BILL ANALYSIS Ó
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 1907
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR:
Ridley-Thomas
VERSION: 4/3/14
Analysis by: Nathan Phillips
FISCAL:YES
Hearing date: June 10, 2014
SUBJECT:
Fuel tax: natural gas: gallon equivalent
DESCRIPTION:
This bill requires compressed and liquefied natural gas sold as
motor vehicle fuels to be metered, labeled, and taxed in units
of gasoline- and diesel-gallon equivalents, respectively.
ANALYSIS:
Existing law imposes an excise tax on compressed natural gas
(CNG) at a rate of $0.07 per 100 cubic feet at standard
temperature and pressure, and on liquefied natural gas (LNG) at
a rate of $0.06 per gallon. Sellers of CNG and LNG must clearly
display on the dispensing apparatus a label showing the total
price per gallon or liter of all motor fuel sold. An owner or
operator of a vehicle propelled by CNG or LNG may pay an annual
flat-rate fuel tax based on the type or weight of a vehicle
instead of a per-gallon or cubic-foot rate. Existing law
recognizes the National Bureau of Standards as the authority
that defines basic units of weight and measure, and their
equivalents, for purposes of governing weighing and measuring
equipment and transactions in the state.
This bill :
1.Requires retail sales of CNG vehicle fuel to be metered in
gasoline gallon equivalent units, equal to 5.66 pounds, or
126.67 cubic feet, of natural gas at standard temperature and
pressure
2.Requires retail sales of LNG vehicle fuel to be metered in
diesel gallon equivalent units, equal to 6.06 pounds of
liquefied natural gas
3.Requires labeling of the retail price of CNG or LNG in units
AB 1907 (RIDLEY-THOMAS) Page 2
of gasoline or diesel gallon equivalents, respectively, in a
conspicuous place on the dispensing apparatus
4.Maintains the existing excise taxes on CNG and LNG, but
changes the units of the excise tax rates to conform to gallon
equivalents ($0.0887 for each gasoline gallon equivalent of
CNG and $0.1017 for each diesel gallon equivalent of LNG)
COMMENTS:
1.Purpose . The purpose of this bill is to provide consumers
with easily understandable unit pricing of CNG and LNG motor
vehicle fuels, allowing direct comparison with the prices per
gallon of gasoline or diesel fuel, with which motorists are
most familiar. The most recent U.S. Department of Energy data
from April shows that nationwide, CNG cost $2.15 per
equivalent gasoline gallon, compared to $3.65 per gallon for
gasoline during the same period. This bill would reveal these
price savings to consumers.
2.Natural gas as a vehicle fuel . Natural gas as a vehicle fuel
comes in two forms: compressed and liquefied. CNG is
pressurized to above 3,100 pounds per square inch, and is used
in all vehicle types (light- and heavy-duty), although it is
more commonly used in light-duty vehicles and buses. LNG,
obtained from cooling natural gas to below -260o F, is more
often used as a substitute for diesel fuel in heavy-duty
vehicles. In recognizing that CNG typically replaces gasoline
while LNG typically replaces diesel fuel, the author specifies
a gasoline gallon equivalent for CNG and diesel gallon
equivalent for LNG.
3.Equivalent gallon units are a national trend . Since March,
2013, 11 states have passed legislation to measure or label
CNG and/or LNG in equivalent gallons of gasoline or diesel.
4.All natural gas is not created equal . The energy content of a
given volume of natural gas may vary by up to 10%, because
although natural gas is mostly composed of methane, it also
includes other hydrocarbons and inert gases, which vary by
supply origin and refining process. LNG is typically less
variable in its energy content than CNG, because in the
process of condensing the gas to a liquid, other constituents
and impurities are removed. Notwithstanding this variability,
the conversion factors specified in this bill are based on the
average energy content of CNG, as originally codified in 1994
by the National Conference on Weights and Measures. A single
conversion factor and label based on average energy content of
AB 1907 (RIDLEY-THOMAS) Page 3
CNG may mask variation in CNG quality. As new sources of
renewable natural gas emerge, including biomethane obtained
from landfills or anaerobic digesters, CNG variability may
continue to be an important consideration in its use as a
vehicle fuel. The author may consider an amendment to include
"fine print" labeling that indicates that the content of CNG
may vary within specified bounds, or that the gallon
equivalency is assured within certain bounds.
5.Does this bill help lock in units of gallons ? The author
asserts that this bill places CNG and LNG on a comparable
footing with gasoline and diesel fuels, based on the energy
content of these fuels, but this bill retains the gallon,
which is a volume measure, as a proxy unit for energy content.
The short-term value of this is clear, because consumers are
most familiar with gallon unit pricing for gasoline or diesel.
The longer term consequences may be to make it more difficult
to create a more generally comparable unit of measure and
pricing for all vehicle fuels. A more fundamentally
comparable unit for vehicle fuels is the fuel energy content
itself, which can be expressed in Joules or kilowatt-hours.
Any conventional, alternative, or renewable vehicle fuel can
be priced in energy units. Should this bill pass, it may
influence how electricity is metered, labeled, and taxed as a
vehicle fuel in the future. Rather than being metered and
labeled in kilowatt hours, electricity may in the future be
metered and labeled in units of equivalent gallons of
gasoline, following on the precedent set in this bill. In the
longer term, when gasoline may be phased out altogether as a
vehicle fuel, its use as a unit of measure may become an
entrenched historical artifact.
6.Double referral . This bill has been referred to both the
Senate Transportation and Housing Committee and the Senate
Governance and Finance Committee.
Assembly Votes:
Floor: 78-0
Appr: 17-0
Rev & Tax: 9-0
AB 1907 (RIDLEY-THOMAS) Page 4
BP&CP:14-0
POSITIONS: (Communicated to the committee before noon on
Wednesday, June 4,
2014.)
SUPPORT: California Natural Gas Vehicle Coalition
(sponsor)
California Trucking Association
Bay Area Air Quality Management District
Honda
San Diego Gas & Electric
Sempra Energy Utilities
Southern California Gas Company
Trillium CNG
United Parcel Service
VNG, Co. (based in Pennsylvania)
Waste Management
OPPOSED: None received.