Discussion

Alternative Fuel Provisions of the Clean Air Act Amendments of 1990 (CAAA)^1-6

The intent of the alternative fuel provisions of the CAAA is to reduce air pollution. Since conventional gasoline produces more air pollutants than clean alternative fuels, the CAAA requires the use of these fuels on certain vehicles according to a strict schedule. Vehicles covered and the compliance schedule are as follows:

A. Vehicles covered include public and private fleets of 10 or more light-duty vehicles (up to 8,500 lbs.) and heavy duty vehicles (up to 26,000 lbs.) capable of central refueling when based in an ozone non-attainment area that is classified under the Act as Serious, Severe, or Extreme based on data for calendar years 1987, 1988, and 1989; and carbon monoxide (CO) non-attainment areas with a design value at or above 16.0 parts per million (ppm) based on data from 1988 and 1989. In addition, the areas must have had a 1980 population of 250,000 or more.

B. The compliance schedule requires that fleet operators must begin purchasing clean-fuel vehicles in model year 1998 when replacing existing vehicles with new ones. The minimum purchase requirements of passenger cars and light duty trucks is 30% in 1998, 50% in 1999, and 70% in the year 2000. For heavy duty trucks it is 50% for all three years.

There are no CO non-attainment areas in Louisiana. Among the 22 cities in the U.S. that are classified as Serious, or worse, ozone non-attainment areas under the CAAA, the only Louisiana city is Baton Rouge, which includes the surrounding parishes of East Baton Rouge, West Baton Rouge, Livingston, Iberville, Point Coupee, and Ascension. The area is considered a Serious ozone non-attainment area based on 1989-90 conditions. Additional Louisiana cities may be added to the list based upon more current data. On the other hand, under another provision in the law Baton Rouge could be reclassified to a less serious category if the EPA could be convinced the area's ozone level had been reduced below the Serious threshold. This appears unlikely as Baton Rouge has exceeded the CAAA threshold limit on several occasions this past summer.

The Louisiana Department of Environmental Quality (DEQ) is responsible for the implementation of the CAAA on the state level. On July 13, 1994, DEQ emergency rule AQ78E became effective to satisfy the CAAA requirements. The rule sets up an elaborate vehicle inspection/maintenance program in the six - parish area around Baton Rouge for the control and abatement of motor vehicle emissions from internal combustion engines. However, a legislative resolution prohibits use of state funds for the program. On August 22 the legislature approved another resolution urging the attorney general to take legal action so the Baton Rouge area will not have to develop the expensive program.

On September 15 DEQ Emergency Rule AQ80E went into effect for the six-parish Baton Rouge area. The rule follows the CAAA, which requires implementation of a Clean Fuel Fleet program in ozone non - attainment areas. The rule requires a program under which covered fleet operators would have to phase in use of alternative fuels in accordance with the provisions of the CAAA and prescribes associated fees on covered fleets to enable DEQ to administer the program. The fees are based on the size of the fleet and range from $300 to $1000. The rule remains in effect for a maximum of 120 days or until a final rule is promulgated, whichever occurs first. A legislative oversight committee must approve the rule for it to become final.

For more information about this program and DEQ's other programs, policies, and regulations regarding the CAAA contact DEQ as follows:

Alternative Fuel Provisions of the Energy Policy Act of 1992 (EPACT)²

The intent of EPACT is to lessen dependence on foreign oil as the source of the nation's transportation fuels. In order to displace foreign oil certain provisions of EPACT, like the CAAA, mandate the use of alternative fuels in vehicles covered by the law. The vehicles covered and the compliance schedule are as follows:

A. Vehicles covered include federal fleets; state and local government fleets; fleets operated by alternative fuels producers, distributors, and marketers (including gas and electric utilities); and some private fleets consisting of at least 50 vehicles nationally, with at least 20 vehicles that can be centrally fueled and are operated in a major metropolitan area with a 1980 population of at least 250,000.

