Nat Gas, Biodiesel Tax Credits to Expire Unless Congress Acts Before Year’s End

This story appears in the Dec. 2 print edition of Transport Topics.

Two federal tax incentives created to help promote the use of natural gas and biodiesel in the trucking industry will expire Dec. 31 if Congress does not act to renew them.

Biodiesel and natural-gas supporters said allowing the credits to expire would harm the economy and slow down trucking’s transition from diesel to alternative fuels.

“I’m disappointed that we can’t get our government to see the value of continuing investment to help this fledging industry move forward,” said Mike DelBovo, president of Saddle Creek Transportation of Lakeland, Fla., one of the early adopters of natural gas.

The natural-gas tax credit is 50 cents per gasoline-gallon equivalent of compressed natural gas and 50 cents per gallon of liquefied natural gas and goes to those who own the fuel and dispense it into a truck or other vehicle powered by natural gas.

DelBovo said he and others who use or sell natural gas are calling their senators and representatives in an effort to spur action on extending the tax credits.

“It really is the right thing to do to promote this wonderful source of energy to be used in our trucks and to promote energy independence and a domestic clean-burning fuel source,” DelBovo said. “It’s a great tax credit.”

Carriers such as Saddle Creek and UPS Inc., which have built natural-gas fueling facilities at their terminals, can reap the tax benefit.

UPS is working with the group Natural Gas Vehicles for America to persuade Congress to act on renewal, said Kara Ross, UPS’ vice president of strategic communications.

“There is no doubt that using natural gas lowers emissions and this tax credit is an incentive to deploy natural-gas vehicles,” Ross said.

Clean Energy Fuels, of Newport Beach, Calif., a supplier, said in a statement prepared for Transport Topics: “We remain optimistic that Congress will extend the tax credit that will promote the use of the domestic, cleaner fuel.”

Richard Kolodziej, president of NGVAmerica, was not as optimistic, saying that Congress may be too gridlocked to grant any tax credits.

“It’ll be hard to get these guys to agree on Christmas Day; it doesn’t matter how valid the issue is,” Kolodziej said.

Without the tax credit, carriers considering a transition to natural gas will back off, even though the price gap between natural gas and diesel is wide, he said.

“It’s pretty straightforward — the bigger the savings, the more fleets qualify,” he said. “If you lose that 50 cents, the [price] gap narrows and there’s going to be fewer fleets that find it economic to convert.”

Glen Kedzie, energy and environmental affairs counsel for American Trucking Associations, said trucking needs the natural-gas tax credit even though the fuel is less expensive than diesel — about $1.50 less per gallon.

The credit helps underwrite the higher cost of natural-gas trucks and fueling facilities, he said.

The cost of natural-gas Class 8 trucks has added as much as $80,000 to the comparable price of their diesel counterparts.

Ben Evans, spokesman for the National Biodiesel Board, said biodiesel producers are optimistic that Congress will extend the biodiesel tax credit.

“We know the economic impact of letting these tax incentives expire essentially acts as a tax increase on biodiesel production,” Evans said.

The biodiesel credit — $1 per gallon — goes to the fuel producers to help keep the cost of the more expensive biodiesel blend competitive with the cost of regular diesel.

Currently, Minnesota, Washington and Oregon mandate that diesel contain 5% biodiesel. Pennsylvania has adopted a mandate but has not enforced it yet.

In 2010, when Congress allowed the biodiesel tax credit to lapse, production plummeted and dozens of producers shuttered their plants.

“Clearly, there’s tremendous gridlock in Congress right now,” Evans said. “But we remain hopeful and believe that Congress will ultimately recognize the value of these credits to the economy and pass extensions this year.”

No bills have been introduced to renew the biodiesel tax credit.

A House bill introduced by Rep. John Larson (D-Conn.) would extend the natural-gas credit through 2018.

“Congress must get to work on extending the Alternative Fuel Tax Credit in order to provide the certainty necessary for businesses to make long-term investments in our natural-gas infrastructure,” Larson said.

Tax credits are often renewed via congressional measures known as tax extenders that pass at the end of the year and renew various tax credits all at once.