1. A Review of State Policies & Incentive Programs for Natural Gas Vehicles Jeffrey Clarke September 30, 2014 A Review of State Policies & Incentive Programs for Natural Gas Vehicles Jeffrey Clarke September 30, 2014

2. NGVAmerica – About Us NGVAmerica is a national trade association dedicated to creating a profitable, sustainable and growing market for compressed natural gas and liquefied natural gas powered vehicles. NGVAmerica represents more than 230 companies, including vehicle manufacturers; natural gas vehicle component manufacturers; natural gas distribution, transmission, and production companies; natural gas development organizations; non-profit advocacy organizations; state and local government agencies; and fleet operators.

3. Overview of Presentation What states can do to encourage greater use of natural gas vehicles; Discussion of the barriers to increased natural gas use; Highlight what specific states are doing to encourage use of natural gas vehicles

4. What can states do to facilitate market for NGVs? Provide financial incentives Provide regulatory incentives Remove regulatory barriers Act as market participant Promote use through educational outreach

5. Barriers to NGV Development Initial high capital cost of vehicle and fueling infrastructure; Economics not compelling for fleets that are not high fuel users; Many fleets require very short payback periods; Reluctance of fleets to share private fueling stations (security, insurance, safety issues); Resistance to new technology; Lack of light duty OEM products

6. Overcoming Economic Barriers Targeting high fuel use fleet applications first Provide incentives to help buy-down incremental cost of vehicles to accelerate payback Encourage open access stations – public or private locations Provide incentives for station owners to build large stations Provide incentives for station owners to build near major transportation corridors

7. Overcoming Economic Barriers Provide exemption from motor fuel taxes (e.g. AL, AZ, FL, NY); Provide lower motor fuel tax rates (e.g., CO, OK, UT); Exempt incremental cost of vehicles from sale taxes; Provide lower property tax assessment on natural gas fueling property

8. Removing Regulatory Barriers Consistent enforcement of permitting requirements for alternative fuel refueling facilities; Develop educational materials for regulatory and code officials (e.g., Fire Marshal Training, First Responder Training, Building Inspectors); Continue to support GGE standard, adopt DGE standard for dispensing natural gas; Relax requirements for highway signage; provide reduced rates for highway service signs

9. Removing Regulatory Barriers Provide weight exemption for natural gas trucks; Remove bridge and tunnel restrictions on alternative fuel vehicles; Apply motor fuel excise taxes based on energy content of fuels not on volume; Exempt non-road use of alternative fuels from taxes and adopt taxation procedures that do not require refunds;

10. Leading the Way – Market Participation Purchase NGVs for state motor pool; Incorporate aftermarket conversions into purchasing programs; Retain NGVs in fleet longer; Work collectively with county and local governments to combines purchases of NGVs; Use CMAQ and other available funds to purchase vehicles for state agencies, local governments, and support fueling infrastructure; Prioritize alternative fuel use – NG use – in state bids/contracting

11. California – CARB, CEC, SCAQMD grants New York – NYSERDA grant programs Texas - TERP Grant Program Pennsylvania – new NGV grant program Tax and other incentives: –10 states provide vehicle tax credits –6 provide infrastructure tax credits –Virtually all but small handful of states provide some level of support/incentives for NGVs State and Local Government Support

12. Leading States Providing NGV Incentives and Favorable Excise Tax - NGVAmerica State Government Advocacy Committee ALAZARCACOFLGAILINLAMDMAMTNYOHOKORPATXTNUTVAWV Fueling Infrastructure Tax Credits X* X X XX X Vehicle Tax Credits X*X X XX X XX X X Sales Tax X X X Motor Fuel Tax RatesXXXXXXXXX XXXX X XXX AFV Mandates/ Goals X X X X XX XXX X Grant Funding XXXX XX XX XX XXX XX Weight Exemption X XX X X NGV MOU Participant Yes