B. Separate compliance schedules apply for fleets operated by the federal and state governments and fuel providers. There are potential requirements for private companies and municipal governments if a prescribed number of AFVs are not voluntarily included in their fleets by certain dates. The percentage requirements and effective model year dates for covered Louisiana fleets are as follows for any new purchases in each specified year:

1. State Government: 10% in 1996, 15% in 1997, 25% in 1998, 50% in 1999 and 75% in the year 2000 and thereafter.

2. Alternative Fuel Provider: 30% in 1996, 50% in 1997, 70% in 1998, and 90% in 1999 and thereafter.

3. Municipal/Private: 20% from 1999 through 2001, 30% in 2002, 40% in 2003, 50% in 2004, 60% in 2005, and 70% in 2006. These are voluntary acquisitions, but DOE may require them if the agency finds the number of AFVs is unlikely to be met voluntarily.

C. Businesses or individuals can get a tax deduction for purchasing new AFVs ranging from $2,000 for automobiles and trucks that weigh up to 10,000 lbs. up to $50,000 for trucks over 26,000 lbs. Tax deductions for businesses installing fueling stations are allowed up to a $100,000 ceiling. The tax deductions began June 30, 1993, and start to phase out in 2001, ending in 2004.

In Louisiana, the Baton Rouge, New Orleans, and Shreveport metropolitan areas would fall under the jurisdiction of EPACT in that each area has a population of at least 250,000.

If a fleet is covered under both the CAAA and EPACT, it is required to conform to both laws. If covered, the percentages apply only to the new vehicles purchased during that year. Converted vehicles can be used to meet percentage requirements.

The information presented above on the CAAA and EPACT is only an portion of the provisions contained in the two pieces of legislation. The full text of the original legislation should be consulted as the final authority.

DOE "Clean Cities Program"⁷

The Clean Cities Program was established by the DOE to facilitate voluntary cooperation among metropolitan (city) governmental and private entities in promoting AFVs in significant quantities, along with essential refueling and maintenance facilities, to insure an economically selfsustaining AFV infrastructure. DOE will assist in adapting a metropolitan area's existing AFV programs and local objectives into an implementation plan and, upon completion, will enter into a memorandum of understanding (MOU), with area entities to conduct a Clean Cities Program. The Clean Cities Regional Contact is as follows:

While the program is available to any size city, the DOE is soliciting interest in the program from those metropolitan areas affected by EPACT and has invited Baton Rouge, New Orleans, and Shreveport to participate. Baton Rouge, which is also a Serious ozone non - attainment area under the CAAA, is especially being encouraged to participate. So far none of the three cities have committed to the program.

The National Alternative Fuels Hotline⁸

The U.S. Department of Energy (DOE) is sponsoring an "800" telephone number National Alternative Fuels Hotline for Transportation Technologies to assist the general public and interested organizations in improving their understanding of alternative fuels. DOE is currently sponsoring one of the largest alternative fuel programs in the world -- funding the government purchase of fleet AFVs, providing funds for the Alternative Fuels Data Center at the National Renewable Energy Laboratory in Golden, Colorado, and working with engine manufacturers, fuel suppliers, and others to develop new technologies.

The Hotline number is 1-800-423-1363. The address, local phone number, and FAX number are as follows:

Louisiana's Choice - CNG and LPG^9,10

Most AFVs now used in Louisiana operate on CNG or LPG. A few are capable of operating on M85 (85% methanol and 15% gasoline) or LNG. Most AFVs are fueled by LPG, but CNG use is incresasing rapidly at the same time LPG use is declining. Official state government policy favors alternative fuels derived from natural gas, and most new conversions are to CNG. This policy is rooted in the rationale that the production of natural gas plays a major role in the state's economy and is a clean fuel as well. The trend toward CNG is clear as indicated by the following table, which shows the number of vehicle issued special fuels decals by the Louisiana Deptartment of Revenue and Taxation according to fuel type since the 1992 fisical year.

Compared to the over four million automobiles, trucks, and busses registered in Louisiana, the number of AFVs, at 1362, is indeed tiny. However, the number of AFVs is certain to increase considerably over the next three years as fleet owners implement AFV purchase or conversion programs to comply with legislatively mandated deadlines.

Economic Factors Of Using CNG¹¹

While compliance with federal and state legislation is the primary reason for converting to an alternative fuel, reducing operating costs is also a goal. Fuel costs are lower than gasoline, but that advantage is somewhat offset by a restricted driving range and some power loss with bi-fuel vehicles. On an equivalent energy content basis the cost of CNG should be 20 to 50% less than gasoline if the cost savings are passed along to the vehicle operator.

