BILL ANALYSIS Ó AB 1907 Page 1 Date of Hearing: May 7, 2014 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair AB 1907 (Ridley-Thomas) - As Amended: April 3, 2014 Policy Committee: Business, Professions & Consumer Protection Vote: 14-0 Revenue & Taxation 9-0 Urgency: No State Mandated Local Program: No Reimbursable: No SUMMARY This bill requires that Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG) sold at retail for use as a motor vehicle fuel be sold in a gasoline gallon or diesel gallon energy equivalent, respectively, and revises the corresponding excise taxes to remain revenue-neutral. FISCAL EFFECT 1)Minor and absorbable costs to the Board of Equalization (BOE). 2)The BOE indicated these rates will not impact revenue from CNG and LNG excise taxes. COMMENTS 1) Purpose. According to the author, traditional volumetric taxation methods disadvantage CNG and LNG due to their lower energy contents. A solution to this is to convert the tax from one based on volume to one based on energy, which the author contends will simplify transactions for purchasers and sellers of natural gas fuel. The author notes that tax commissions in nine other states have adopted similar measures. 2) Energy Equivalent Measures and Tax Rates. Traditional retail prices and taxes for retail motor vehicle fuel are based on volume and not energy content. CNG and LNG are also sold based on volume, but those volumes do not contain comparable amounts of energy to the equivalent volumes of gasoline and AB 1907 Page 2 diesel. As a result, comparing the price and efficiency of CNG and LNG with gasoline and diesel can be difficult. This bill's revised pricing units for CNG and LNG are based on the energy equivalent amounts of fuel in British Thermal Units. In the case of LNG, which is also sold as a liquid, 1.7 gallons of LNG contain the equivalent energy of one gallon of diesel. Under this bill, both CNG and LNG are priced by weight in pounds, with the following excise taxes: a) For CNG, from $0.07 per 100 cubic feet to $0.0887 per 5.66 pounds. b) For LNG, from $0.06 per gallon to $0.1017 per 6.06 pounds. Analysis Prepared by : Joel Tashjian / APPR. / (916) 319-2081