Menendez, Reid And Burr Introduce Fully Paid For Nat Gas Act

Menendez, Reid And Burr Introduce Fully Paid For Nat Gas Act

Bill Promotes Cleaner, Domestically Fueled Natural Gas Vehicles

Washington - U.S. Senator Robert Menendez (D-NJ), Majority Leader Harry Reid (D-NV) and Senator Richard Burr (R-NC) announced the introduction of the New Alternative Transportation to Give Americans Solutions (NAT GAS) Act of 2011, legislation that would boost domestic production of vehicles that run on clean natural gas. The bill would extend tax credits for natural gas vehicles and building refueling infrastructure, and be fully paid for by a temporary user fee on natural gas used as a vehicle fuel.

"Natural gas is cheap and abundant here in America. Instead of exporting this fuel abroad we should be using it right here to displace oil," said Menendez. "This bipartisan bill will create jobs, help lower transportation costs, lower pollution in urban areas, make us more energy secure, and do so without adding one dime to the deficit."

"Creating clean-energy jobs and reducing our dependence on foreign oil is an economic and national security imperative," said Majority Leader Reid. "We cannot afford to continue spending hundreds of billions of dollars a year to buy oil from foreign countries, many of which are unfriendly to the United States. This bill will create over one million jobs by accelerating the development of clean alternative vehicles and fuels here at home, and make our nation more secure."

"This bill will increase our nation's energy independence and help free us from our over-reliance on foreign oil," said Richard Burr (R-NC). "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."

Currently there are nearly 14 million natural gas vehicles in the world, but only about 117,000 in the United States. [EIA, 2011] 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.

Natural Gas is Plentiful

North America's natural gas resources discoveries have increased by more than 1,800 trillion cubic feet (Tcf) over the past three years, bringing the total natural gas resource base to more than 3,000 Tcf. With U.S. natural gas demand at about 23.5 Tcf per year, this resource could supply current consumption for over 100 years.[Fueling North America's Energy Future, p. ES-4]

Natural Gas Is Cheap

At the pump, on average, CNG sells for $2.33 per gasoline gallon equivalent while gasoline sells for $3.46 [DOE Clean Cities Price Report, p. 3]. LNG, which competes primarily with diesel fuel, currently is selling for $2.25 per diesel gallon equivalent while diesel sells for $3.81 per gallon. [Id., p. 6 n.6]

We Have To Decide: Do We Use It Here Or Export It?

If we do not use our natural gas here in America, it will be exported abroad, for other's benefit. The price of natural gas internationally is significantly higher than it is here in the United States. As a result one facility recently received a permit to export natural gas and four more U.S. facilities are following suit. [Testimony of Deputy Assistant Secretary for Oil & Natural Gas Mr. Chris Smith, 11/8/11] We can use that natural gas here in the United States to displace oil or we can export it, so other countries can improve their own energy security and clean their air.

SUMMARY OF LEGISLATION:


Summary

New Alternative Transportation to Give Americans Solutions Act (NAT GAS ACT) of 2011

TITLE I-PROMOTE THE PURCHASE AND USE OF NGVS WITH AN

EMPHASIS ON HEAVY-DUTY VEHICLES AND FLEET VEHICLES

Sec. 101 Extension and modification of new qualified alternative fuel motor vehicle credit.

There currently are no federal tax credits to encourage the purchase of new natural gas vehicles, or to encourage the conversion of existing petroleum-fueled vehicles to operate on natural gas. Previous tax credits, located in 26 USC 30B, intended to encourage such purchases expired on 12/31/2010. This provision would reinstate the expired credits and extend the incentive through the end of 2016.

Sec. 102 Allowance of vehicle and infrastructure credits against regular and minimum tax and transferability of credits.

The alternative minimum tax provisions in the tax code limit the usability of natural gas fueling infrastructure (IRC, 30C) and natural gas vehicle (IRC, 30B) tax credits. Most business and individual tax credits may only be applied to reduce regular taxes -- not minimum taxes. This section would allow the tax credits to be applied against a taxpayers minimum tax.

The transferability provision similarly is intended to enhance the utility of the fueling infrastructure and vehicle tax credits in cases where the taxpayer who would otherwise benefit from the credit is unable to do so because of insufficient tax liability. Under IRC 30B and 30C, the tax credit benefit goes to the buyer. For leased fueling infrastructure or vehicles, the credit goes to the lessor (i.e., leasing company). For sales to tax exempt entities, the tax code treats the seller as if they placed the fueling infrastructure or vehicle in service and allows the seller to claim the tax credit, but only if they disclose the value of the tax credit to the purchaser.

The transferability provision in this bill allows the claimant to transfer the credit if they cannot benefit from it, allowing the taxpayer to transfer the credit to the seller, manufacturer or lessee (in cases involving leases).