CNG conversion kits cost anywhere from $2,500 to $4,000. The cost of a new dedicated CNG vehicle is $800 - $3,000 more than a comparable gasoline model. To help offset the cost, the federal government has set up financial incentives for individuals converting their own vehicles and companies converting fleets. Under EPACT, a person or business can take a tax deduction of up to $2,000 for a passenger vehicle and up to $50,000 for a heavy-duty truck.

The cost of a "fast-fill" refueling station capable of handling about 300 cars a day with an eightminute fillup time could be $300,000 to $400,000. It is unlikely that these facilities will be built with private capital except in high population, urbanized areas where demand is sufficient to warrant the investment. This is a classic "chicken and egg" situation. Demand will not materialize unless there is a fueling infrastructure, but the fueling infrastructure will not be developed unless sufficient demand can justify it. To encourage infrastructure development, EPACT provides for a tax deduction of up to $100,000 for refueling facilities.

Ultimately, the economic feasibility of conversion depends on how long a payback period the fleet owner is willing to accept for the savings in fuel costs to pay for the additional capital cost of conversion. This period will vary with the particular scope of the conversion program.

CNG Gasoline-Equivalent Standard Proposed¹²

As the fastest growing alternative fuel in the U.S. today, there is a need for a universally accepted CNG-gasoline equivalency standard on which to base commercial transactions. A working group of the National Conference on Weights & Measures (NCWM) has recommended that NCWM define the gasoline-gallon equivalent of CNG as one gasoline gallon equal to 5.660 lbs. of CNG. This sets the stage for how CNG will be metered and measured at retail dispensing pumps. The working group included state and federal weights and measures officials, representatives of the U.S. Department of Energy, automobile manufacturers, CNG distributors, the American Automobile Association, American Petroleum Institute, Natural Gas Vehicle Coalition, and consumer groups. The proposal will likely be finalized at the next NCWM meeting in January 1995.

Role of the Louisiana Gas Association (LGA) in Promoting CNG^13,14

The LGA is a nonprofit organization that consists of natural gas pipeline and distribution companies, municipalities, governmental gas districts, master meter operators and suppliers to the natural gas transporters and distributors. Its activities include educational, public relations, and legislative support for its members as well as promoting the use of natural gas

.

For each of the past four years the LGA has provided the mechanical engineering department of the University of Southwestern Louisiana with a $1000 grant to study natural gas vs. other fuels as transportation fuels. Plans are to extend the grant to all engineering schools within the state. The basic research findings produced with this money can provide the justification for obtaining additional funds from other sources to continue the research. For more information about this program and other LGA activities contact

:

In September the LGA formed an NGV committee to promote natural gas as a vehicle fuel in Louisiana. The committee will develop educational programs to increase public awareness of natural gas as an environmentally beneficial and economic vehicle fuel, provide conversion assistance, and encourage the expansion of the NGV refueling infrastructure. It will also assist other groups with similar goals. The committee chair is Robert Borne of GSU; its members are listed below.

Public Acceptance of CNG^15,16

There has been little demand for personal NGVs by the general public, and for good reason. Two formidable obstacles exist to discourage consumer acceptance. The $2,500-$4,000 cost of conversion of an existing automobile is high, and a convenient network of public access refueling stations is not in place yet. It is unlikely an individual could drive enough miles to generate the fuel savings it would take to pay for his investment over a reasonable period of time. Simply put, for an individual it is usually neither cost effective or convenient in today's market and infrastructure picture

.

However, there are indications that the CAAA, EPACT, and state fleet conversion laws and programs are starting to make an impact in establishing a self-sustaining fueling infrastructure for fleet operated vehicles. During the past year the number of new public-access refueling stations has more than doubled to seven from only three (See Appendix A for a complete listing), and two more stations mill be opened by Ecogas by the end of the year. Under their contract with the state the company is committed to at least four more stations. One is planned for Lake Charles and another in Lafayette. The other two will be located in areas where sufficient demand can support them. Ecogas may increase the number of stations beyond those required by its contract if it is economically justifiable to do so.

Furthermore, at the September 28 dedication ceremony for the new Fuelman/Entergy CNG refueling station in Baton Rouge, company officials indicated three or four more stations are in the planning stages for Baton Rouge in anticipation of sharply increased demand for CNG by fleets affected by EPACT and Baton Rouge's designation as a Serious ozone non-attainment area under the CAAA. The clean air mandate could affect between 14,000 and 20,000 vehicles in the Baton Rouge area.

