First we present an email from Coordinator, the Clean Cities Coordinator for ________ ______. Following that is a response from Richard Kolodziej, President of NGVAmerica. And finally, a PDF comparing the House and Senate versions.
From: Coordinator
Sent: Saturday, November 19, 2011 3:19 AM
To: Clean Cities Coordinators
Subject: Re: Senate NAT GAS Act - Menendez-Reid-Burr (S. 1863)
I got an 'army' e-mail from Boone today that stated the senate bill was "fully-funded." In Washington, DC – where I reside – those words are almost always a lie, and usually a big one. So, I had to look:
The text of the bill is not available yet, so one needs to rely on wording from the NGVC, d.b.a. the re-branded NGVsforAmerica, per what John Mitton's provided above. All federal NGV-CNG legislation (and I mean ALL: ALL that has been drafted, ALL that has ever been discussed, ALL that has ever been introduced, ALL that has not passed, and ALL that has passed) has been drafted, and lobbied for, principally, by Richard R. Kolodziej, who has been president of ngvc/NGVA since 1993. So, R.K.'s press release on it is likely accurate.
Here's the crux of the 'new' language which gets at the 'fully-funded' claim (emphases added):
It includes an extension and expansion of income tax credits for the purchase of natural gas vehicles and the installation of natural gas fueling infrastructure, and a production tax credits for auto, truck and buses makers to manufacture natural gas vehicles. All these incentives would be in place for a five-year period.
However, S. 1863 is different from H.R. 1380 in two significant aspects. First, unlike the House bill that includes a 50 cent per gallon excise tax credit for each gallon of compressed or liquefied natural gas sold, S. 1863 includes no similar tax credit. Second, under S. 1863, the users of natural gas vehicles would pay back the federal Treasury for the cost of the incentives via a surcharge on the natural gas used in vehicles. The surcharge would ramp up by steps over a 10 year period, from zero in the first two years to 12.5 cents per gallon in the last two years.
And here are the several reasons why i) Boone's characterization is (yet again) likely to be ridiculous puffery, and ii) the surcharge is a real bad idea:
1.) The funding mechanism will require additional federal borrowing, for years and years. You may bet that the senate bill contains no credible estimates for when the "ramp[ing] up" surcharge revenue will catch up with the 'tax expenditure' cost*, which is the lost tax revenue from currently profit-making, taxable companies -- like Ford, GM, some truck OEMS, and gas utilities, to name a few.
As is typical with much federal legislation, the (tax) spending comes first, with greedy assurance -- and the promised tax revenue comes late, or often never at all.
________
* plus interest (and year-in-year-out geo-political costs) on the years of borrowings, please.
2.) The proposed funding mechanism transfers wealth
fromto
- existing private CNG consumers who aim to keep their existing NGVs,
- future private consumers who aim to buy used vehicles,
- future private consumers without enough tax liability to benefit from the credits,
- non-taxable (non-profitable) business CNG consumers, past and future.
- the small set of profitable, taxable businesses which can access the credits, that have been sized to give most benefits to semi tractor buyers**,
- future private consumers who have enough taxes due, after an AMT calc, to use credits (i.e., folks with healthy incomes, who, btw, are the last to struggle with the consumerist concerns that accompany making the NGV choice.)
Notice the function of penalizing the early-movers, and the less well-off, in favor of those who act only after the bill's an Act (are late to the game, IOWs) and the more well-off.
________
** Boone's Clean Energy reports that the cost premium for a NG tractor has dropped well below the max $64k credit amount mooted in the House 'Act.' Meaning: The market is moving much faster than Capitol Hill.
3.) The way to incentivize use of CNG for all citizens regardless their tax bracket or amount of disposable income -- as it should be for a widely-needed good such as motor fuel – is for the fully-taxed retail price of CNG to be as low as possible vs. fully-taxed gasoline/diesel. The senate bill takes 2 large steps backwards in this regard: no 'blender' credit (VETC), and an additional federal sales tax. Boo…
________
Note: VETC only exists due to the NGVA's (R.K.'s) coat-tail riding -- vis an alt. fuel 'fairness'/'level-playing-field' theory -- on the ethanol VEETC credit, When VEETC is stopped – and we should all hope it is soon – VETC will likely stop, too.
Some CNG advocates grasp at any pro-CNG-sounding legislation mainly as an exercise of hope, per the thought that it's likely all there is or ever will be. But that's a wholly insufficient way to think and proceed.
There are many equitable, responsible ways to incentivize CNG use that do not suffer from the re-distribution-of-wealth and federal-debt problems I've pointed out here, which should be fatal for S. 1863 (Call your senator! Use the link The PP's e-mail provides!). To ID a few:
- public utility commissions across the land can command their LDCs to do similar – or even better -- things as Utah's PUC has had Questar to do over several decades. 'Better' things could include
- not 'rate-basing' the LDC's CNG costs,
- not allowing (at all) some (rich!) LDC OH costs,
- doing good CNG pump price fixing (read tariff setting) versus the local city gate gas price, or,
- alternatively, enjoining LDCs, and their affiliates, from the CNG business, totally, so entrepreneurs are not crowded out, or scared away. While they enjoin, they also need to force LDCs to supply any-'n'-every CNG retailer at industrial rates.
