Gov. Wolf Reverses Tax Increase On LNG, A Clean Energy Alternative To Diesel

After thorough consideration of the environmental and economic development benefits derived from use of liquefied natural gas (LNG) as a vehicle fuel alternative to diesel, Acting Secretary of Revenue Eileen McNulty announced Thursday Gov. Wolf has reversed a decision made in late 2014 that increased state tax on LNG.

“One of my goals is to promote and develop a comprehensive energy portfolio for Pennsylvania that supports clean energy alternatives to imported petroleum,” said Wolf.  “Liquefied natural gas is not only a cleaner alternative to diesel, generating lower pollutant emissions when used to fuel vehicles, but it’s also produced here in Pennsylvania from abundant natural gas reserves.

“Given the immediate environmental benefits of fueling trucks with LNG and the future economic gains that will come from further development of the alternative fuels industry in Pennsylvania, it makes no sense to discourage LNG consumption by taxing it at a higher rate.”

For 2015, a gallon of gasoline is subject to state tax of 50.5 cents, while diesel is taxed at 64.2 cents per gallon.

LNG is defined in Pennsylvania law as an alternative fuel that should be taxed based on its energy potential as compared to gasoline, and the Department of Revenue has historically taxed LNG using a cents-per-gallon basis indexed to gasoline.

The policy shift late last year, which followed a Department of Energy change in how LNG is measured at the federal level, applied the higher diesel tax to LNG, effectively increasing the state tax on LNG by 4.3 cents per gallon.

The reversal of the tax change for LNG will be effective retroactively to January 1, 2015, the date the increase took effect.  As required by law, the new rate of 33.5 cents per gallon equivalent of LNG will be reflected in the March 13 edition of the Pennsylvania Bulletin.