In the northwestern part of the state, the Southwestern Electric Power Company (SWEPCO) of Shreveport would like to build three public-access CNG refueling stations in the Shreveport/Bossier area if approval to locate the stations on property not owned by the company can be obtained from the Securities and Exchange Commission (SEC). SWEPCO must get SEC approval because its parent company, Dallas-based Central and South West Corporation, is a registered public utility holding company as defined by Public Utility Holding Company Act of 1935. With this designation the company is required to apply for and receive approval from the SEC for any new venture outside its traditional utility business.

LPG (Propane) as an Alternative Fuel^2,9,11,17

LPG is the most widely used alternative fuel in the world. About 3.5 million on and off-road vehicles world-wide and 350,000 in the U.S. are running on LPG. As of September 7, 1994, Louisiana had 1036 vehicles registered as fueled by LPG. Exhaust emissions of hydrocarbons are not much lower than those from gasoline engines but are less reactive, thus producing ozone benefits. Stored as a liquid, its storage tank is not much larger than a gasoline tank to yield the same range. Its retail price and operating cost varies but has been favorable enough over the years to maintain a secure position as a motor fuel without any government financial incentives to use it. Since LPG fueled vehicles are fueled solely by LPG, they are dedicated AFVs.

Conversion is a well - established technology that has been available commercially for over 60 years and is readily available in Louisiana. LPG conversion kits cost from $1,500 to $2,000. Propane is also widely used for space and water heating. It is distributed nationwide by pipeline or truck and can be obtained at over 600 refueling stations in Louisiana.

LPG is a byproduct of natural gas production and crude oil refining. Neither gas or refinery production in the U.S. is expected to increase much in the foreseeable future so any significant increase in LPG demand could increase prices substantially. Furthermore, additional supplies would have to be obtained from foreign sources, which is counter to the intent of EPACT to lessen dependence on foreign oil. Notwithstanding LPG's favorable technical characteristics as an alternative fuel, these constraints will likely limit its role as a major alternative fuel source.

The industry is represented by the Louisiana Propane Gas Association (LPGA), chartered in 1940. Its overall mission is to promote and develop the use of LPG in Louisiana so that it may serve the best interests of the public. The LPGA does not have an official program promoting propane as a motor fuel. For more information contact:

Transportation Fuel Excise Taxes Applied to Alternative Fuels⁹

Motor fuel taxes play a significant role in the price differential between conventional and alternative fuels. The Omnibus Budget Reconciliation Act of 1993, signed into law by President Clinton on August 10, 1993, increased the federal excise tax on gasoline, diesel fuel, gasohol, and other transportation fuels by 4.3¢/gallon, effective October 1, 1993. Alternative fuels are also taxed at the same rate per gallon. For the first time CNG is also subject to the tax at an energy equivalent of a gallon of propane instead of gasoline. On an energy equivalent basis the CNG tax is about 5.9¢/gallon of gasoline, making it higher than the 4.3¢/gallon increase on gasoline. However, even with this new federal tax, natural gas is still taxed at a lower rate than both gasoline and diesel. The new federal rates on gasoline, diesel, and gasohol are now 18.30, 24.40, and 13.00¢/gallon, respectively. The state tax remains at 20.00¢/gallon for all three fuels. The federal excise tax on the two new ethanol blends of 7.7% and 5.7% that qualify for the federal ethanol production subsidy is 14.24 and 15.32¢/gallon, respectively.

The total state excise tax on all motor fuels, conventional and alternative except CNG, LPG, and LNG, is 20¢/gallon. This rate is the sum of the 16¢/gallon rate specified in the gasoline tax law and the special fuels tax law, plus the 4¢/gallon rate specified in the Transportation Infrastructure Model for Economic Development Law of 1989 (TIMED). The tax applies to all private and public entities, including state agencies and local governmental bodies.

The tax on CNG, LPG, and LNG is based on the total rate and can be paid annually at a flat rate of 80% of $150.00, based on a 16¢/gallon total rate, or a variable rate of 80% of the current total rate. For example, since the total current rate is 20¢/gallon, the present annual flat rate is $150.00 ($150.00 x 200/160 x 80%); and the variable rate is 16¢/gallon (20¢ x 80%). The variable tax computation shall be based on estimated fuel efficiency of 12 miles/gallon, but not to exceed the annual flat rate. For the purpose of determining the amount of the tax and enforcement, the number of gallons of fuel used the previous year shall be determined by using a schedule for calculating the number of miles per gallon for the type of vehicle in question.

