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Tax Code Tweak Might Make CNG for Vehicles More Available

By: Steve Maley (Diary)  |  May 7th, 2012 at 06:00 PM  | 

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Rep. William Cassidy (R-LA) common-sense approach to increasing the role of natural gas as a vehicle fuel, without the grandiose involvement of the Federal government. Unlike the Pickens Plan, this plan does not rely on massive government subsidies or direct payments for vehicle conversion. Instead, it would change the definition of “independent producer” in the tax code, to get around their current prohibition from making retail sales exceeding $5 million per year.

Full text at www.thehayride.com. Originally published in the Shreveport Times.

The recent natural gas boom in the United States has been so wide-spread and profound that it has dropped natural gas prices to historical lows. These prices are so low that producers have begun to scale back operations as extraction has almost become uneconomical. We should be focused on exploring new commercial markets for natural gas to take advantage of such a low-cost energy source. Because technology and supply is currently available to sell the natural gas equivalent for about $1.50 a gallon compared with the current price of gasoline, it would seem natural for consumers to begin making the switch to compressed natural gas CNG (Compressed Natural Gas) vehicles.

So if the technology is already available and we have at least a 100-year supply of natural gas right here in America, why aren’t we all driving CNG cars?

Unfortunately, the main obstacle is a lack of natural gas fuel infrastructure in our country. Currently in the United States, there are only 449 CNG fueling stations accessible to the public, which is dwarfed by the more than 157,000 gasoline stations.

There are a number of proposals to spur natural gas infrastructure development in Washington. Not surprisingly, when it comes to Congress, the most talked about option involves subsidies for both natural gas vehicles and for the actual CNG fuel itself. While we should be using all of our available natural resources to aid in lowering the costs of transportation, the reality is that our country has neither the money to subsidize development nor the expertise to pick winners and losers in the energy and transportation sectors.

As opposed to subsidies, I believe that a simple change to our tax code would help those companies that develop natural gas look at domestic retail infrastructure development as a serious option. For background purposes, it is important to understand the differences between independent and major oil and gas producers. Under our tax code, independent producers of oil and gas, such as Apache and Chesapeake, are different from major oil and gas companies, such as ExxonMobil or Shell, as independents are limited to $5 million in revenue from retail sales. Whether intentional or not, this antiquated provision is keeping companies that from investing in CNG fueling stations all over the country.

I have drafted legislation, H.R. 1712, that will help remove these unnecessary tax barriers. It begins by recognizing that independent producers are the companies principally involved in new natural gas discoveries, and who have the most financial incentive to find new markets for natural gas. The creation of a new market for natural gas — as well as a new income stream for independent producers — would almost undoubtedly incentivize these companies to invest in the infrastructure needed to deliver CNG through retail operations.

Cassidy is a medical doctor by training and a potential 2014 opponent for Mary Landrieu.

Cross-posted at Stevemaley.com.

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COMMENTS

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  • GISAP

    …therefore, Obama must find an excuse to kill it.

    • radicalrighty

      No way do they want CNG to cut into their share of the market.

      • edintexas

        Gasoline and diesel are still the best fuels for vehicles. Both pack more power into a given capacity than any other fuel. CNG is a technology which has been available for decades. It has a downside (what doesn’t?) – loss of power for the converted vehicle when compared to gas or diesel.

        Of course I doubt facts will matter to your view of the relationship between Dear Leader and these companies.

        • radicalrighty

          My post was simply sarcasm, based on the skill (?) that Obama has in regards to collecting contributions, even from companies and industries that he vilifies, like Big Banking and Big Oil. I remember when he was ripping ExxonMobile during the Gulf spill, it came out that they were his biggest contributor in ’08.

          I guess fear and intimidation open checkbooks as well as being in one’s back pocket (trial lawyers, unions) does.

      • Dave_A

        The oil companies aren’t ‘standing in the way’ of new vehicle technologies – especially if it means helping a man who vows to put them out of business.

