BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 1907 (Ridley-Thomas) - Use Fuel Tax: Natural Gas: Gallon
Equivalent
Amended: April 3, 2014 Policy Vote: T&H 10-0 G&F 6-0
Urgency: No Mandate: No
Hearing Date: August 11, 2014
Consultant: Robert Ingenito
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 1907 would (1) require 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 (2) revise the
corresponding excise taxes such that they remain
revenue-neutral.
Fiscal Impact:
The California Department of Food and Agriculture (CDFA)
anticipates increased ongoing workload resulting from the
bill that would cost $1 million annually (special fund).
The Board of Equalization (BOE) indicates that the bill
would result in minor and absorbable administrative costs.
Additionally, BOE estimates that the change in measurement
and conforming revisions to the excise taxes would be
revenue neutral.
Background: In 1993, the National Conference on Weights and
Measures determined the way in which CNG would be sold to the
public at retail. This working group focused on (1) providing
the industry a method of selling natural gas that would be
familiar to consumers, (2) providing officials with a verifiable
method of determining the accuracy of natural gas, and (3)
providing a uniform standard of measurement. A recommendation
was made to use "gasoline-gallon equivalent" (GGE) for the sale
of CNG because it would be convenient for retail customers to
compare the cost and fuel economy of a natural gas vehicle to a
comparable gasoline vehicle.
AB 1907 (Ridley-Thomas)
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CNG can be measured by volume in standard cubic feet (volume),
by weight (pounds), or by its energy content (BTU). The
conversion rate from cubic feet to pounds for CNG is not common
knowledge, nor is the energy content of CNG to an equivalent
gallon of gasoline. Consequently, it is difficult for consumers
to compare the cost of fuels sold using different methods of
measurements. The use GGE and other gasoline equivalents,
therefore, provide consumers with a simple way of comparing the
price of energy in natural gas to a common product with which
consumers are familiar. In this case, GGE is based on the energy
equivalent of a single gallon of regular gasoline and diesel
gallon equivalent (DGE) is based on a single gallon of diesel.
AB 1907 (Ridley-Thomas)
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Proposed Law: This bill would do all of the following:
Require that CNG sold at retail to the public for use as
a motor vehicle fuel shall be sold in a GGE equal to 126.67
cubic feet, or 5.66 pounds, of CNG, measured at the
standard pressure and temperature required.
Require that LNG sold at retail to the public for use as
a motor vehicle fuel shall be sold in a DGE equal to 6.06
pounds of LNG.
Require a person selling CNG or LNG for use as a motor
fuel at retail to the general public to display and label
in a conspicuous place on the dispensing apparatus the
phrase "Gasoline gallon equivalent" or "Diesel gallon
equivalent," respectively.
Sunset the current excise tax rate for natural gas and
CNG before January 1, 2015.
Impose, on or after January 1, 2015, an excise tax rate
on natural gas as follows:
o The rate of $0.0887 for each 126.67 cubic
feet, or 5.66 pounds, of CNG used, measured at
standard pressure and temperature.
o The rate of $0.1017 for each 6.06 pounds of
LNG used.
Provide that the excise tax will not apply to the use of
CNG or LNG used in a vehicle during any period of time for
which the owner or operator of the vehicle has paid the
annual flat rate fuel tax.
Provide that in circumstances where the owner or
operator has prepaid the annual flat rate fuel tax, the
owner or operator shall be solely responsible for the taxes
due under this part and the fuel seller shall not be liable
for collecting and remitting those taxes
Staff Comments: CDFA's Division of Measurement Standards (DAS)
is generally responsible for the manner in which fuel is sold
and measured in the State. CDFA notes that this bill would add
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methods of sale for CNG and LNG sale to the Business and
Professions Code, thereby allowing the industry to expand the
sale of the fuel at retail. In other words, the department
concludes that this bill would essentially implement the
commercialization of CNG and LNG as motor vehicle fuels. CNG's
role in the marketplace currently is limited to very few retail
stations, as the fuel is sold through California Public
Utilities Commission-regulated entities and local government
agencies not under DAS jurisdiction. Instead, CNG currently is
used mainly in fleet vehicles, such as municipal buses and
garbage trucks.
Therefore, if enacted, this measure would have a direct fiscal
impact to DMS. Specifically, it would be responsible for the
development of CNG and LNG dispenser testing and fuel sampling
protocols, and provide training for county weights and measures
officials, who perform the bulk of commercial measuring device
testing in the State. To implement the commercialization of CNG
and LNG as motor vehicle fuels, the department would require
funding in the amount of $1 million annually for staff,
equipment, operating expenses, and training.