LNG Taxed 70% More Per Diesel Gallon Equivalent Than Diesel

Mike Whitlatch, VP of Global Energy and Procurement at UPS, points out the inequity of the LNG federal tax rate.

The federal excise tax on both diesel fuel and LNG – which is determined by volume – is 24.3 cents per gallon. Yet, a gallon of LNG produces only 58% of the energy produced from a gallon of diesel.

In short, LNG is effectively taxed at 170% of the rate of diesel fuel on an energy-equivalent basis. That means LNG is being taxed an additional 17 cents per equivalent gallon more than diesel fuel.

In addition to the higher original cost of natural gas-powered alternative fuel vehicles when compared to a conventional diesel truck, a 12% Federal Excise Tax for heavy-duty trucks is applied to the total purchase price of the vehicle.