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Thornberry introduces bill to 'level the playing field' for LNG

Senate Finance Committee passes tax provision based on Thornberry's bill

Washington, February 12, 2015 | Jon Corley (202-225-3706)
Tags: Energy
U.S. Congressman Mac Thornberry (R-Clarendon) introduced a bill Wednesday, H.R. 905, to make the excise tax on Liquefied Natural Gas (LNG) and diesel comparable on an energy-equivalent basis. Thornberry was joined by Rep. John Larson of Connecticut in introducing the “LNG Excise Tax Equalization Act of 2015” in the U.S. House of Representatives.

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. Thornberry’s 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 and gasoline.

“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 have a real, positive effect on our economy.”

Thornberry originally introduced the bill in 2009, and he has reintroduced the bill in each subsequent Congress. The Senate Committee on Finance passed several tax related bills Wednesday including one based on Thornberry’s bill.

“Utilizing natural gas is critical to our energy independence, but current federal tax policy discourages investment in vehicles that run on this American fuel source. This common sense, bipartisan legislation levels the playing field for LNG trucks, further empowering companies to harness the benefits of clean, affordable, and domestic natural gas,” said Congressman Larson. 

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.

The bill has 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.