Senate Introduces Bill to Promote Natural Gas in Vehicles

On July 8, 2009, a new bill to promote the use of natural gas in vehicles was introduced in the U.S. Senate by Robert Menendez (D-NJ) and co-sponsored by Majority Leader Harry Reid (D-NV) and Senators Orrin Hatch (R-UT).   The New  Advanced Transportation to Give Americans Solutions Act (the NAT GAS Act), introduced by Menendez and co-sponsored by Reid and Hatch, would extend and increase tax credits for natural gas vehicles and refueling stations.  A companion bill was introduced in the House of Representatives in April 2009 by Congressmen John Larson (D-CN), Dan Boren (D-OK) and John Sullivan (R-OK).

The NAT GAS Act would accomplish the following:

• Expand and modify the alternative fueled vehicle and refueling property tax credits as follows:
  • Make all dedicated natural gas-fueled vehicles eligible for a credit equal to 80% of the vehicle’s incremental cost. Only some dedicated natural gas vehicles currently can qualify for an 80% federal tax credit.
  •  Make all bi-fuel natural gas-fueled vehicles eligible for a credit equal to 50% of the vehicle’s incremental cost. This is the first time bi-fuel vehicles would be eligible for a federal tax credit.
• Increase the allowable incremental cost limits to more accurately reflect the cost of producing or converting natural gas vehicles:
  • For light-duty vehicle, the purchase tax credit cap would be increased by to $12,500 (currently $5,000).
  •  For all other vehicle weight classes, the purchase tax credit cap would be doubled.
• Increase the refueling property tax credit from $50,000 to $100,000 per station
• Allow the natural gas vehicle and natural gas fueling infrastructure credits to be transferred by the taxpayer back to the seller or to the lessor
• Allow state and local governmental entities to issue tax exempt bonds in order to finance natural gas vehicle projects
• Allow 100% of the cost of a natural gas vehicle manufacturing facility that is placed in service before January 1, 2015 to be expensed and to be treated as a deduction in the taxable year in which the facility was placed in service.

The bill would create new markets for natural gas in the United States, and take advantage of the new discoveries in this country and the abundant natural gas reserves they contain.  Switching from diesel or gasoline to natural gas also reduces the emission of greenhouse gases.  These emission reductions can be monetized in the form of carbon credits (as a voluntary credit today, and potentially a compliance credit in the future), providing another incentive and revenue stream to move vehicles to the use of natural gas as a transportation fuel.