The state excise tax on owners of school buses operating on CNG, LPG, or LNG is the lesser of one-half of the above annual or variable rates.

Progress Report on Ecogas Contract with the State of Louisiana¹⁸

Executive Order No. EWE 93-9, of March 29, 1993, by Governor Edwin Edwards, directed DNR to solicit bids to convert to natural gas a minimum of 500 vehicles and up to 1500 vehicles, which is approximately 25% of the state on-road vehicle fleet. Ecogas of Louisiana was selected by competitive bid to make the vehicle conversions and ultimately build eight CNG/LNG refueling stations accessible to the general public as well as to state government vehicles. Under the seven year contract, Ecogas finances all conversions and stations, recouping their costs through a surcharge on the fuel. The program is administered in DNR by the Technology Assessment Division.

The converted vehicles will all be bi-fuel. All vehicles converted so far are using CNG, but vehicles that require longer cruising ranges and have a high road use time will be converted to use LNG. Ecogas has subcontracted conversions in Baton Rouge to American Natural Gas Power, and in New Orleans to ExproFuels. Two conversion centers have been operating since February. The Baton Rouge center is at 13123 Choctaw Drive, near Flannery Road, and the New Orleans area center is in Metairie at 5425 Powell Street.

The project is proceeding in two stages. Stage one, which has been completed, is the conversion of the first 100 vehicles in the Baton Rouge to New Orleans corridor, where there is a high concentration of vehicles. As of September 30 the number of vehicles converted totalled 141.

Stage two is the conversion of the next 400 vehicles. So far, out of the state's 6,000 on-road vehicles, 2,500 have been identified as potential candidates for conversion. Of these, 625 have been earmarked for conversion. Additional conversions depend on the whether the state exercises its option to convert up to 1500 vehicles.

There are presently two refueling stations in operation. One is located in Baton Rouge in the north parking lot of the Louisiana Department of Transportation and Development (DOTD) building, near the Governor's mansion. The other one is in Harahan in the Elmwood industrial park at 1200 Edwards Avenue near the foot of the Huey Long bridge. The Harahan station is about two blocks from the conversion center. Both stations presently dispense only CNG, but LNG should also be available by November. A fuel card assigned to a specific state vehicle must be used when refueling.

Two additional stations are slated to be operational by the end of 1994. Both will dispense CNG and LNG. One will be in Baton Rouge in the vicinity of the DEQ headquarters, which is located in the Jimmy Swaggart Ministries complex on Bluebonnet Boulevard. The other one will be in the New Orleans area on the West Bank at the intersection of LaPalco and Ames streets in Marrero. All four Ecogas stations will be manned during operating hours and be open to the public.

The first refueling station to be located outside the Baton Rouge/New Orleans area is planned for the Lake Charles area, probably along the 1-10 corridor.

For the duration of the contract, the price of natural gas delivered into state vehicles on a gasoline equivalent gallon basis will be 99¢/gallon, which includes a 23¢/gallon surcharge to defray the cost of conversion. Once the conversion cost has been recouped by Ecogas, the price to the converted vehicles is reduced to 76¢/gallon. State vehicles outside the Ecogas contract (such as existing vehicles already converted to LNG or CNG, or new vehicles purchased already equipped for natural gas) will refuel at the 76¢/gallon price.

Requests for more information from DNR or Ecogas should be directed as follows:

Progress Toward AFV Use by Municipal and Parish Governments^19-23

State law (Act 954) requires that 30% of parish and municipally owned vehicles have the capability to operate on an alternative fuel by September 1, 1994. Most officials have sought and received waivers of the deadline based on provisions in the law that allow that the conversion target date schedule may be waived if there is no alternative fuel source or the cost of conversion is uneconomic.

However, the CAAA and EPACT are more stringent than the state legislation, and some covered fleets may be required to convert at least 10% of their vehicles by model year 1996. Because EPACT covers those areas with a population of at least 250,000, many government and certain private vehicle fleets in the Baton Rouge, Shreveport, and New Orleans metropolitan areas will be affected.