- federal legislation could set a more advantageous spread between the excise taxes on gasoline and diesel versus CNG. Doing so would also require 'fixing' what some DoT officials think about re. 'their' budgeting and dedicated revenues, and who their target public includes.
- state legislatures can do the same at the state level.
- There are more, but this post is getting a little long.
To wit: The senate bill should not be supported by most CNG consumers and advocates. This is an issue we can carry to Capitol Hill when we make our annual visit. I would urge all of you to seek the support of your stakeholders in contacting their representatives, as outlined above.
Regards,
Coordinator
__ Clean Cities
From: Kolodziej, Rich [mailto:rkolodziej@ngvamerica.org]
Sent: Saturday, November 19, 2011 4:50 PM
To: Undisclosed recipients
Subject: Senate NAT GAS Act - Menendez-Reid-Burr-Chambliss (S. 1863)
Clean Cities Coordinators:
Earlier today, you received the email [above] from Coordinator of the ________ ______ Clean Cities detailing his view that the NAT GAS Act introduced in the Senate on Tuesday was flawed, and that Clean Cities Coalitions should oppose it. NGVAmerica strongly disagrees. In fact, NGVAmerica believes that enactment of this legislation is in the best interest of the NGV industry, consumers and fleets and America in general. Here's why.
I'll start with the assumption that all Clean Cities Coalitions believe that we need to reduce our dependence on foreign oil while simultaneously reducing urban pollution and greenhouse gases. Since a growing NGV market would help achieve those goals, I'll also assume that all Clean Cities Coalitions support a more rapid increase in the number of NGVs on America's roads. As Coordinator points out, the use of NGVs is increasing. The primary driver has been economics. Because of expanded production from our huge domestic natural gas resource base, natural gas availability is exceeding natural gas demand. As a result, natural gas prices are quite low, and are expected to stay low for decades. In fact, on a BTU basis, natural gas is about a third the price of petroleum. So, at the pump, natural gas is selling for $1.50 to $2.00 less per gasoline-gallon-equivalent than gasoline.
Unfortunately, NGVs cost more to buy than comparable gasoline and diesel vehicles. This greater first cost will come down as technology improves and as increased demand leads to more mass production and competition. But right now that greater first cost is significant. This, in turn, has been dampening demand for NGVs – especially for fleets and consumers that don't use a lot of fuel.
The Senate version of the NAT GAS Act (S. 1863) introduced on Tuesday would bring down the first cost of NGVs by offering income tax credits to buyers of NGVs for a five year period. To help payback the US Treasury for the cost of this incentive, the bill would also impose a surcharge on natural gas used in vehicles that ramps up over a 10 year period (no surcharge the first two years, 2.5 cents per gallon the next two years, 5 cents per gallon the following two years, 10 cents per gallon the following two years and then 12.5 cents per gallon the last two years, after which the surcharge would expire). Attached is a summary of the provisions of S. 1863 compared with the House version and current law.
Clearly, the NGV industry would prefer the House version (HR 1380), which does not impose any surcharge. However, given the mood about government spending programs in Congress and the country, NGVAmerica's Government Affairs Committee and Board of Directors believe that a bold approach such as S. 1863 has a much better chance of getting Congressional attention and approval. We also believe that even with the added cost of the surcharge, the incentives in S. 1863 will result accelerated demand for NGVs.
Let me now address some specific concerns raised in Coordinator's email:
Coordinator: "The funding mechanism will require additional federal borrowing, for years and years. You may bet that the senate bill contains no credible estimates for when the 'ramp[ing] up' surcharge revenue will catch up with the 'tax expenditure' cost* …
* plus interest (and year-in-year-out geo-political costs) on the years of borrowings, please."
Response: That is incorrect. The Congressional Joint Tax Committee has estimated that the cost of S.1863 would be $3.8 billion. The specific surcharges included in the bill were selected to recover this $3.8 billion. This amount does not include the millions of dollars that would be added to the Highway Trust Fund because of estimated increases in sale of LNG. The excise tax on LNG (which goes into the Highway Trust Fund) is actually greater than for diesel fuel on a diesel-gallon- equivalent (DGE) basis. The more LNG that displaces diesel fuel, the more excise tax goes into the Highway Trust Fund. As to geo-political cost, there is no geo-political cost greater than the $1+ billion America sends per day to foreign countries for imported oil. This increases our balance of trade deficit, distorts our foreign and military policy, destroys jobs here at home, etc. A growing NGV market in the US helps reduce this drain of America's wealth and increases economic development here (more NGVs sold, more natural gas produced and sold, more fueling infrastructure development, vehicle retrofits, etc.).
Coordinator: "The proposed funding mechanism transfers wealth fromto
- existing private CNG consumers who aim to keep their existing NGVs,
- future private consumers who aim to buy used vehicles,
- future private consumers without enough tax liability to benefit from the credits,
- non-taxable (non-profitable) business CNG consumers, past and future.
