This week Senators Robert Menendez (D-NJ), Majority Leader Harry Reid (D-NV), Senator Richard Burr (R-NC) and Senator Saxby Chambliss (R-GA), introduced companion legislation to H.R. 1380, the “Alternative Transportation to Give Americans Solutions Act (NAT GAS ACT) of 2011” to encourage the use of domestic natural gas to fuel vehicles. A glaring difference within the Senate bill is the proposed “pay for” which would fund the new tax credits for natural gas vehicles and infrastructure by charging a temporary user fee on the sale of liquefied natural gas and compressed natural gas sold for use as a motor vehicle fuel. The House version of the T. Boone Pickens plan, H.R. 1380, has the bi-partisan support of 181 cosponsors.

The bill would provide tax credits for the purchase of vehicles: $7500 for car (8500 lbs), $16,000 for 14,000 lbs, $40,000 for 26,000 lbs, and $64,000 for more than 26,000 lbs. It would also provide a producer credit for vehicles fueled by NG or LNG of 10 percent of the basis or $4000, with an aggregate credit of $200 million, and pump installation credits of 50 percent of the cost -- up to $100,000.

To offset the cost of this bill, a new, temporary tax would be imposed on the sale of liquefied natural gas (LNG) and compressed natural gas (CNG) sold for use as a motor vehicle fuel. The fee would be phased-in starting in 2014 and would run through 2021. The fee schedule is as follows: 2.5 cents for 2014 and 2015; 5 cents for 2016 and 2017; 10 cents for 2018 and 2019; 12.5 cents for 2020 and 2021; ending in 2022. Although the user fee was included to off-set scrutiny from fiscal conservatives, conservative critics - including Kansas Republican Mike Pompeo and the Heritage Foundation are already rallying against the measure. PMAA estimates the measure will cost taxpayers $3.7 billion over five years. The credit will expire in five years but the new tax will be for ten years and the biggest tax burden will be imposed after the tax credit program expires.