13. State Legislative Tracking Major Incentives Vehicles Major Incentives Stations Excise Tax (EE or other changes) Incremental Cost / Equipment - Sales Tax Weight Limit (2000 lbs.) 2013 Passed 10 – AR, CO, FL, IN, MO, MS, OK, TX, UT, WV 9 – AK, AR, MO, ND, NY, OK, TX, UT, WY 11 – AR, CO, FL, GA, IN, OH, OK, PA, TX, VA, WV 1 - IN2 - IN, OH 2013 Proposed 7 – AL, GA, IL, KS, KY, NM, PA 9 – AL, IA, KS, MN, MS, NM, PA, OR, RI 2 - MS, WY 5 – CA, NJ, NY, WV, WY 1 - PA 2014 Passed 4 - CA, CO, DC, GA3 - AR, DC, MO 13 - AL, CT, IA, KS, MO, MS, NC, NE, NH, NM, NY, SD, WY 2 - CO, NJ2 - IL, VA 2014 Proposed 7 - MN, MO, NJ, OH, SC, UT, VA 4 - IA, NJ, RI, UT 7 - CA, IL, OH, OK, SC, TN, VA 3 - NY, WA, WV2 - OH, SC

14. State Laws & Regulations Resources –Clean Cities AFDC website –NGVAmerica Member-Only Portal Track existing incentives Track proposed incentives

15. State Regulations Regulation of aftermarket conversions –States can regulate who performs conversions and qualifications –States can limit incentives to “certified or approved” alternative fuel systems; –EPA however is responsible for enforcement of emission standards for motor vehicles Fleet rules – most states have requirements requiring state government fleets to acquire AFVs but they generally cannot mandate private fleets to purchase AFVs (market participant exception)

16. NGVAmerica State Legislative Priorities  Excise taxation on energy equivalent basis –Mostly an issue for LNG since taxed per gallon –Still need to address CNG in many states –Still need to remove decals in other states Weights & Measures Standards –Standards for dispensing CNG and LNG –Seeking DGE standard for CNG and LNG Weight exemptions for NGV –Up to 2,000 lbs. (cont.)

17. State Priorities Conversions - look to the states to indicate that they will only encourage use of EPA certified or approved aftermarket systems; Safety inspection programs – registration of NGVs, verify cylinders meet U.S. standards, track end of life of cylinders

18. Colorado Legislation enacted in 2014 Lower motor fuel tax rates with gradual increase over time Tax credits for natural gas vehicles: –LDP - $6,000 –LDT - $7,500 –MDT - $15,000 –HDT- $20,000 Sales tax relief for trucks $35 million in CMAQ funding –AFVs –AF infrastructure 1,000 pound weight exemption

19. Florida Enacted in 2013 5-year moratorium on motor fuel taxes on CNG and LNG Adopted GGE and DGE units for taxing CNG and LNG $30 million grant program for natural gas trucks: –Up to $25,000 per truck –Limit $250,000 per company/fleet –Available through 2018 –Public and private fleets

20. Georgia New incentives enacted in 2014 Available 7/2015 – 7/2017 Tax credits for NGVs –MDVs up to $12K –HDVs up to $20K –Limit on tax credits $2.5 million per year DGE adopted for taxation of LNG

21. Indiana Enacted in 2013 HD truck incentive (33,000 lbs. & up) –Available 2014 – 2016 –Credits worth 50% of increment cost or $15K –Limit $150K per company per year –$3 million in credits per year Motor fuel taxation –Use GGE and DGE –Repeal of decal program 2,000 lb. weight exemption

22. Vehicle purchase tax incentives: –50% of incremental cost –Expiration: None Station construction tax incentives: –50% of cost on infrastructure –Expiration: None Louisiana

23. Massachusetts CMAQ support NGV program –Light duty vehicles 80% of cost, max $10K $500K in funding –Medium duty vehicles 80% of cost, max $25K $800K in funding –Heavy duty vehicles 80% of cost, max $40K $531K in funding

