1. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 IFTA – DUAL FUEL VEHICLE TAX REPORTING Annual IFTA Business Meeting August 21, 2013 Reno, NV Presented by DUAL FUEL WORKING GROUP

2. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Overview Dual Fuel Vehicles - 101 Recommended Reporting Process Full-Track Ballot #03-2013

3. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Dual Fuel Vehicles - 101 A dual fuel vehicle can use two fuels (e.g., diesel and natural gas at the same time) Two types of natural gas Liquefied Natural Gas (LNG): – Natural gas stored as a super-cooled liquid (e.g., -260°F or -170°C) – Energy content comparable to gasoline and diesel fuels – Expect will be used more for long-haul runs – Almost always sold as a liquid measure (e.g., gallons or liters)

4. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Two types of natural gas (continued) Compressed Natural Gas (CNG) – Natural gas stored as a gas in high-pressure tanks (e.g., 3,000 to 3,600 psi – Lower energy content compared to gasoline and diesel fuels – Often sold as a gaseous measure (e.g., ft3 or m3) Dual Fuel Vehicles - 101

5. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 How they operate: Can operate solely on diesel but not natural gas At idle and low load conditions the engine burns mostly diesel At full load, the engine burns up to 95% natural gas (diesel is used solely to trigger combustion) Overall the same power and performance of normal diesel engines Dual Fuel Vehicles - 101

6. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Why is this engine technology being developed and used: o Significantly lower cost fuel compared to diesel o Environmentally friendly (lower truck emissions) o Domestic supply – less concern about future world price and availability compared to other fuels Dual Fuel Vehicles - 101

7. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Dual Fuel Vehicles - 101 Challenges Infrastructure: – Fueling stations with equipment to cool the gas; and – Distribution / fuel supply availability along transportation corridors for long haul trucks Weight and space considerations (e.g., extra engine components and different fuel tanks capable of keeping LNG cool until used which reduce load-carrying capacity)

8. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Why is this important to IFTA Anticipate at least 5% of long haul vehicles will be dual fuel within the next 5 years IFTA tax return was built for reporting one fuel type per vehicle, and we need to agree on a new process to ensure a fair and consistent distribution of taxes

9. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Questions / Discussion

10. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Recommended Reporting Process Considerations: – Accuracy (but not vehicle specific) – Easy to understand (government and industry); – Easy to implement (e.g., integrate into existing systems used by government and industry); and – Easy to audit 10

11. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Recommended Reporting Process Observations: 1.IFTA is not a perfect reporting system (we accept average fuel consumption for all jurisdictions travelled). 2.IFTA documents are generally silent on how to calculate taxable distances and fuel use 11

12. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 3. New technology is impacting on IFTA: New fuel types New engine types Onboard devices to track the amount of each fuel used in each jurisdiction are available. However: Their accuracy needs to be verified They should not be used since consumption rates under IFTA are an average based on distance and purchase records over a quarter. (Unless we want to change the entire IFTA reporting process) Recommended Reporting Process

13. At a high level: – Dual fuel vehicles must be treated and reported separately (e.g., gasoline fleet, diesel fuel fleet, LNG fleet, dual fuel fleet) – Duel fuel vehicles must be treated and reported as two vehicles: Separately reporting the distances travelled and fuel purchased Pro-rating the distances to avoid double counting Fleet TypeFuel Type IFTA Return or Return Line Actual Distance Travelled Distances Reported Pure DieselDiesel “D”Return #1100 Dual Fuel Diesel “dD”Return #2100 (pro-rated) 25 LNG “dL”Return #3 (pro-rated) 75

14. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Recommended Reporting Process Dual vehicle distances are pro-rated based on their fuel purchases: dD Distance = Total Distance Travelled * Diesel purchase Total (Diesel + LNG) purchases dL Distance = Total Distance Travelled * LNG purchases Total (Diesel + LNG) purchases

15. Recommended Reporting Process AssumptionsTotal Distance dD (gallons)dL (gallons)Total Fuel J1 8,000 500 - J2 2,000 - 1,000 Total 10,000 500 1,000 1,500 No exempt distances were traveled in either jurisdiction. 15 Calculate MPGTotal DistanceTotal FuelMPG 10,000 1,5006.67 Prorate Distances by Jurisdiction Between Fuel Types Total Fuel Fuel by TypeRatio dD 1,500 5000.3333 dL 1,0000.6667 Total DistanceRatioProrated Distance J1 8,000 0.3333 (dD) 0.6667 (dL) 2,667 5,333 J2 2,000 0.3333 (dD) 0.6667 (dL) 667 1,333 Total 10,000