Sec. 103 Modification of credit for purchase of vehicles fueled by compressed natural gas or liquefied natural gas.

The previous tax credits for natural gas vehicles found in IRC 30B only encouraged the acquisition of dedicated natural gas vehicles. Some heavy-duty dual-fuel or mixed-fueled vehicles qualified for the tax credits but in general dual-fuel and bi-fuel vehicles did not qualify for the federal tax credits. Also, the value of the tax credits was tied to the incremental cost of such vehicles and the credit values were capped according to weight with the maximum tax credit values allowed under the law ranging from $2,500 to $32,000. As described below, this bill increases these dollar amounts.

Under this bill, all new dedicated natural gas vehicles and certain bi-fuel and dual-fuel alternative natural gas vehicles would be eligible for a credit equal to 80 % of the incremental cost up to a maximum tax credit amount or cap. To qualify for the maximum credit of 80%, a bi-fuel natural gas vehicle must be capable of operating a minimum of 85 percent of its total range on compressed or liquefied natural gas. Dual-fuel natural gas vehicles qualify for the maximum tax credit allowed if the vehicle is capable of operating on a mixture of no less 90 percent compressed or liquefied natural gas and no more than 10% gasoline or diesel. All other new or converted natural gas vehicles are eligible for a credit equal to 50% of the incremental cost up to a credit cap. The maximum value of the tax credits provided would be capped and would range depending on the weight of the vehicle as shown below:

NGV Eligible Weight Categories

Max. Allowable Tax Credit

Light Duty, less than 8,501 lbs.

$7,500.00

Medium Duty, 8,501 - 14,000 lbs.

$16,000.00

Heavy Duty 14,000 - 26,000 lbs.

$40,000.00

Heavy Duty 26,001 & up lbs.

$64,000.00

Sec. 104 Modification of definition of new qualified alternative fuel motor vehicle.

This section modifies the definition of new qualified alternative fuel motor vehicles so that in addition to dedicated alternative fueled vehicle that are only capable of operating on an alternative fuel, IRC 30B now also includes bi-fuel natural gas vehicles, and a dual-fuel natural gas vehicle. For purposes of IRC 30B, this section defines bi-fuel vehicles as a vehicle that is capable of operating on compressed or liquefied natural gas and gasoline or diesel fuel. Dual-fuel vehicles are defined as vehicles that are capable of operating on a mixture of compressed or liquefied natural gas and gasoline or diesel fuel. This section also clarifies that converted or repowered vehicles shall be treated as new vehicles for the purposes of this section.

Sec. 105 Providing for the treatment of property purchased by Indian tribal governments.

The tax credits found in IRC 30B and 30C currently benefit certain tax exempt entities by treating the seller to such entities as if they placed the vehicle or fueling infrastructure into service and thus allowing the seller to claim the tax credit. However, this section does not specifically include sales to Indian Tribal Governments and therefore Indian Tribes do not receive any potential benefit from this provision. The provision relating to sales to tax exempt entities is intended to give the seller a tax benefit with the idea that some of the tax benefit will be passed along to the purchaser in the form a lower price. Therefore, this bill amends IRC 30B and 30C to clearly identify Indian Tribal Governments along with other tax exempt entities.


TITLE II- PROMOTE PRODUCTION OF NGVS BY ORIGINAL

EQUIPMENT MANUFACTURERS

Sec. 201 Credit for producing vehicles fueled by natural gas or liquefied natural

gas.

To encourage manufacturers to offer a greater variety of new NGVs -- and in particular light duty NGVs, this section creates a new production tax credit in section 45S of the IRC. The tax credit is valued at the lesser of 10 percent of basis of the new natural gas powered motor vehicle or $4,000. The maximum aggregate amount that can be claimed by an individual manufacturer is $200 million.

Sec. 202 Additional vehicles qualifying for the advanced technology vehicles

manufacturing incentive program.

EISA 2007, Section 136 (42 USC 17013) contains the Advanced Technology Vehicle Loan Program administered by the Department of Energy's Loan Programs Office. The Advanced Technology Vehicles Manufacturing (ATVM) Loan Program supports the development of innovative, advanced automotive technologies. The program emphasizes modifications to production facilities that are related to producing more fuel efficient vehicles. Currently, only one NGV manufacturer has been awarded a loan under this program. DOE has never issued definitive guidance concerning the ability of NGVs to qualify for this loan program. However, it appears that dedicated NGVs do qualify. To ensure that other NGV manufacturers qualify for this program, this section amends the statute so that the advanced technology vehicles specifically includes dedicated, bi-fuel and dual-fuel natural gas powered vehicles. The amendment also opens up this program to manufacturers of medium- or heavy-duty NGVs as well as bus manufacturers.

