Alternative Fuels Primer Jack Frehafer PA Dept. of Revenue Gary Bennion Conway Trucking
What is an alternative fuel? Any fuel used to propel vehicles on public highways that does not fall under the classification of liquid fuels or fuels. Examples: Compressed Natural Gas (CNG) Liquefied Natural Gas (LNG) Liquid Propane Gas (LPG) Alcohols Ethanol Methanol Hydrogen Electricity
An alternative fuel dealer-user may be defined as any person who delivers or places alternative fuels into the supply tank or other device of a vehicle for use on the public highways. There are 2 types of dealer-user’s: Retailer (dealer) selling to the public and (user) purchasing for their own use and not reselling the fuel to the public. Alternative Fuel Dealers and Users
Why the trend to Alternative Fuels? The high and increasing cost of petroleum based fuels. The finite amount of petroleum based fuels and eliminating emissions. The desire to increase economic (agriculture) activity in the United States. The need to “do something” about the fuel crisis and our dependency on foreign oil
Natural Gas Also Referred to as Compressed Natural Gas (CNG) Primarily Methane Fossil Fuels Coal beds Methanogenic organisms Marshes Bogs Landfills Processed Removes impurities Primary Use Buses Most wide spread in the US Trucking fleets In some countries, cars are being converted By-products: Ethane Propane Butane Hydrocarbons Sulfur CO2 Water Vapor Helium and nitrogen
Natural Gas comes into the line without pressure. It is not until it goes through the compressor to become Compressed Natural Gas (CNG) that it becomes a usable motor fuel. CNG gaseous volume can be equated to liquid gallons using a BTU ratio. Once the ratio is known, CNG gas can be sold in volume units that equate to the BTU equivalent of gasoline. Natural Gas Under Pressure
CNG takes as much time to fill a vehicle tank as would gasoline. The tank life is about 20 yrs. There is no GGE meter located on this line. Fast Fill Station
This 2011 Honda Civic runs totally on CNG from the factory. The cost of the car was about $29,000. This car travels, runs, and sounds just like a gas powered vehicle. CNG Passenger Car
CNG tanks are located behind this panel in the truck. The tank life expectancy is 20-25 yrs. There is limited space for only a few small suitcases. CNG Trade-Off : Available Cargo Space
At the Pump Here a PECO employee registers into the system to fill the tank. PECO allows its customers to purchase CNG at their various sub stations. PECO is licensed as an alternative fuels tax dealer and remits the tax to the state through monthly their tax returns.
The Electric Car Nissan Leaf 100% electric No Gasoline Zero Emissions Range 100 Miles per charge Must recharge for 30 Min. Not economical for people who do long distance commuting Wonderful for short trips Suburban transit Chevy Volt Technically a hybrid Electric motor along with gasoline tank Gas is not used for propulsion The Engine Purely electric for first 40 miles 0 Emissions 0 Gas used After 40 miles Gas is used to generate electricity for the engine to continue running 230 MPG
IRS Form 720 Quarterly Excise Tax Return Notes on Instructions: Alternative fuel, IRS Nos. 120, is for CNG. CNG is taxed at $0.183 per GGE (126.67 cubic feet [cf]) LPG includes propane, butane, pentane, or mixtures of those gases. CNG: Measurement Unit = 100,000 cf Conversion factor = Divide by 126.67 = 789 Gallons/Unit
Minnesota CNG: Measurement Unit = 100,000 cf Conversion factor = Divide by 114.1 = 876 GGE LNG: Measurement Unit = 100,000 gallons Conversion Factor = Divide by 1.654 = 60,459 GGE Pennsylvania CNG: Measurement Unit = 100,000 cf Conversion factor = Divide by 126.67 = 789 GGE LNG: Like IRS, no conversion measurement used; LNG liquid gallon BTU = 0.582 gasoline gallon BTU
California CNG: Measurement Unit = 100,000 cf Conversion factor = Divide by 100 = 1,000 gasoline gal. LNG: Measurement Unit = 100,000 gallons Conversion Factor = Divide by 1 = 100,000 gasoline gal. Oklahoma CNG: Measurement Unit = 100,000 cf Conversion factor = Divide by 126.67 = 789 GGE LNG: Measurement Unit = 100,000 gallons Conversion Factor = Divide by 1.52 = 65,789 GGE
BTU Conversion Table Alternative BTU/gal = 1 Gal gas Fuel of al fuel Ethanol 76,400 1.499 Methanol 56,560 2.024 Propane/LPG 83,500 1.371 E-85 80,460 1.423 M-85 65,350 1.752 CNG(3,000psi) 29,000 3.948 LNG 66,640 1.718 Electricity 3,412/KWH 33.55 KWH Tax Rate/ Gal $0.208 $0.154 $0.228 $0.219 $0.178 $0.079 $0.182 $0.0093/KWH
Alternative Fuels : Exempt Fuel ? Exempt Entity ? Exempt Use of Fuel ?
Exempt Fuel, Exempt Entities, and Exempt Fuel Use Exempt Fuel Exempt Fuel is fuel upon which no tax is ever imposed. Exempt entities Exempt entities are not subject to paying motor fuel taxes Exempt fuel use Exempt fuel use is a use of fuel upon which NO motor fuel taxes are imposed. Off-road diesel Refrigeration Unit fuel Non-exempt entities Non-exempt entities may be entitled to use fuel in a manner exempt from fuel taxes.
Compounding the Problem Exempt entities mistakenly believe they may use or sell tax-free alt fuels in any manner they see fit. A general misunderstanding of the dealer-user concept is widespread, but also “excusable” Existing laws may have insufficient definitions of “dealer- user” and “person” “Official business purpose” implied but not specified in statutes Misunderstanding of the dyed fuel tax exemption
Definition Problems – PA Example “Alternative fuel dealer-user.” Any person who delivers or places alternative fuels into the fuel supply tank or other device of a vehicle for use on the public highways. “Person.” Every natural person, association or corporation.
An alternative fuel dealer-user is usually defined as any person who delivers or places alternative fuels into the supply tank or other device of a vehicle for use on the public highways. 2 types of dealer-users: Dealer or Retailer User (purchasing for their own use) Dealer-User Concept
Who is the Dealer- User? Hey, price doesn’t include tax. Carl, you wanna be dealer-user this time?
Dealer or No Dealer: The Hose Test Which party owns the fuel at the instant before it is dispensed through the hose or fueling connection? Answer: The owner is the dealer- user. A few exceptions to this rule: Leased equipment Pre-paid tax Property ownership of bulk tanks or related land.
An alternative fuel dealer-user pays the tax. To be an alternative fuel dealer-user, you must be a person. Acting in their official capacity, which one of these people is a person? The “Person” Concept
Misconception about Alternative Fuels and Dyed Diesel Fuel Recent inquiries by school bus subcontractors indicate a perception that alternative fuels may be purchased tax-free, the same as dyed diesel. This is a misperception. In PA, dyed diesel is the only fuel that can be purchased tax-free by school bus subcontractors. Alternative fuels are treated the same as clear diesel.
Impact on PA-Motor Carrier Road Tax / IFTA Should be no impact on PA-MCRT IFTA impact No credit given for exempt fuel purchases if vehicle travels outside PA. Dual-fuel vehicles are a problem that IFTA is beginning to address.