BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  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