Cassidy, Young promote bill to bring fairness to tax on marine transport of LNG

Bipartisan legislation recently introduced by U.S. Sens. Bill Cassidy (R-LA) and Todd Young (R-IN) would ensure that excise taxes on liquefied natural gas (LNG) for marine transportation are fair and equitable as the country shifts to cleaner burning fuels.

The Waterway LNG Parity Act would ensure that excise tax rates for marine transportation of LNG on inland waterways are consistent with their energy output relative to diesel and gasoline. LNG is considered a cheaper and cleaner domestic energy source, and the current financing mechanism for the inland waterways system puts its use at a disadvantage, the lawmakers said.

“LNG is taxed at a 72 percent higher rate for the same amount of energy provided as diesel,” Cassidy said. “That needs to change. Establishing equal tax treatment for LNG will encourage its use and production — benefiting the economy, environment and workers of Louisiana.”

It takes approximately 1.7 gallons of LNG to provide the same energy output as a gallon of diesel on an energy equivalent basis, so a marine transporter of LNG would have to pay 50 cents in tax for the same amount of energy contained in a gallon of diesel fuel that is taxed at 29 cents.

“This is a market-based fix to ensure consumers aren’t discouraged from adopting alternative fuel vehicles,” Young said. “Liquid natural gas is a growing sector of our economy, and this legislation guarantees it competes on a level playing field with other forms of energy.”

U.S. Sen. Michael Bennet (D-CO), who joined Cassidy and Young in introducing the bill, said it would expand the LNG market and encourage the use of domestically produced natural gas.

The excise tax for LNG in highway use was changed to equal the same rate as diesel beginning on Jan. 1, 2016, a modification that had a major impact on the trucking industry, noted Tim Hermann, president of Storage and Fuels for Southern Company Gas and president of Pivotal LNG.

“Pivotal LNG believes that fuels should compete based on commodity cost and not be disadvantaged by an outdated tax code,” Hermann added.