The new energy bill introduced by Senator Harry Reid on July 27 has the potential to boost demand for natural gas vehicles (NGVs) thanks to generous purchase tax incentives. The current vehicle purchase incentives have recently been extended through 2010, but are all scheduled to expire by the end of this year (some have expired).
In a nutshell, Senator Reid’s bill provides $3.8 billion for encouraging NGVs with vehicle purchase incentives based on the size of the vehicle, refueling station incentives, and manufacturer reequipping loans. There are two key items that NGV advocates are likely to see as missing from this legislation. First, is a continuation of the federal alternative fuel tax credit. This provides a tax credit to the refueling station owners of $0.50 for each gasoline gallon equivalent (GGE) of CNG or LNG sold. This tax credit is currently in place through the end of 2010, so it seems likely that it will ultimately be addressed by another bill. Secondly, the $2,000 home vehicle refueling apparatus purchase incentive that exists as part of the Energy Policy of 2005, but is also scheduled to end at the end of 2010. Ironically, there are not currently home vehicle refueling appliances available in the marketplace, but they are expected to come available this fall.
Senator Reid’s bill is a much more comprehensive than the NATGAS Act (H.R. 1835) from the House, and is more often compared to the Consolidated Land, Energy, and Aquatic Resources (CLEAR) Act of 2009 (H.R. 3534), which now includes oil spill response legislation, off-shore oil and gas whistleblower protection, as well as carbon caps and renewable energy incentives. However, the NATGAS Act appears to be much stronger in terms of incentives for NGVs, thanks to higher purchase tax incentives, inclusion of home refueling incentives, and manufacturer tax incentives of up to $4,000/vehicle.
The NGV provisions of these bills seem to be getting support from both the senate and house, but how these provisions are reconciled between the senate bill, the CLEAR and NATGAS acts is likely to be fly in the ointment for NGV advocates. Senator Reid’s new bill leaves out many of the key provisions of the CLEAR Act including carbon cap and trade and was introduced to bring in more bipartisan support. While it isn’t clear his bill will end up with that bipartisan support, there does seem to be momentum in both the senate and congress to address the incentives for fleets to purchase NGVs and use more CNG or LNG.