TITLE III-INCENTIVIZE THE INSTALLATION OF NATURAL GAS

FUEL PUMPS

Sec. 301 Extension and modification of alternative fuel vehicle refueling property

credit.

The tax credit for natural gas fueling infrastructure located in IRC 30C currently expires at the end of 2011. This bill extends the tax credit for qualified natural gas vehicle refueling property until the end of 2016.

Sec. 302 Increase in credit for certain alternative fuel vehicle refueling properties.

Under current law, IRC 30C, a taxpayer who acquires natural gas refueling property qualifies for an income tax credit equal to the lesser of $30,000 or 30% of cost of the property, or $1,000 for home refueling units. This bill increases the value of the tax credits so that new natural gas fueling equipment that is depreciable property would qualify for a tax credit equal to the lesser of $100,000 or 50% of the cost of the property, or $2,000 for fueling property that is acquired by a taxpayer but is not depreciable.


TITLE IV-NATURAL GAS VEHICLES

Sec. 401 Grants for natural gas vehicles research and development.

This section directs the Secretary of DOE to provide funding for RD&D to improve NGV performance and efficiency and to integrate natural gas engines into additional on-road vehicles.

Sec. 402 Sense of the Congress regarding EPA certification of NGV retrofit

kits.

In April 2011, the U.S. Environmental Protection Agency (EPA) published new regulations for aftermarket manufacturers of clean alternative fuel conversion systems. The purpose of the new rules is to alleviate some of the onerous burdens associated with certifying such systems and also to provide greater regulatory certainty with regard to the treatment of systems intended to be used on older vehicles and vehicles whose emission systems have exceeded their useful life. The rules are promising, but new so their impact as yet is not clear. Therefore, this bill expresses the desire that the EPA continue to review its regulations and the impact they have on alternative fuel aftermarket conversion systems in order to determine if additional changes are necessary.

Sec. 403 Amendment to section 508 of the Energy Policy Act of 1992.

The current federal law governing certain fleet acquisitions of alternative fueled vehicles (AFVs) requires that these AFVs be newly acquired in order to satisfy the acquisition credits. These requirements were first enacted as part of the Energy Policy Act of 1992 and are still in effect today. Under rules issued by the U.S. Department of Energy, state government fleets and covered alternative fuel providers must: 1) buy a brand new AFV; 2) purchase a used AFV from someone else; or 3) buy a vehicle and have it converted within four months of acquisition. The third option is too narrow and does not allow most conversions or repowering of older vehicles to earn credits or count against the program's acquisition requirements. This is particularly problematic for repowering because fleets do not repower vehicles within four months of purchase. The bill therefore directs DOE to provide credits to state government fleets and covered fuel providers even if they convert or repower vehicles even if this does not occur within four months of acquiring the vehicle. The provision also directs DOE to issue similar rules with respect to conversions or repowers undertaken by federal government fleets.

TITLE V-TRANSIT SYSTEMS

Sec. 501 Federal share of costs for equipment for compliance with Clean Air Act.

Under current law, the federal share for transit bus purchases is 80 percent of the cost. However, federal law provides 90 percent of the net cost associated with complying with Clean Air Act requirements or the Americans with Disabilities Act. In order to further encourage such purchases and help local jurisdictions, this bill would amend federal law to provide that the federal cost share is 100 percent of the net (i.e., incremental) cost of acquiring new, clean fuel or alternative fuel buses for amounts not to exceed a net cost of $75,000. If the net cost is more than $75,000, the federal cost-share would remain at 90 percent.

Sec. 502 Natural gas transit infrastructure investment.

The bill includes a new program to encourage the development of natural gas fueling infrastructure for transit agencies. This program would assist transit agencies in installing natural gas fueling infrastructure or expanding existing natural gas fueling infrastructure, and would authorize funding of up to $100 million dollars to be competitively awarded by the Federal Transit Administration. In awarding grants under this program, the FTA shall take into consideration the amount of petroleum to be reduced by the project, the level of local financial support, and the technical and economical feasibility of the project.

TITLE VI-USER FEES

Sec. 601 User fees.

To offset the cost of this bill, this section would impose a new and time-limited user fee on the sale of liquefied natural gas and compressed natural gas sold for use as a motor vehicle fuel. The fee would be separate from the excise tax imposed on CNG and LNG. The fee schedule would be phased-in starting in 2014 and would run through 2021 after which time it would expire. The user fee will not apply to those who refuel at home. The fee schedule is as follows:

  • Nothing for 2012 and 2013;
  • 2.5 cents for 2014 and 2015;
  • 5 cents for 2016 and 2017;
  • 10 cents for 2018 and 2019;
  • 12.5 cents for 2020 and 2021;
  • Nothing for 2022 and thereafter.

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