24. New York VIP or Voucher Incentive Program –Vehicles and Vendors are pre-qualified –$6 million available –80% of incremental cost or max. of $40K –Class 3 – 8 trucks –Focus on 5 Boroughs of NY City NG Fueling Infrastructure 2014 –$3.6 million –$300 - $500K

25. New York No fuel tax and no sales tax on alternative fuels ($0.44 gge value) Infrastructure tax credit $5K NYSERDA – history of supporting development of alternative fuels

26. Lower motor fuel tax rates for NG Vehicle purchase tax credit: –45% of incremental cost –Expiration: 1/1/20 Station construction tax credit: –75% of cost on infrastructure –Expiration: 1/1/20 Goal: –Highways: CNG station every 100 miles by 2015 Oklahoma

27. Pennsylvania Law – Act 13 enacted in 2012 –Three-year $20 million grant program –Incentive for medium & heavy-duty trucks (14,000 lbs. & up) –50 percent of incremental cost –Maximum $25K per vehicle –Must have 5 or more vehicles

28. Texas – TCEQ NG Fueling Grants 2011-13 Programs – –$6MM –18 counties eligible –Funded 22 public access natural gas fuel stations 2013-15 New & Improved Program – –$8MM program –63 counties now eligible –Grant amounts per station Up to $400,000 for a CNG station Up to $400,000 for an LNG station Up to $600,000 for an LCNG station –Estimated to fund 16-24 new public access stations

29. Texas - TCEQ NGV Grants 2011-13 Programs – –$26MM for heavy or medium duty fleet trucks 10 Fleets received incentives, funded 500 new fleet vehicles 2013-15 New & Improved Program – –$24MM for heavy duty or medium duty fleet trucks >25 Fleets received incentives Why this program is a success being copied in several other states? –Large branded fleets are going 100% to natural gas in TX due to confidence in fuel supply of LNG & CNG – UPS, Lowe’s, Anheuser Busch, McShan’s Florist –High stakeholder involvement - >300 companies in NGV consortiums –Fleet adoption is key to station development –Approved fleets result in a reduction of nitrogen oxides (NOX) emissions of >25% –First-come, first served programs accelerates adoption

30. Texas Motor Fuel Taxes –Excise tax modified in 2013 –CNG and LNG pay 15 cents per GGE or DGE – based on how fuel is sold at retail –Gasoline and diesel pay 20 cents in Texas

31. Enacted 2013 Vehicle purchase tax incentives: –35% of incremental cost (50% of conversion cost) –Cap: $7,500 for 26,000 lbs. –Expiration: 1/1/21 Station construction tax incentives: –50% of cost on infrastructure (up to $250,000 or $312,000 if public station) –Expiration: 1/1/21 West Virginia

32. Innovative State Legislative Proposals Offer tax credits on a competitive basis or first- come-basis Capping annual tax credits so as to limit budgetary impact Allowing tax credits to count against income taxes as well as other types of taxes Allowing tax credits to be transferred or sold Targeting credits to fueling stations located near corridors and/or requiring open access

33. Tax Credits v. Grants/Rebates Advantages of tax credits: –Allows for more certainty in planning economics of particular project or purchase; –Generally do not have to apply for tax credits (but this is changing) Advantages of grants or rebates: –Allows for more state control –Incentive can be more targeted and include public fleets –Funding may in some cases be available sooner –Limited budgetary impact –Ability to fund with federal dollars

34. Ways to Minimize Cost of Tax Incentives Cap the total amount of tax credits that can be claimed; Require businesses to apply for tax credits; Target credits to certain applications (e.g., HD fleets); Establish minimum thresholds (e.g., fuel displaced, overall commitment)

35. Recap – Policy Tools Tax credits Rebates/grants Lower motor fuel tax rates or no taxes for period of time Lower tax assessments Removal of regulatory barriers Educational outreach