        The fact is, liquid fuel will always be superior to gaseous fuel for motor vehicles, simply because of the weight involved in containing gaseous fuel safely.

        THAT SAID we *can* use natural gas to help the vehcile-fuel situation, by USING IT TO REPLACE OIL IN FIXED-PLANT APPLICATIONS such as running generators (both the standby/emergency-type and the power-plant type), and home heat (WHY is the Northeast STILL dependent on diesel fuel/bunker-oil for home heat?),,,,

        That will free up oil for use as a motor fuel – something we have no viable alternative for at this time….

  • 1stRichard

    There is a huge market for CNG conversions however, emission laws in many States make it illegal to change anything including improvements. Then there is the problem with the CNG tanks, despite being almost bomb proof safety approval was almost impossible. Back in the seventies when I started getting it to this it was impossible to get past all the regulations, I am not sure how it is now but I can only figure it has gotten much worse. I think it is going to take much more then a tax code tweak, first work on dismantling the State and Federal regulations and you may not need a tax code tweak.

    • citizenkh

      Every rice farmer in SW Louisiana had dual fuel pickup trucks with butane tanks. They also had Minneapolis Moline tractors which used butane but mostly used to pull carts at harvest time and other “light duty” duties.

      One step at a time. Remove the tax and regulatory problems which keeps indies from getting into fueling biz first.

  • mndasher

    CNG vehicles suffer from the fact that it is very difficult to compress NG enough to not make fuel storage a major issue. The most available CNG vehicle is the Honda Civic GX. Half of the trunk space is taken up with the gas canister, and it still has only 1/2 the range of a standard gasoline powered Civic.

    The other problem similar to EV’s problem is the time required to compress the gas and force it into the canister. Another one of those over night exercises.

    • papabear

      They are issues with the infrastructure and poorly designed cars.

      Time required to compress the gas is only an issue when the compressor and gas are not actively cooled. Commercial filling stations cool the gas as it is compressed. Commercial filling stations can fill the energy equivalent of 10 gallons worth of gasoline in less than 5 minutes. You are implying that the crippled “Honda Home Filling” system is as good as it gets.

      The Civic GX was not designed for CNG. It is a hacked up gasoline vehicle that Honda was able to shoehorn a CNG tank into. If cars were designed for CNG from the start, they would be a little larger in order to accommodate the CNG tank.

      It would be a mistake to pass judgement on CNG based on poor Honda engineering.

      • citizenkh

        The infrastructure is in place (via natural gas lines in towns and cities) to provide a low pressure (300 psig or so) supply to fueling stations. A fueling station would then have a small 3 stage (rods loads required would make 3 stages more desirable than 2) reciprocating compressor to achieve 4000 psig (with some sort of intercooling between stages) then into storage (most likely a bank of several vessels (tubes as they are called in the industry). There would be no corresponding increase above ambient temperature with filling of a vehicle’s “tank” (actually a pressure vessel).

        Alternately, a fueling station could actually have a tube trailer dropped off after being filled at a central location and dropped off and connected to a fueling station’s system.

        I had already spec’d out a small station for my home, several years ago when the Barnett Shale was being developed. 5HP motor on a small rebuilt 3 stage compressor with a “6 Pack” bottle rack being used. Such bottle racks are used to transport compressed nitrogen to offshore oil/gas production at even higher pressures than required for CNG. It is still too much a capital investment for the difference in price.

        • jaydickb

          but isn’t there still a problem with the fuel’s volume vs. the energy it contains, thus limiting the vehicle’s range? And, what about safety in a crash? Because of the high pressure, isn’t the tank more like a bomb than a normal gasoline tank is?

          Couldn’t the natural gas be converted to a liquid that could be stored at something near normal temperatures and pressures? Wouldn’t the energy density be higher with a liquid?

          The research in the ’70s on synfuels probably has a lot of information that would be helpful now.

          • citizenkh

            someone has a cryogenic cooler to take the liquid which had boiled off to turn it back to liquid state, other vent to atmosphere. How many will have something to keep it cold enough to remain at below MINUS 160 degrees or so, fahrenheit?

