Liquefied Natural Gas (LNG) has attracted a lot of attention around the nation as a cleaner, more affordable transportation energy source. LNG — natural gas that is cooled and converted into a liquid — is used for a variety of fueling purposes including large trucks, marine and rail vessels. Along with its potential as greener, cheaper fuel, it can also be a major economic driver in Colorado, where we have an abundance of natural gas.
Colorado has already pioneered the use of Compressed Natural Gas (CNG). It is currently used to fuel everything from school buses in Weld County, to the Free Mall Ride in downtown Denver, to the VelociRFTA bus system in the Roaring Fork Valley (which hosted one of our recent mobile town halls in August).
LNG has similar potential as a clean, cost-effective, Colorado fuel source. Large companies like UPS have plans to deploy nearly 1,000 LNG vehicles nationwide and Noble Energy is investing in a $45 million LNG plant right here in Colorado. Unfortunately, under our current tax system, LNG is at a disadvantage compared to more polluting fuels like diesel, stunting its growth and stifling its potential to boost local economies.
In response, Sen. Richard Burr, a Republican from North Carolina, and I are sponsoring a bipartisan bill to remedy that imbalance and put the fuel on equal footing with diesel by changing the way that LNG is taxed under the federal highway excise tax.
Here’s how it works. At around $1.85 per gallon, LNG is significantly cheaper at the pump than diesel’s $3.19 per gallon. Although it takes about 1.7 gallons of LNG to propel a vehicle the same distance as one gallon of diesel fuel, the price difference at the pump -— and the fact that it’s domestically produced — still makes LNG a great option for fleet operators, long haul truckers and sanitation companies. Yet LNG and diesel are taxed at the exact same price per gallon: 24.3 cents. This results in LNG being taxed at 170 percent of the rate of diesel, serving to drive the cost of LNG upwards and create a disincentive.
This unfairness in the tax system can result in thousands of dollars of additional costs for companies that choose to use LNG. The UPS president of U.S. operations said that the tax disparity amounted to a difference of $65,000 over the life of a tractor trailer. Our bill solves this problem by taxing LNG not on a per-gallon basis, but according to the amount of energy it contains. By changing the excise tax structure and putting these fuels on an even playing field, it removes this disincentive and opens the door for companies interested in switching to this cleaner, cheaper energy source.
And there are plenty of incentives to choose LNG. A recent study commissioned by the Small Business and Entrepreneurship Council shows that increased international demand for LNG has had a positive effect on the nation’s economy, particularly in Colorado. Colorado’s natural gas production has risen by almost 45 percent from 2005-2011, leading to a large increase in job growth –— particularly for small and midsize businesses in the state.
LNG also produces significantly lower levels of toxic emissions than diesel fuel, including lower levels of carbon dioxide, nitrogen oxide and sulfur dioxide. Using LNG instead of diesel fuel also reduces pollution from so-called “black carbon,” also known as soot. Black carbon is a major contributor to climate change, second only to carbon dioxide in the amount of heat it traps in the atmosphere once emitted.
In a congressional session that has been marked by partisan gridlock, this bill actually has a chance of becoming law — the full Senate has already approved it and we’re working on building more support in the House. This common-sense proposal will allow us to continue expanding our energy portfolio, address climate change, save money and grow the economy. It’s good for our economy, good for our environment and good for the citizens and businesses that call Colorado home.