The projects now being undertaken by city and parish governmental bodies are bi-fuel or dual fuel CNG/gasoline or diesel conversions of existing vehicles. They include the following:

- Lafayette Parish School Board: 43 vehicles; 6 to be completed in 1994.

- East Baton Rouge Parish School Board. One school bus under a pilot program. Conversion of 40 more vehicles is under consideration.

- East Baton Rouge Parish Department of Public Works: Soliciting bids in November for CNG fast-fill fueling station to serve 165 vehicles to improve air quality. Will also convert 65 vehicles. Cancelled order for 110 OEM General Motors vehicles because of GM's suspension of its bi-fuel NGV program.

- St. Charles Parish School Board. 40 school busses. Application for DNR revolving loan pending.

- Jefferson Parish: Up to 350 vehicles in lots of 25 at a time; so far 25 converted.

- Morgan City Department of Public Works: CNG fueling facility for 20 vehicles to be operational mid-September. Vehicles to be converted in-house.

- City of Sherveport: 60 vehicles already converted to CNG; 50 more to be converted.

- Caddo Parish: Two CNG vehicles now operating; 20 more to be converted.

Progress Toward AFV Use by Federal Agencies in Louisiana^1,23

In April 1993 President Clinton issued Executive Order 12844 directing federal agencies to increase EPACT national AFV purchase requirements for 1994 from 7,500 to 11,250 and for 1995 from 10,000 to 15,000 pending the availability of funds and life cycle cost considerations. Nevertheless, only one federal AFV in the whole state is actually operating on an alternative fuel - a CNG van in New Orleans.

In addition to the van, the GSA (Government Services Administration) says there are 174 bifueled methanol/gasoline AFVs in the state. The methanol fuel is a mixture of 85% methanol and 15% gasoline called M-85. New Orleans has 112 of the AFVs and Baton Rouge 62. Plans for an M-85 refueling source fell through so the vehicles are running on straight gasoline. The U.S. Postal Service does not have any AFVs in Louisiana at the present time, but plans to convert 90 vehicles to CNG in 1995. These will be located in Baton Rouge and/or New Orleans depending on the proximity of a commercial refueling station. Barksdale Air Force Base had 18 OEM NGVs on order, but they were put on hold due to the suspension of General Motors bi-fuel NGV program.

Summary of Current Louisiana Alternative Fuels Legislation

Act 927 of 1990 requires that 30% of new state agency vehicles must have a clean-fuel capability by September 1, 1994. The mandate increases to 50% in 1996. The Secretary of DEQ shall review the program by December 31, 1996, and if the program is considered effective at reducing emissions, at least 80% of the fleet must be capable of using alternative fuels by September 1, 1998. The vehicles can be leased or purchased, or existing state vehicles can be converted. The law provides two exceptions. If there is no alternative fuel source or if conversion to alternative fuels is more expensive than conventional fuels, the conversion targets may be waived.

Act 927 also gives the DNR Office of Conservation regulatory authority over CNG safety including refueling stations and the installation of conversion equipment in a vehicle. The regulations were adopted in January of 1992 as LAC Title 43, Part XI, Subpart 5, Chapter 25, Paragraphs 2501- 2541. All questions pertaining to them should be directed as follows:

The Act also directs the Louisiana Liquefied Petroleum Gas Commission to make safety inspections on vehicles equipped for and capable of using LPG.

Act 954 of 1990 has the same provisions for vehicles of political subdivisions of the state as Act 927 does for state government vehicles. Instead of DEQ reviewing the program by December 31, 1996, the governing authority of each political subdivision does it.

Act 531 of 1990 deregulates the price of natural gas for use in vehicles capable of using CNG as a motor fuel.

Act 1060 of 1991 provides an income tax credit for AFVs and fueling infrastructure costs. A tax credit can be claimed for 20% of the cost of the equipment to modify a gasoline fueled vehicle to use an alternative fuel as well as property which is directly related to the dispensing of the fuel. In the case of a vehicle originally equipped to operate on an alternative fuel, if "the taxpayer is unable or elects not to determine the exact basis which is attributable to such property, the taxpayer may claim a credit in an amount not exceeding the lesser of twenty percent of ten percent of the cost of the motor vehicle or one thousand five hundred dollars."

