Liquefied natural gas (LNG) has had the advantage of being a cleaner, less expensive fuel, but its limited availability and longer payback period for equipment has hindered its use in medium and heavy duty vehicles.
Due to its increasing supply, the cost of natural gas fuel has dropped by 50% since 2008. This, in addition to recent changes in the IRS code, has further increased the value proposition for natural gas as a transportation fuel. Natural gas proponents have long complained about the inequity of how the tax code has treated LNG, which was taxed by volume rather than by its energy value. Because a gallon of LNG has 42% less energy by volume than diesel, the effective tax rate was much higher, which put the retail price of the fuels closer together.
Good News for LNG Fleets
On July 31, President Barack Obama signed into law H.R. 3236, a transportation bill that changed the tax code to tax both LNG and propane at the same rate per diesel gallon equivalent, according to NGTNews. For LNG, the tax drops by 41%, which will increase the monthly savings for fleet operators when switching from diesel.
Even before the tax change, Navigant Research anticipated that the number of LNG refueling stations in the United States is likely to nearly double by 2020 to more than 210, according to the recently published report, Natural Gas Vehicle Refueling Infrastructure. With the lower cost of the LNG fuel, more fleets will consider installing refueling stations and converting their trucks.
The supply of LNG in North America will continue to flow sufficiently. According to Victoria News, the government of Quebec approved the building of an LNG plant in Becancour. Similarly, the Goldboro LNG terminal in Halifax, Nova Scotia received government approval to start exporting LNG. According to CTV, it is expected to receive natural gas via pipeline from the United States.
Earlier this year, the U.S. Department of Energy reversed its policy to allow LNG to be exported, which has excited interest in supplying and liquefying the fuel. Several LNG export terminals are being either reopened or opened in the United States, including in Port Arthur, Texas and in Cameron Parish, Louisiana. Feeding both domestic and foreign markets with LNG is unlikely to be a problem due to the extensive shale deposits in North America and the increased use of hydraulic fracturing.
Tags: Natural Gas Vehicles, Policy & Regulation, Refueling Infrastructure, Transportation Efficiencies
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