          • citizenkh

            don’t even mention the 1970′s boondoggles.

            One drop of gasoline in a gallon canister can be equivalent to a stick of TNT.

          • acat

            Batteries suffer from all of the same problems you’ve pointed to here.

            Chevy Volts have caught fire and burned due to accidents that pierced the battery pack .. except the fires *didn’t start* until well after the accident….

            Imagine it – your teenager takes the car, gets bumped at a stoplight, no visible damage so you don’t hear about it … and a couple nights later, your garage burns down.

            As for the explosion factor, it can be argued both ways – the natural gas would be released quickly and may burst into flames… same with gasoline.

            The difference, though, is that natural gas is a gas, so will dissipate faster. Unless it’s in an enclosed space (say, a garage) there won’t be blast damage, just a very brief fireball with relatively low damage where gasoline will burn more slowly, and hotter.

            As for energy density, yeah, there’s less by volume … but there’s also fewer impurities, so engines last a lot longer, and the density compares favorably to .. again .. the Volt and other plug-in hybrids.

            Mew

          • citizenkh

            It was only a combination of Katrina, Rita & Ike which removed a significant amount of natural gas engine powered gas compressors from the saltwater atmosphere of offshore Louisiana after 40, 50 and even 60 years of continuous service.

            You have LESS impurities at your home natural gas supply.

          • acat

            There’s a reason this cat bought a propane-fueled standby generator.

            Mew

          • citizenkh

            gasoline engines to both burn gasoline, butane and natural gas (not at the same time) is cheap and easy.

          • acat

            and making sure to pay the fuel taxes is somewhat more difficult.

            Mew

          • arthurjake

            When it comes to taxes the government always finds a way to collect. They did it to tell the difference between fuel for commercial vehicles and fuel for other purposes. Just took a little dye. They will find a quick fix to nail people trying to use natural gas that is supposed to be used for heating or generators to run cars.

          • acat

            which, since it’s usually got some sort of a “with GPS to ensure nobody cheats”, may as well say “Big Brother” right on the cover….

            Mew

          • citizenkh

            Louisiana, where it doesn’t need anything else.

          • funwithknives

            and I’m here to tell you gas explodes/encompasses a wide area with really hot stuff, in an open area if there’s enough of it.

            After the incident I want back to trace my foot prints and only found 3 or 4 in 150 yards.Lost my eye-lashes, brows, some hair and stuff we can’t say in mixed company.. Was 100 feet from the source, when it torched off.

            Say OHHH-WEEE !!!

          • acat

            it was all gone quickly…. unlike a gasoline leak/fire that’d have to burn itself out and could take significant time depending on how full the tank is … and today we can also get gasoline vapor, which is just as explosive….

            There is definitely some safety engineering needed to apply CNG to transportation, and there will inevitably be some poor choices that lead to deaths .. but that’s always been how it goes, eh?

            Out of curiosity, what was it that torched off? Grill bottle?

            Mew

          • funwithknives

            the former Ford Wixom Assembly plant {aka: Lincoln Plant}
            If you’re familiar with Novi/Wixom, directly in front of the former ‘Jimmies Rustics’, on Gr. River, east of Wixom road.
            {depressing, isn’t it, how ‘former’ keeps getting in here?}

            An underground contractor miscalculated where his Bore and Jack ‘sleeve pipe’ {to contain a sanitary lead pipe} was going to emerge and put the drill throught the bottom third of the gas main. Line had to be kept active as Ford was running 62 cars/hour and this line fed the paint drying area.

            To make it short, The H P gas company torched -off the line while affecting the repair. To say ‘OOOPS’ is to put it mildly….

            They lost a buncha cars anyway and the entire gas crew went to the hospital.

            The personally unfunniest part of it was, I just happened to stop by on my way home, to visit with a fellow employee. Didn’t know about the hissing until I arrived,and Fascination was my downfall.

            “…lucky I was ,Youngling…”
            Stupid and moronic fits in there somewhere…..