16. Recommended Reporting Process Pro-Rating Worksheet These fields auto-populate and then transferred to the appropriate dD and dL form/return for each jurisdiction TOTAL DISTANCE TRAVELLED EXEMPT DISTANCE TRAVELLED Total Distance dD Portion Exempt Distance Txbl Distance dD Portion Total Distance dL Portion Exempt Distance Txbl Distance dL Portion J18,00002,6670 5,3330 J22,00006670 1,3330 Total Miles 10,00003,3330 6,6670 Pro-rating more complicated if a carrier has exempt distances Developed and tested worksheet which can be used to accurately prorate the “Total Distance” and “Taxable Distance” between fuel types.

17. Recommended Reporting Process Dual Fuel Vehicles – Diesel Average MPG 6.67 Fuel Type Jurisdiction Total Distance Txbl Distance Txbl Volume Tax Paid Volume Net Txbl Volume Tax Rate Tax Due dD J12,667 400500-1000.2000-$ 20.00 dD J2667 1000 0.1000 $ 10.00 Sub-total 3,333 500 0 -$ 10.00 Dual Fuel Vehicles – LPG Average MPG 6.67 Fuel Type Jurisdiction Total Distance Txbl Distance Txbl Volume Tax Paid Volume Net Txbl Volume Tax Rate Tax Due dL J15,333 8000 0.0500$ 40.00 dL J21,333 2001,000-8000.1000- $ 80.00 Sub-total 6,667 1,000 0 -$ 40.00 TOTAL DUAL-FUEL VEHICLES 10,000 1,500 -$ 50.00

18. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Questions / Discussion

19. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Ballot #03-2013 Purpose: – Introduce a standard for converting CNG sold in a gaseous measure to a liquid measure (e.g., ft3 to gallons, and m3 to liters) – Ensure a fair and consistent process for reporting and disbursement of taxes between jurisdictions Notes: – This ballot is specific to CNG (i.e., LNG always sold as a liquid measure) – Jurisdictions conversion rates for CNG vary considerably 19

20. CNG Conversion Rates Source – FTA

21. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Ballot #03-2013 Observations: – There is no impact to sovereignty: A method for restating volumes of CNG and jurisdiction’s tax rate into a different but common unit or measure for use by other IFTA jurisdictions.. Almost identical to Procedures Manual Section P1300 to convert tax rates and volume measurements between U.S. and Canadian jurisdictions.

22. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 – By way of an example: BC's tax rate is converted through a two-part process for IFTA reporting purposes (i.e., litres to gallons, and Canadian currency to US currency) The result is BC’s tax of 0.2267 cents per litre for diesel set by our legislature is restated to 0.8398 cents per gallon IFTA has not forced BC to change its tax rate, BC/IFTA are simply restating BC’s tax rate for others to ensure the correct reporting and distribution of taxes between IFTA jurisdictions Ballot #03-2013

23. What happens if we use different conversion rates? CNG Purchased (ft3) Conversion FactorsdC (gallons) 126,760 126.76 1,000.00 126,760 100.00 1,267.60 AssumptionsMiles dD (gallons)dC (gallons)Total Fuel Jurisdiction 1 8,000 500 - Jurisdiction 2 2,000 - 1,000 Total 10,000 500 1,000 1,500

24. Ballot #03-2013 What happens if we use different conversion rates? Total MilesdD PurchaseddC Purchased Total Fuel MPG 10,0005001,0001,5006.67 10,0005001,2761,7685.66 MilesRatioProrated Distances Jurisdiction 1 8,000 0.3333 (dD) 0.6667 (dC) 2,667 5,333 Jurisdiction 1 (at 100 ft3) 8,000 0.2829 (dD) 0.7171 (dC) 2,663 5,737 Jurisdiction 2 2,000 0.3333 (dD) 0.6667 (dC) 667 1,333 Jurisdiction 2 (at 100 ft3) 2,000 0.2829 (dD) 0.7171 (dC) 566 1,434

