1. Kentucky Energy & Environment Cabinet Department for Energy Development and Independence Compressed Natural Gas Road Taxes Presentation to: Kentucky Gas Association (KGA) September 30, 2014 Michael Kennedy, P.E. Assistant Director of Fossil Energy Development To Protect and Enhance Kentucky’s Environment 1

2. 2 CNG and LNG Road Tax CNG and LNG Equivalency IEIA for CNG Compressed Natural Gas (CNG)

3. CNG and LNG Equivalency –CNG and LNG gasoline gallon equivalents (gge) under 103 KAR 43:330 GGE for CNG is 5.66 lbs or 126.67 cf GGE for LNG is 6.06 lbs CNG Road Tax 3

4. CNG Equivalency –Energy Content CNG has a LHV of 20,160 Btu/lb 1 5.66 lb/gge * 20,160 Btu/lb = 114,105 Btu/gge Gasoline has a LHV of 112,114 – 116,090 Btu/gge 1 1 Alternative Fuels Data Center http://www.afdc.energy.gov/fuels/fuel_properties.php CNG Road Tax 4

5. LNG Equivalency –Energy Content LNG has a LHV of 20,900 Btu/lb 1 6.06 lb/gge * 20,900 Btu/lb = 126,654 Btu/gge Diesel has a LHV of 128,488 Btu/gge 1 1 Alternative Fuels Data Center http://www.afdc.energy.gov/fuels/fuel_properties.php LNG Road Tax 5

6. Kentucky Road Tax –Gasoline and special fuels Motor Fuels Taxes consist of taxes on gasoline, liquefied petroleum. Special fuels (all combustible gases and liquids capable of being used in motor vehicles, except gasoline and liquefied petroleum). Environmental Fee – Assigned to gasoline and diesel CNG Road Tax 6

7. Road Tax –CNG and LNG are taxed as a special fuel. From: October 1 to December 31, 2014 Special fuel tax is 27.5 cents per gallon. Motor Fuel tax is 30.5 cents per gallon. Environmental Fee is 1.4 cents per gallon. CNG Road Tax 7

8. –One gge of CNG: $0.275 per gge as special fuel. –One gallon of gasoline: $0.305 per gallon as motor fuel. $0.014 per gallon as environmental fee. $0.319 per gallon total. CNG Road Tax 8

9. LNG Road Tax –One gge of LNG: $0.275 per gge as special fuel. –One gallon of diesel: $0.275 per gallon as special fuel. $0.014 per gallon as environmental fee. $0.289 per gallon total. LNG Road Tax 9

10. Road Taxes Road Tax 10

11. IEIA Incentives for Energy Independence Act (IEIA) –Minimum Capital Investment $1,000,000 –Up to $500,000 in incentives for a CNG station –Available up to 25 years http://energy.ky.gov/Documents/IEIA%20Fact%20Sheet%20-%20July%201%202010.pdf 11

12. CNG Road Tax Michael Kennedy, P.E. Assistant Director of Fossil Energy Development Michael.kennedy@ky.gov 12