Kerry-Lieberman climate change bill would “tax” truck diesel, gasoline

Just shy of 1,000 pages, the American Power Act revealed yesterday by sponsors Sen. John Kerry (D-MA) and Sen. Joseph Lieberman (I-CT) is truly an omnibus climate change bill that, according to Sen. Kerry, “would transform our economy, set us on the path toward energy independence and improve the quality of the air we breathe.” However, trucking’s lead lobbying group has already announced it cannot support the bill, saying it would impose a “hidden tax” on transportation.

According to the ATA explained that in its view, the act’s cap-and-trade provisions would require refiners to purchase billions of dollars worth of carbon allowances that correspond to the carbon footprint of the fuels they sell. And this extra cost would be passed on to consumers in the form of higher fuel prices that would amount to a “hidden” multi-billion-dollar tax.

“While others might object to our characterization, the climate bill clearly imposes a tax on transportation fuels and reallocates revenue from that tax for non-transportation purposes,” said Gov. Bill Graves, ATA’s president & CEO. He noted that “only a small portion of the tax” would go to the Highway Trust Fund for improvements and repairs to highway infrastructure.

“The bill will markedly increase the cost of fuel, but the trucking industry is not a ‘discretionary’ user of fuel,” Graves said. “While the trucking industry has reduced its fuel consumption and carbon output through the EPA SmartWay Transport Partnership Program and other efforts, the bulk of trucking companies’ fuel use is for their economically vital role of distributing freight whenever and wherever manufacturers, wholesalers, retailers and consumers demand.”

What’s more, contended Graves, forthcoming federal regulations required under existing law will mandate vehicle modifications that, while increasing the cost of trucks, will improve fuel efficiency and further reduce carbon emissions.

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p> “The economically essential nature of trucking means that unless you shrink the economy and reduce the amount of freight transported, which would have disastrous results, you are not going to curb carbon output by trucking under this bill,” Graves said.

“Part of our concern is that with this cap and tax bill, trucking companies are being asked to pay for the reduction of carbon output three times over,” he continued. “The first payment will take the form of equipment cost increases for large truck fuel efficiency regulations referred to earlier. The second will be an increase in excise fees we pay into the Highway Trust Fund as the cost of trucks and tires rise under this legislation. And the third will be the enormous hidden fuel taxes that result from the Kerry-Lieberman bill.”

Both ATA and the American Association of State Highway and Transportation Officials (AASHTO) say the bill would not direct that all transportation tax revenue resulting from this legislation be put into the Highway Trust Fund. ATA said such funds are needed “to repair bridges and highways and eliminate congestion points, which would further reduce fuel consumption and carbon emissions.”

“The 2008 U.S. DOT Conditions and Performance Report for Highways and Transit concluded that to improve the system, highway investment needs to increase to $174.6 billion annually, and to improve the transit system, $21.1 billion needs to be invested annually, said AASHTO executive director John Horsley. “The evidence is clear; Congress can ill afford to consider any legislation that preempts funding from the Highway Trust Fund which supports the vital transportation systems every American relies on."

Although the bill includes incentives for trucking operations to convert trucks from diesel to natural gas power, ATA argues these incentives will be attractive to only a small number of companies with dedicated, short-distance operations and would be “insufficient to ensure the build-out of a competitive natural gas refueling infrastructure.”

Not so fast, says Seal Beach, CA-based Clean Energy Fuels Corp., a top provider of natural gas (both CNG and LNG) for transportation use in North America. Announcing its support for the American Power Act, the company noted a major provision of the proposed legislation “would double the current federal tax credits that are available for the purchase of natural gas-powered fleet vehicles for the next 10 years.”

"Natural gas transportation fuel is a cleaner, cheaper, and domestic alternative to our ever-increasing dependence on foreign, particularly OPEC, oil,” said Clean Energy president & CEO Andrew Littlefair. “We applaud Senators Kerry and Lieberman for their efforts to move forward with a broad energy package that includes replacing imported petroleum products with natural gas in America's vehicle fleets.

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"The introduction of this bill, particularly the tax incentives specified for natural gas vehicles, is a highly meaningful step in national efforts to help ensure U.S. energy security and preserve environmental quality," Littlefair added.

The transportation fuel cap-and-trade provisions are but one among many in this massive bill that seeks to remake how the U.S. deals with everything from climate change to energy security to adding new industries to our economy.

The outlook on how likely the likelihood the bill – even after it goes through the maw of the committee process – will become law is decidedly mixed. On the one hand, as pointed out today in The New York Times, the bill “reflects eight months of closed-door negotiations with Sen. Lindsey Graham (R-SC), while still leaving wide open additional room for changes as they search for the magic 60 votes.”