25. Ballot #03-2013 25 dC @ 126.75 ft3 Fuel TypeJurisdiction Total Distance Taxable Distance Taxable Fuel Volume Tax Paid Volume Net Taxable Volume Tax RateTax Due dCJ1 5,333 8000 0.050040.00 dCJ2 1,333 2001000(800)0.1000-80.00 Subtotal 6,667 1,00010000 -40.00 TOTAL FOR BOTH FUELS 10,000 1,5001500 (50.00) dC @ 100ft3) Fuel TypeJurisdiction Total Distance Taxable Distance Taxable Fuel Volume Tax Paid Volume Net Taxable Volume Tax RateTax Due dCJ1 5,737 1,0140 0.050050.70 dCJ2 1,434 2541,268(1,014)0.1000-101.41 Subtotal 7,171 1,26810000 -50.70 TOTAL FOR BOTH FUELS 10,000 1,7681500 (60.70) $ Difference-$10.70 % Difference21.4%

26. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Ballot #03-2013 Next Steps: (Assuming the ballot passes) – Jurisdictions with different conversion rates instruct their carriers, solely for IFTA reporting purposes, to either restate: 1.CNG tax rates/volumes purchased at 100 ft3 (or something else) to rates/volumes at 126 ft3; or 2.CNG tax rates/volumes purchased at 126 ft3 (or something else) to CNG tax rates/volumes at 100 ft3 and then the jurisdiction convert to 126 ft3 for its transmittal purposes. 26

27. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Ballot #03-2013 Notes: Option #2 will completely address the sovereignty issue. Either option requires carriers to know what conversion rate is being used by fuel sellers in each jurisdiction they purchase CNG in, and carriers will be required at some point to convert of their purchases: – To a common standard; or – From a common standard to their base jurisdiction’s standard (if different). Next Steps: – There were several constructive suggestions which the Working Group will be adding 27

28. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Ballot #03-20 13 Article R200: Add definitions of Gallon and of Liter, as applied to CNG: R222 Gallon, as applied to compressed natural gas, means a quantity of compressed natural gas equal to 126.67 cubic feet of natural gas at 60 degrees Fahrenheit and one atmosphere of pressure. In the alternative, Gallon, as applied to compressed natural gas, means a quantity of compressed natural gas that weighs 5.66 pounds. R237 Liter, as applied to compressed natural gas, means a quantity of compressed natural gas equal to 1.0 cubic meters of natural gas at 15 degrees Celsius and one atmosphere of pressure. In the alternative, Liter, as applied to compressed natural gas, means a quantity of compressed natural gas that weighs 0.7316 kilograms. (No Changes)

29. Ballot #03-2013 Article P700: Add to P730 CONVERSION RATES AND MEASUREMENTS: A note referring to the new definition of a gallon and a liter of CNG: P730 CONVERSION RATES AND MEASUREMENTS When the membership includes a member jurisdiction other than a U.S. jurisdiction, conversion rates and measurements must be printed on all standard tax returns or instructions provided with tax returns. If the conversion rates and measurements are not printed on the tax returns, or if specific instructions including those conversion rates and measurements are not included with tax returns, either the IFTA, Inc. web-site or the base jurisdiction’s web-site shall be referenced on the tax return instructions, provided those sites contain the current conversion rates and measurements. (See IFTA Articles of Agreement Section R222 regarding the definition of a gallon of compressed natural gas, and R237 regarding the definition of a liter of compressed natural gas. Also see Procedures Manual Section P1300 regarding conversion rates and measurements between U.S. and Canadian jurisdictions.) (Green signifies no longer a strike through)

30. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Ballot #03-2013 Article P1300: Delete section: P1320 FUELS NOT MEASURED IN LITERS OR GALLONS: P1320 FUELS NOT MEASURED IN LITERS OR GALLONS For reporting fuels that cannot be measured in liters or gallons (e.g., compressed natural gas), the licensee shall report the fuel in the units of measurement employed by the jurisdiction in which the fuel was used. (No Changes)

31. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Questions / Discussion

32. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Dual Fuel Working Group IFTA: Hugh Hughson (BC)Dawn Lietz (NV ) Paul Bernander (WI)Garry Hinkley (MI) Tim Ford (CA)Chuck Ulm (MD) Industry: Robert Pitcher (ATA) Gary Bennion (Con-Way) FTA: Cindy Anders-Robb IFTA, Inc. Advisors: Lonette TurnerAmanda Koeller

33. INTERNATIONAL FUEL TAX AGREEMENT Celebrating 30 Years of Cooperation and Trust 1983 - 2013 Thanks!