-year period, from zero in the first two years to 12.5 cents per gallon in the last two years, according to the bill.

“The ‘user fee’ structure is a huge factor in this proposed legislation,” Richard Kolodziej, president of the trade group NGV America, told Fleet Owner. “The federal government doesn’t have money for tax credits, so this is a way to fully fund the extension of tax credits without dipping into the U.S. Treasury.”

Kolodziej also noted the fee makes sense in a way because natural gas sold as transportation fuel is currently anywhere from a $1.50 to $2 cheaper per equivalent gallon compared to diesel fuel. Thus, a temporary fee would reduce that cost advantage natural gas enjoys only slightly.

“There is a contention that the federal government should not be involved in picking ‘winners and losers’ in the market,” he added. “However, ever since President Nixon’s administration, we’ve picked petroleum as a ‘loser’ since our nation’s stated energy policy is to find ways to reduce oil consumption.”

Sen. Burr made similar points in his written statement in support of the NAT GAS Act; a bill he wants Congress to pass by the end of this year.

“This bill will increase our nation’s energy independence and help free us from our over-reliance on foreign oil,” Burr said. “Energy independence plays a vital role in America’s national security, and this bill represents a step in the right direction towards decreasing our dependence on imported energy sources.”

There are currently nearly 14 million NGVs in the world, he added, but only about 117,000 in the U.S. “It is estimated that the NAT GAS Act of 2011 will jumpstart the industry and in ten years add over 700,000 NGVs to our roads. In addition it is estimated that the bill will displace over 20 billion gallons of fuel and create over 1 million direct and indirect jobs,” Burr added.

“The backing by Congress is critical for our nation to succeed in its goal of utilizing domestic natural gas instead of imported petroleum, and we applaud efforts to achieve this important objective,” said Andrew Littlefair, president & CEO of Clean Energy, in a statement supporting the bill.

“There are about eight million Class 5-8 heavy-duty trucks in the U.S., ranging from delivery to refuse trucks to over-the-road 18-wheelers and using upwards of 30 billion gallons of fuel annually,” he noted. “Helping replace diesel trucks with trucks running on CNG or LNG can have an immediate, measurable effect.”

Additionally, natural gas reduces greenhouse gas emissions up to 30% in light-duty vehicles and 23% in medium- to heavy-duty vehicles, Littlefair explained. It’s also what he calls a “more secure” North American energy source, with 98% of the natural gas consumed in the region produced either in the U.S. or Canada.

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