Alternative Fuels Primer
Gary Bennion
Conway
Trucking
Jack Frehafer
PA Dept. of
Revenue
What is an alternative fuel?


Any fuel used to propel vehicles on public highways that
does not fall under the classification of liquid fuels or
fuels.
Examples:







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Compressed Natural Gas (CNG)
Liquefied Natural Gas (LNG)
Liquid Propane Gas (LPG)
Alcohols
Ethanol
Methanol
Hydrogen
Electricity
Alternative Fuel Dealers and Users

An alternative fuel dealer-user may be defined
as any person who delivers or places alternative
fuels into the supply tank or other device of a
vehicle for use on the public highways.

There are 2 types of dealer-user’s: Retailer
(dealer) selling to the public and (user)
purchasing for their own use and not reselling
the fuel to the public.
Why the trend to Alternative Fuels?
The high and increasing cost of petroleum
based fuels.
 The finite amount of petroleum based fuels
and eliminating emissions.
 The desire to increase economic
(agriculture) activity in the United States.
 The need to “do something” about the fuel
crisis and our dependency on foreign oil

Natural Gas



Also Referred to as
Compressed Natural
Gas (CNG)



Coal beds
Methanogenic organisms



Marshes
Bogs
Landfills



Processed

Removes impurities
Most wide spread in the
US
Trucking fleets
In some countries, cars are
being converted
By-products:





Buses

Primarily Methane
Fossil Fuels

Primary Use




Ethane
Propane
Butane
Hydrocarbons
Sulfur
CO2
Water Vapor
Helium and nitrogen
Natural Gas Under Pressure

Natural Gas comes into the line without
pressure.

It is not until it goes through the compressor
to become Compressed Natural Gas (CNG)
that it becomes a usable motor fuel.

CNG gaseous volume can be equated to
liquid gallons using a BTU ratio.

Once the ratio is known, CNG gas can be
sold in volume units that equate to the BTU
equivalent of gasoline.
Natural Gas is dried and converted to CNG
Fast Fill Station
CNG takes as much time to fill a vehicle tank as would gasoline.
The tank life is about 20 yrs. There is no GGE meter located on this line.
CNG Passenger Car
This 2011 Honda Civic runs totally on CNG from the factory.
The cost of the car was about $29,000.
This car travels, runs, and sounds just like a gas powered vehicle.
CNG Trade-Off : Available Cargo Space
CNG tanks are located behind this panel in the truck.
The tank life expectancy is 20-25 yrs.
There is limited space for only a few small suitcases.
The CNG tank is located behind this panel in the trunk of the Honda Civic.
Interior of CNG cargo
At the Pump
Here a PECO employee registers into the system to fill the tank.
PECO allows its customers to purchase CNG at their various sub
stations.
PECO is licensed as an alternative fuels tax dealer and remits the tax
to the state through monthly their tax returns.
School District Fueling Pump
PECO Fast Fill Pump
CNG Retail Station Pump
Safety First !
The Electric Car
Nissan Leaf
 100% electric



No Gasoline
Zero Emissions


Electric motor along with
gasoline tank


Not economical for
people who do long
distance commuting
Wonderful for short trips

Suburban transit
Gas is not used for propulsion
The Engine
Purely electric for first 40 miles

