Thursday Congressman John B. Larson joined Congressman Mac Thornberry (R-TX) in introducing the "LNG Excise Tax Equalization Act of 2013", a bill which would make the excise tax on Liquefied Natural Gas (LNG) and diesel comparable on an energy-equivalent basis.
Currently, the federal excise tax on LNG and diesel is set at 24.3 cents per gallon. Because it takes 1.7 gallons of LNG to produce the same amount of energy as a gallon of diesel fuel, LNG is taxed 70 percent higher than diesel. The bill would level the playing field by applying the excise tax to LNG and diesel based on the amount of energy each produces, which is how it is applied to Compressed Natural Gas (CNG) and gasoline.
"Natural gas is an affordable and American energy source that is an essential part of ending our dependency on foreign oil," said Congressman Larson. "Companies are already beginning to make the switch towards natural gas vehicles and this bill will knock down a significant barrier preventing companies from further harnessing this domestic energy source. By leveling the playing field for LNG trucks, we are taking an easy step towards utilizing clean, affordable and American energy."
"This bill provides a fair, market centered solution to fix the tax disparity between diesel and LNG," said 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."
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, domestic form of fuel, it would pay an additional $3,402 per year in taxes for using LNG.
A Senate companion bill is expected to soon be introduced by Senators Michael Bennet (D-CO) and Richard Burr (R-NC). The bills have received public support from Natural Gas Vehicles for America, American Gas Association, America's Natural Gas Alliance, AGL Resources, Clean Energy Fuels, UPS, and others.