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The United States has enacted many tax incentives to promote the use of environmentally friendly fuels. There are many alternative fuel laws and regulations to consider when attempting to claim these credits.
IRS Alternative Fuel Definition
The IRS recognizes certain fuels as alternative under current Federal alternative fuel laws.
Recognized Alternative Fuels
- Liquefied petroleum gas
- Compressed natural gas
- Liquefied natural gas
- Liquefied hydrogen
- Liquid fuel made from coal through the Fischer-Tropsch process
- Liquid hydrocarbons made from biomass
- P-Series fuel
Unrecognized Alternative Fuels
- Renewable Diesel
Although these fuels are made from biomass, the IRS has excluded them in order to promote the use of more cutting edge alternative fuel sources covered under current federal alternative fuel laws.
Federal Fleet Vehicle Acquisition and Fuel Use
The EPAct of 1992 requires that 75% of new, light-duty vehicles purchased by particular federal fleets must be alternative fuel vehicles (AFVs).
AFVs are defined by alternative fuel laws as vehicles using technology such as:
- Hybrid electric
- Fuel cell
- Advanced lean burn
Dual-fuel vehicles in federal fleets are required to use alternative fuels as well unless the DOE deems them exempt.
Grounds for Exemption
- No alternative fuel availability
- Cost restrictions
Fleets using fuel blends of at least 20% biodiesel in medium and heavy duty vehicles may qualify for credit toward their annual requirements under current alternative fuel laws.
Petroleum Consumption Reduction
The January 2007 Executive Order 13423 requires that federal agencies with over 20 vehicles decrease their petrochemical consumption by 2% per year through 2015. In addition, they must continue to increase alternative fuel usage by 10% per year.
Alternative fuel laws also mandate the federal fleets compile a complete inventory of greenhouse gas emissions for 2010 and update it annually. The reduction of these gases can be accomplished through AFV use and the optimization of their fleets.
Strategic Sustainability Performance Plan
Executive Order 13514 of 2009 requires federal agencies to develop, implement, and update a Strategic Sustainability Performance Plan. Agencies are required to develop, implement, and annually update a Strategic Sustainability Performance Plan. In addition, federal agencies are required to measure, reduce, and report their greenhouse gas emissions. Current alternative fuel laws require a reduction in greenhouse gas emission of 20% by the year 2020.
Other requirements for federal fleets under alternative fuel laws are stated in the Energy Independence and Security Act of 2007. These include low greenhouse gas emission vehicle acquisition mandates and renewable fuel infrastructure installation.
State and Alternative Fuel Provider Fleet Vehicle Acquisition and Fuel Use
The EPAct of 1992 requires specific state government and alternative fuel provider fleets to obtain alternative fuel vehicles, with compliance mandated for those fleets in the United States which operate, lease, or control over 50 light-duty vehicles. Current U.S. alternative fuel laws require that No less than 20 of the 50 vehicles are to be used mainly within the same Metropolitan Statistical Area or Consolidated Metropolitan Statistical Area. These AFVs must be able to be fueled in a central location as well.
Fleets earn alternative fuel and natural gas incentives for each vehicle purchase. After tax requirements are met, the remaining credit can be banked or traded with other fleets. In addition, those fleets using a fuel blend of 20% biodiesel or more in medium and heavy-duty vehicles can earn credit toward their annual AFV acquisition requirement.
The DOE released a final rule on Alternative Energy Compliance in 2007 giving fleets the option to reduce petroleum usage instead of purchasing AFVs.
Private and Local Government Fleet Vehicle Acquisition
The DOE was tasked by the APAct of 1992 to decided if private and local government fleets should be required to purchase alternative fuel vehicles. After heavy deliberation the DOE extended the EPAct’s 1992 goal to 2030 with a desired result of replacing 30% of the consumed motor fuel in the United States with alternative sources.
In March of 2008, the DOE determined that private and local government fleets would not be included in fleet compliance laws, because it would not significantly impact its Replacement Fuel Goal.
EPAct Alternative Fuel Definition
Recognized Alternative Fuels Under Current Alternative Fuel Laws
- Other alcohol
- Alcohol-gas blends – minimum 85% alcohol content
- Natural gas
- Liquefied fuels made from natural gas
- Coal produced liquid fuel
- Pure biodiesel
- Fuels mae from biomass not including alcohol
- P-Series fuel
Other Alternative Fuel Designations
Under current alternative fuel laws, other fuels may be designated as alternative fuel by the DOE under the following conditions:
- The fuel is primarily non-petroleum
- The fuel possesses meaningful energy security benefits
- Possesses meaningful environmental benefits
Aftermarket Alternative Fuel Vehicle Conversions
Under current alternative fuel laws, conventional vehicles are fall under the aftermarket AFV conversion heading if they have been converted to use:
- Natural gas
- Methane gas
All conversions must adhere to EPA standards.
Alternative Fuel and Vehicle Labeling
Today’s alternative fuel laws and regulations state that AFV vehicles and fuel dispensers must have labeling containing information which helps the consumer make an informed decision about buying or fueling an AFV. New and used AFVs, including converted vehicles, are to be labeled with their cruising ranges and other descriptive information. Hybrid electric vehicles are exempt from these labeling requirements.
Alternative fuel dispensers are to be clearly labeled with the fuel’s name and rating. The following fuel types are covered under this rule:
- Denatured ethanol
- Ethanol blends of 85% or more ethanol
- Natural gas
- Liquefied petroleum gas
- Liquid biofuels made from coal
- Biodiesel blends of more than 5% biodiesel
Incremental Cost Allocation
Current federal alternative fuel laws state that the United States General Services Administration is required to allocate the incremental costs of alternative fuel vehicle purchases across fleet vehicles which are distributed by the GSA.
To learn more about bulk fuel tank regulations, please visit our Fuel Tank Regulations page