100 Miles per charge
Must recharge for 30 Min.



Range

Chevy Volt
 Technically a hybrid


0 Emissions
0 Gas used
After 40 miles


Gas is used to generate
electricity for the engine to
continue running
230 MPG
Alternative Fuel Conversion Analysis
1 cubic foot CNG = 900 BTU
1 gallon Gasoline = 114,000 BTU
114,000 / 900 = 126.67 GGE
1 gallon LNG = 75,000 BTU
1 gallon Gasoline = 114,000 BTU
114,000 / 75,000 = 1.52 GGE
(LNG Fuel – Liquid in US Gallons)
GGE = Gasoline Gallon Equivalent
Alternative Fuel Conversion Analysis
1 cubic foot CNG = 900 BTU
1 gallon Gasoline = 114,000 BTU [114,100]
114,000 / 900 = 126.67 GGE [126.78]
1 gallon LNG = 75,000 BTU
1 gallon Gasoline = 114,000 BTU [114,100]
114,000 / 75,000 = 1.52 GGE
(LNG Fuel – Liquid in US Gallons)
GGE = Gasoline Gallon Equivalent
IRS
Form 720 Quarterly Excise Tax Return
Notes on Instructions:
• Alternative fuel, IRS Nos. 120, is for CNG.
• CNG is taxed at $0.183 per GGE (126.67
cubic feet [cf])
• LPG includes propane, butane, pentane, or
mixtures of those gases.
CNG:
• Measurement Unit = 100,000 cf
• Conversion factor = Divide by 126.67 = 789
Gallons/Unit
Minnesota
CNG:
• Measurement Unit = 100,000 cf
• Conversion factor = Divide by 114.1 = 876 GGE
LNG:
• Measurement Unit = 100,000 gallons
• Conversion Factor = Divide by 1.654 = 60,459 GGE
Pennsylvania
CNG:
• Measurement Unit = 100,000 cf
• Conversion factor = Divide by 126.67 = 789 GGE
LNG:
• Like IRS, no conversion measurement used; LNG liquid
gallon BTU = 0.582 gasoline gallon BTU
California
CNG:
• Measurement Unit = 100,000 cf
• Conversion factor = Divide by 100 = 1,000 gasoline gal.
LNG:
• Measurement Unit = 100,000 gallons
• Conversion Factor = Divide by 1 = 100,000 gasoline gal.
Oklahoma
CNG:
• Measurement Unit = 100,000 cf
• Conversion factor = Divide by 126.67 = 789 GGE
LNG:
• Measurement Unit = 100,000 gallons
• Conversion Factor = Divide by 1.52 = 65,789 GGE
BTU Conversion Table
Alternative
BTU/gal
Fuel
of al fuel
 Ethanol
76,400
 Methanol
56,560
 Propane/LPG
83,500
 E-85
80,460
 M-85
65,350
 CNG(3,000psi) 29,000
 LNG
66,640
 Electricity
3,412/KWH
Tax Rate/
Gal
$0.208
1.499
$0.154
2.024
$0.228
1.371
$0.219
1.423
$0.178
1.752
$0.079
3.948
$0.182
1.718
33.55 KWH $0.0093/KWH
= 1 Gal gas
Alternative Fuels :
Exempt Fuel ?
Exempt Entity ?
Exempt Use of Fuel ?
Exempt Fuel, Exempt Entities, and Exempt Fuel Use
Exempt Fuel is fuel upon which no tax is ever imposed.
Exempt entities are not subject to paying motor fuel
taxes
Exempt fuel use is a use of fuel upon which NO motor
fuel taxes are imposed.
Off-road diesel
Refrigeration Unit fuel
Non-exempt entities may be entitled to use fuel in a
manner exempt from fuel taxes.
Compounding the Problem
Exempt entities mistakenly believe they may use
or sell tax-free alt fuels in any manner they see fit.
A general misunderstanding of the dealer-user concept is
widespread, but also “excusable”
Existing laws may have insufficient definitions of “dealeruser” and “person”
“Official business purpose” implied but not specified in
statutes
Misunderstanding of the dyed fuel tax
exemption
Definition Problems – PA Example
“Alternative fuel dealer-user.” Any person who
delivers or places alternative fuels into the fuel
supply tank or other device of a vehicle for use
on the public highways.
“Person.” Every natural person, association or
corporation.
Dealer-User Concept

An alternative fuel dealer-user is usually defined
as any person who delivers or places alternative
fuels into the supply tank or other device of a
vehicle for use on the public highways.

2 types of dealer-users:
 Dealer
 User
or Retailer
(purchasing for their own use)
Who is the DealerUser?
Hey, price doesn’t include
tax. Carl, you wanna be
dealer-user this time?
Dealer or No Dealer: The Hose Test

Which party owns the fuel at the
instant before it is dispensed
through the hose or fueling
connection?

Answer: The owner is the dealeruser.

A few exceptions to this rule:

Leased equipment

Pre-paid tax

Property ownership of bulk tanks or related
land.
The “Person” Concept

An alternative fuel dealer-user pays the tax.

To be an alternative fuel dealer-user, you must
be a person.

Acting in their official capacity, which one of
these people is a person?
Misconception about Alternative Fuels and
Dyed Diesel Fuel
Recent inquiries by school bus subcontractors
indicate a perception that alternative fuels may
be purchased tax-free, the same as dyed diesel.
This is a misperception. In PA, dyed diesel is
the only fuel that can be purchased tax-free by
school bus subcontractors. Alternative fuels are
treated the same as clear diesel.
Impact on PA-Motor Carrier Road Tax / IFTA
Should be no impact on PA-MCRT
IFTA impact
No credit given for exempt fuel
purchases if vehicle travels outside
PA.
Dual-fuel vehicles are a problem that
IFTA is beginning to address.