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President signs Thornberry's natural gas provision in to law

Washington, August 10, 2015

The President has signed in to law legislation that included a provision that makes the excise tax on liquefied natural gas (LNG) and diesel comparable on an energy-equivalent basis. The provision was introduced earlier this year by U.S. Congressmen Mac Thornberry (TX-13) and John Larson (CT-01) as the “LNG Excise Tax Equalization Act of 2015,” H.R. 905.

The federal excise tax on LNG and diesel has been 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 being taxed 70 percent higher than diesel. The new law that will take effect in 2016 levels 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.

“We have been working for several years to achieve a fair, market-centered solution to fix the tax disparity between diesel and LNG,” said Thornberry. “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 provision in 2009, and he has reintroduced it in each subsequent Congress. Rep. Larson, a Member of the Ways and Means Committee, joined Thornberry to advance the bill and permanently correct the excise tax disparity.

“I have long called for a fair tax on natural gas fuels, which are cleaner and more efficient than gasoline, said Congressman Larson.” “Utilizing natural gas is key to gaining energy independence, and lowering taxes on natural gas fuels will encourage more vehicle manufacturers and businesses to make the switch. This is a commonsense step in the right direction for clean, affordable, and domestic energy.” 

To better understand the change to the 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 had to pay an additional $3,402 per year in taxes for using LNG.

Thornberry and Larson’s bill 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.