US rules, tax code changes could boost NGV use: AGA's McCurdy

The Obama Administration and Congress could make natural gas vehicles more competitive with electric vehicles in the US if changes were made in administration policy and the federal tax code, David McCurdy, president and CEO of the American Gas Association, said Tuesday.

In a hearing before the Senate Energy and Natural Resources Committee, McCurdy said: "We need policies that help us sustain the momentum we are seeing in the adoption of natural gas vehicles and fueling infrastructure. The most important component of this is maintaining a level playing field that allows natural gas vehicles to compete fairly in the market."

The Obama administration is finalizing the second round of its fuel economy and greenhouse gas standards for light duty vehicles, which will apply from 2017 to 2025.

"This is a critical, once-in-a-decade opportunity to get the policy right," McCurdy said. "It is vital for the success of the natural gas and alternative fuel sector that this rule expands consumer choice in the marketplace for alternative fuel vehicles, rather than being weighted to favor (electric) technology."

McCurdy also said Congress should remove barriers in the tax code to the growth of the natural gas vehicle market.

Each gallon of liquefied natural gas sold incurs an effective excise tax rate or $0.41/diesel gallon equivalent versus $0.243 for diesel fuel, he said. "This is because LNG has a lower energy density/gallon than diesel, but the tax is applied on a volume (gallon) basis rather than an energy equivalent basis."

Also, he said heavy duty natural gas trucks cost $30,000 to $60,000 more than diesel trucks. "The federal excise tax rate of 12% is imposed on the full cost of a truck," he said. "The effect is an additional cost premium of $3,600 to $7,200 towards a new natural gas truck."​

This article was first published by Platts.

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