- the small set of profitable, taxable businesses which can access the credits, that have been sized to give most benefits to semi tractor buyers**,
- future private consumers who have enough taxes due, after an AMT calc, to use credits (i.e., folks with healthy incomes, who, btw, are the last to struggle with the consumerist concerns that accompany making the NGV choice.)
Notice the function of penalizing the early-movers, and the less well-off, in favor of those who act only after the bill's an Act (are late to the game, iows) and the more well-off."
Response: This incentive is not just directed at large truck fleets. All new vehicles purchased by consumers or businesses would receive the incentive. In fact, consumers and fleets that do not drive many miles per day would actually benefit more. Because NGVs cost more to buy but less to operate, the more miles driven per year, the faster the payback of that added first cost. As a result, NGVs are economic for many big rig fleets today but may not be economic for the average home owner or small fleet. With the purchase incentive, this would change for many consumers and small commercial customers. In addition, this bill (for the first time) would offer a tax credit for bi-fuel light-duty NGVs, something that consumers, not large fleets, mostly having been asking for. Further, the $4,000 manufacturer credit (also included in the bill) is mostly targeted at encouraging light-duty OEMs to expand the offering of NGVs for consumers. As to the incentive not being of value to non-tax paying entities, Coordinator is incorrect. S. 1863 includes language that allows the transferability of the tax credit in cases of non-tax payers (and also in the case of taxpayers who can't take the credit because of insufficient tax liability). Coordinator is correct that existing NGV owners that will not buy an NGV from 2012 through 2016 will not benefit directly. But the number of NGV owners in this category would be very small – as would any financial impact. Assuming an average consumer owns an NGV today and continues to own and use it through the entire 10 year period of the surcharge, the total surcharge paid would be only $300. These consumers would benefit indirectly as more fueling stations are built and more NGVs become available at lower costs as greater economies of scale are reached. Thus, they will benefit if they continue to operate their NGVs or trade them in for another NGV down the road. As to any inequity to buyers of used NGVs, if we are correct that the result of passage of S. 1863 will be a large increase in the number NGVs on the road, I would assume that the increased availability used vehicles would put some downward pressure on used NGV prices that would more than compensate for the total $300 surcharge.
Coordinator: "The way to incentivize use of CNG for all citizens regardless their tax bracket or amount of disposable income -- as it should be for a widely-needed good such as motor fuel – is for the fully-taxed retail price of CNG to be as low as possible vs. fully-taxed gasoline/diesel. The senate bill takes 2 large steps backwards in this regard: no 'blender' credit (VETC), and an additional federal sales tax. Boo…"
Response: We believe that the best way to incentivize the purchase and use of NGVs is not just to minimize the fuel cost but, rather, to minimize the economic payback time of the first cost. For most potential NGV buyers who don't use 15,000 or more GGEs of natural gas per year, lowering the first-cost of the vehicle is more valuable – even with the surcharge. As to the VETC, Coordinator is correct that, unlike the House version of the NAT GAS Act, S. 1863 does not include the 50 cent per gallon excise tax credit. This wasn't our choice. Obviously, we would much prefer that this credit were included. But, as Coordinator himself noted, politically, that was not possible. There is a groundswell in the Congress to get rid of all operating cost incentives, which the VETC is.
In summary, S. 1863 would greatly stimulate the manufacture, purchase and use of NGVs in America. NGVAmerica believes that, if this bill became law, many more OEMs – including light-duty OEMs that make and sell NGVs in other parts of the world – will enter the US market. The increased competition and mass production that would result would further bring down the first cost so that, once the incentive expires, robust growth in the NGV market will continue. All these new NGVs on the road, in turn, would accelerate the building of profitable natural gas refueling stations, which would make NGVs a more attractive option to even more consumers and businesses. In short, the Senate version of the NAT GAS Act would play a critical role in Clean Cities achieving its objective of reducing the use of foreign oil.
NGVAmerica urges all Clean Cities Coalitions to strongly endorse passage of S. 1863.
If you have any questions, please contact me.
Rich
Richard Kolodziej, President
NGVAmerica
400 N. Capitol St. NW
Washington, DC 20001
Phone: 202/824-7366
Fax: 202/824-9160
Email: rkolodziej@NGVAmerica.org
Website: www.ngvamerica.org
Here you will find a PDF that compares the House and Senate versions.
UPDATE 11/22/2011 - A reply from Coordinator:
From: Coordinator
Sent: Sunday, November 20, 2011 3:35 AM
To: Kolodziej, Rich
Subject: RE: Senate NAT GAS Act - Menendez-Reid-Burr-Chambliss (S. 1863)
Persuasive and well said. I will encourage the support of S.1863. I'm just so tired of seeing this bill cut back and morphed into what it has become, relative to where it started. My intent, although less than adequately explained, was to rally support id S.1830 and to avoid acceptance of this lesser offering, but as you point out... something is better than nothing. Thank you for the rebuttal and straitening out several of the points raised.
Coordinator
__ Clean Cities
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