          • citizenkh

            in amount available for combustible gas between a tank and a flowing line. Though pressure of a gas main in a town is under far less pressure than a gas transmission line over distance. and far less than a CNG tank.

          • funwithknives

            but here goes:
            1) H P means High Pressure, as in over 800psi. DEfinetly not a …gas main in a town…, but a dedicated, single use service, steel gas line. Ford/Wixom had Regulators,Prv’s, etc to control the H P and make it usable/controllable.

            One semi, hitting on od these tanks on a foggy or real dark night is all it will take for sales to plummet.
            Remember the Pinto fiasco?

          • citizenkh

            for a burst pressure of over almost 7000 psig, and the operating pressure is approx 3000 psig.

            The problem presently are the regulations surrounding inspection and recertification. They are only certified for up to 25 years but required inspection every 5.

            FYI, Shell Chemical, Carson, CA had pressure vessels in service for ethane rated for 650 psig when constructed in the late 1800′s with welds that looked like someone had applied frosting on top of a cake with a butter knife. They were in service until 1991.

  • http://stevemaley.com Steve Maley

    Is a balance of pros and cons.

    Limited range and size of the tanks may limit in some applications. Building out an infrastructure of fueling stations should help mitigate that.

    On the pro side, it is an extremely clean-burning fuel that per BTU is a third to half the cost of gasoline.

    To me, the lede in this story is not the attractiveness of CNG as a motor fuel, it is the fact that we have a Byzantine tax code that precludes willing investors from building an infrastructure to help market their product.

    • citizenkh

      Though I would say that is more like the labyrinth which held the Minotaur, and the Feds are the Minotaur.

  • brojohn2

    I do hope that folks will get with the program and contact their senators and congressmen/women. This is good legislation and I have also blogged this at: http://texasjq2.wordpress.com/ it is time for all of us to stand up and be counted. This government will not do the right thing and we have to.

    At least in the House we have folks with backbone willing to stand for what is right. Let us stand behind them and back them up!

  • rightlane1111

    http://www.youtube.com/watch?v=uBnlXGvA1Wk&feature=youtube_gdata_player

    • citizenkh

      1st, weight to power ratio.
      2nd, European RON (Octane) standards for “Regular” are equivalent to our “Mid-Grade” and their standards for Premium are higher as well. That means more BTU/gallon (or liter if you want to go metric).
      3rd, Safety Standards which refer to 1st point made.

  • rightlane1111

    People…I have trouble with html…but I try. You want a story…well…the above is a story…and yet nobody looks at it.

    NG as a fuel would be great…clean and cheap. However, it needs some type of a stablizer to be effective. As kitty said…one bump and we’re in for an explosion down the road.

    However, I ask that you watch this video…it’s about another rip off.

    Click Here

    • http://stevemaley.com Steve Maley

      The only place I ever hear of them exploding is when I read blogs.

      Link.

    • acat
    • citizenkh

      you mean like is in our gasoline because of reformulated fuel blends?

      It’s freaking METHANE, how in the world is it going to react and turn into another compound when more complex hydrocarbon compounds (like plastics) require stabilizers so they don’t revert back to natural gas?

      Your info must be from Prison Planet or InfoWars.

  • skip21al

    … its the EPA! They scare people from buying CNG conversion kits by saying the kit “must be EPA approved”. And now, states like California have simply said “yes, we agree, the driver must spend $15,000 on an EPA certified kit in order to pass our emissions test”.

    This is wrong. IF the EPA would get out the the way then more people could buy a reliable CNG conversion kit like the ones at www.skycng.com. They are only about $1000 each. Their quality is just as good, if not better than EPA kits. SkyCNG just hasnt paid the huge fees for the EPA “blessing” of the kit.

    • citizenkh

      Where do you get that from? I can do it myself since it is not that difficult. I’ve already checked into it a couple of years ago but just was not willing to make the capital investment for a home fueling station.

      Then again, I don’t live it a whackjob state.