US Energy Security Council Issues New Report Supporting Alternative Fuels

NGVAmerica Newsletter 10/18/13

This week, the United States Energy Security Council (USESC) issued a report filled with recommendations for improving energy security and increasing fuel choices for consumers. The report, titled Fuel Choice for American Prosperity, includes a number of recommendations for increasing the availability of NGVs. The overriding point made in the report is that energy security depends on having real choices and real alternatives to oil in the transportation market. It also concludes that simply focusing on improved energy efficiency and increased oil production –- the policy of the past 40 years -- will not provide price protection to the U.S. economy or to consumers.

To advance energy security and increase alternative fuel use, the report largely focuses on the need for an open fuel standard. That translates to finding ways to encourage automakers to make more vehicles that are capable of running on multiple fuels such as flexible fueled vehicles, bi-fuel vehicles or dual-fuel vehicles. The report notes that one option for the open-fuel standard is to mandate that automakers offer vehicles that are capable of operating on alternative fuels so that fuel providers will then have an incentive to build alternative fuel refueling stations. The report's authors acknowledge, however, that many in Washington, including the automakers, have an aversion to mandates.

Alternatively, to encourage automakers to offer more alternative fuel choices, the report recommends that the current fuel economy rules or CAFE rules be adjusted to provide an incentive for manufacturers to produce bi-fuel and dual-fuel alternative fuel vehicles such as to count these vehicles as toward compliance with the EPA's greenhouse gas regulations. The current rules largely limit the effectiveness of alternative fuel vehicles because the rules don't allow such vehicles do not generate significant greenhouse gas credits (even though they can offset a significant amount of petroleum use).

Other recommendations include relaxing the US EPA rules for alternative fuel aftermarket conversion systems in order to expand the availability of such systems so that a large portion of the existing fleet market can also operate on alternative fuels. A specific recommendation is to waive virtually all environmental requirements for in-use vehicles that are five years or older. The report also recommends working with other countries to develop international standards that address requirements for aftermarket conversion systems including CNG fueled vehicles.

With respect to tax policy, the report recommends adjusting fuel taxes so that motor fuels are taxed based on energy content and not volume since the volume based tax can penalize alternative fuels, like LNG, that have less energy per volume. The report recommends that Congress should address the current tax treatment of LNG so that it not penalized and, with respect to state taxation, it recommends that the National Governors Association "review tax policy …with the objective of leveling the fuel tax playing field in mind."

A copy of the report can be found at: http://www.iags.org/fuelchoices.pdf. For more information, contact Jeff Clarke 202.824.7364, or jclarke@NGVAmerica.org.