Act 516 of 1991 provides for an alternate method of paying the Special Fuels Tax on CNG, LPG, and LNG, when used as a motor vehicle fuel.

Act 169 of 1992 primarily provides that the tax credit as provided for in Act 1060 for the purchase of qualified clean burning motor vehicles or for certain costs incurred to convert motor vehicles to use certain alternative fuels shall apply only to vehicles registered in Louisiana.

Act 1067 of 1992 creates the Louisiana Natural Gas Marketing Commission within DNR to promote and market gas in general. One of its duties is to develop incentives for the conversion of fleet and other vehicles to natural gas.

Act 666 of 1993 reduces the Special Fuels Tax rate previously provided by Act 516 to an annual flat rate of $150.00 or a variable rate of 16¢/gallon based on the present total tax of 20¢/gallon.

Act 7 of 1994 lowers the Special Fuels Tax for owners of school buses to one-half the rate specified in Act 666.

Acts 516, 666, and 7 above are recent legislation that has been incorporated in the state's Special Fuel Tax Law of 1964: R.S. 47:801 to 47:815. As amended through the 1994 Regular Session, the law now levies a 16¢/gallon excise tax on alternative vehicle fuels and prescribes the method of collection, which includes paying an annual flat rate for CNG, LNG, or LPG. Application forms and additional information may be obtained from:

The Transportation Infrastructure Model for Economic Development of 1989 (TIMED): R.S. 47:820.1 to 47:820.6, as amended through the 1994 Regular Session, levies an additional 4¢/gallon tax on all motor vehicle fuels already subject to the 16¢/gallon tax. This tax added to the gasoline and Special Fuels Tax gives a total tax of 20¢/gallon. This tax is levied, collected, and administered in the same manner as the gasoline and Special Fuels Tax, but the proceeds must be used solely to fund the TIMED program. The TIMED program itself is not relevant to the subject of alternative fuels.

In addition to the above legislation, Governor Edwards' Executive Order EWE 93 - 9 of March 29, 1993, ordered the conversion of approximately 25% of the state's motor vehicle fleet to natural gas.

The complete text of Executive Order EWE 93 - 9; Acts 927, 954, 531, 1060, 169, and 1027; and CNG regulations is provided in Appendix B. The complete text of the Special Fuels Tax and the fuel tax portion of TIMED, as amended through the 1994 Regular Session, is also included in Appendix B. However, historical and statutory notes are not included so the original documents should be consulted as the final authority.

Louisiana Alternative Fuels Conversion Revolving Loan Program

In January 1994 DNR's Energy Division introduced a five year low-interest revolving loan program to assist state and local governmental agencies to convert a portion of their fleets to CNG, LPG, or LNG. The source of funds for the program is the Exxon Petroleum Violation Escrow Fund, which is administered by DOE. At the present time $3.1 million is available for conversions.

Two important changes in the program involving the interest rate and the eligibility of refueling stations have recently been made to increase the level of participation. The highlights of the program, including the recent changes, are as follows:

1. All state and local governmental entities, including school districts, are eligible to apply for loans.

2. CNG, LPG, and LNG are the only eligible fuels.

3. Eligible vehicles include retrofits only. There are no allowances for paying the difference between the costs of new regular vehicles and factory-equipped AFVs.

4. Loans for building refueling stations are eligible up to a maximum of $100,000 to be provided by DNR.

5. Each participating entity will be limited to a maximum loan balance of $100,000, and retrofits will be limited to $3,000 per vehicle.

6. Payback of loans is based on estimated fuel savings, and payments will be made quarterly until the total amount of the loan is repaid. The payback time must be five (5) years or less.

7. Pending approval by the DOE the present interest rate of 3% will be reduced to zero. Approval is expected by the end of 1994. Administrative costs will be paid from funds approved for the program.

8. The funds will be transferred to participating entities by means of individual cooperative agreements.

9. Only certified conversion kits installed by a certified mechanic are eligible. Prior to payment by DNR, a safety inspection of converted vehicles must be made.

So far DNR has two loan applications pending. One is from the St. Charles Parish School Board for the conversion of 40 busses to CNG and the other is from the Caddo Parish Commission for 19 vehicles to be converted to CNG.

The program is described in detail in the Energy Division publication Louisiana Alternative Fuels Conversion Program. Requests for the publication and current application forms should be directed to:

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