Senators reintroduce LNG tax bill

U.S. Senators Michael Bennet and Richard Burr reintroduced their bipartisan bill to put liquefied natural gas on equal footing with diesel fuel under the federal highway excise tax.

The bill will allow LNG to compete fairly with diesel by taxing LNG on energy output rather than per gallon, stands in the joint statement.

“LNG could be a better and more economical fuel choice for Colorado’s business owners, but the current tax system has built-in disincentives that may prevent them from using it,” Bennet said. “This bill would allow LNG and diesel to compete more fairly in the market.”

Senator Burr added that energy security is absolutely vital to the U.S. national security, and the bill will take steps toward decreasing U.S. dependence on imported energy sources.

The current tax system for LNG can result in thousands of dollars of additional cost for companies choosing to use the fuel. For example, if a diesel truck travels 100,000 miles at 5 miles per gallon it consumes 20,000 gallons of diesel fuel. However, an identical LNG truck would require 34,000 gallons of LNG to travel the same distance. The current tax system would result in the LNG truck operator paying an additional $3,402 in taxes because of the 14,000 gallons more of fuel to travel the same distance.

Currently, the excise tax rate for both LNG and Diesel Fuel is set at 24.3 cents per gallon, however LNG produces less energy per gallon than diesel fuel. It takes about 1.7 gallons of LNG to equal the energy in 1 gallon of diesel fuel, resulting in LNG being taxed at 170% of the rate of diesel fuel on an energy equivalent basis. Taxing LNG based on energy output versus volume removes a disincentive to use the fuel, governors said in their statement.

A recent study commissioned by the Small Business and Entrepreneurship Council shows that increased international demand for LNG has had a positive impact on the nation’s economy, particularly in Colorado. Colorado’s natural gas production has risen by almost 45 percent resulting in large numbers of job growth particularly for small and midsize businesses in the state.

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