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NATURAL GAS VEHICLES: FUELING AMERICAN 

JOBS, ENHANCING ENERGY SECURITY, AND 

ACHIEVING EMISSIONS BENEFITS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY, NATURAL RESOURCES, 

AND INFRASTRUCTURE 

OF THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

DECEMBER 3, 2014 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

RON WYDEN, Oregon, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

SHERROD BROWN, Ohio 

MICHAEL F. BENNET, Colorado 

ROBERT P. CASEY, Jr., Pennsylvania 

MARK R. WARNER, Virginia 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

ROB PORTMAN, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JOSHUA SHEINKMAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

SUBCOMMITTEE ON ENERGY, NATURAL RESOURCES, AND INFRASTRUCTURE

MICHAEL F. BENNET, Colorado, Chairman 

RON WYDEN, Oregon 

JOHN D. ROCKEFELLER IV, West Virginia 

DEBBIE STABENOW, Michigan 

ROBERT MENENDEZ, New Jersey 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

THOMAS R. CARPER, Delaware 

JOHN CORNYN, Texas 

CHUCK GRASSLEY, Iowa 

MIKE CRAPO, Idaho 

MICHAEL B. ENZI, Wyoming 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

(II) 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 1 

Bennet, Hon. Michael F., a U.S. Senator from Colorado, chairman, Subcommittee on Energy, Natural Resources, and Infrastructure, Committee 

on Finance ............................................................................................................ 2 

Cornyn, Hon. John, a U.S. Senator from Texas .................................................... 3 

Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee on 

Finance .................................................................................................................. 4 

Isakson, Hon. Johnny, a U.S. Senator from Georgia ............................................ 5 

WITNESSES 

Carrick, Robert, sales manager, natural gas, Daimler Trucks North America, 

Portland, OR ......................................................................................................... 7 

Whitlatch, Mike, vice president, global energy and procurement, UPS, Atlanta, GA ............................................................................................................... 8 

Calabrese, Joseph A., CEO, general manager, and secretary-treasurer, Greater Cleveland Regional Transit Authority, Cleveland, OH ................................ 10 

Jibson, Ronald, chairman, president, and CEO, Questar, Salt Lake City, 

UT .......................................................................................................................... 12

Kassel, Rich, senior vice president, east coast operations, Gladstein, 

Neandross, and Associates, New York, NY ........................................................ 14 

Clay, Harrison, president, Clean Energy Renewable Fuels, Newport Beach, 

CA .......................................................................................................................... 16

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Bennet, Hon. Michael F.: 

Opening statement ........................................................................................... 2 

Prepared statement .......................................................................................... 27 

Calabrese, Joseph A.: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 29 

Carrick, Robert: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 32 

Clay, Harrison: 

Testimony .......................................................................................................... 16 

Prepared statement .......................................................................................... 34 

Cornyn, Hon. John: 

Opening statement ........................................................................................... 3 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 1 

Isakson, Hon. Johnny: 

Opening statement ........................................................................................... 5 

Jibson, Ronald: 

Testimony .......................................................................................................... 12 

Prepared statement .......................................................................................... 48 

Kassel, Rich: 

Testimony .......................................................................................................... 14 

Prepared statement .......................................................................................... 51 

Whitlatch, Mike: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 62 

Page

IV 

Wyden, Hon. Ron: 

Opening statement ........................................................................................... 4 

COMMUNICATIONS

American Chemistry Council .................................................................................. 69 

Diesel Technology Forum ........................................................................................ 70 

Natural Gas Vehicles for America .......................................................................... 74 

(1) 

NATURAL GAS VEHICLES: 

FUELING AMERICAN JOBS, ENHANCING 

ENERGY SECURITY, AND ACHIEVING 

EMISSIONS BENEFITS 

WEDNESDAY, DECEMBER 3, 2014 

U.S. SENATE,

SUBCOMMITTEE ON ENERGY, NATURAL

RESOURCES, AND INFRASTRUCTURE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 2:34 p.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Michael F. 

Bennet (chairman of the subcommittee) presiding. 

Present: Senators Wyden, Stabenow, Hatch, Cornyn, Thune, and 

Isakson. 

Also present: Democratic Staff: Sean Babington, Senior Policy 

Advisor; Laura Sherman, Legislative Fellow; and Andrew Siracuse, 

Legislative Assistant. 

Senator BENNET. So I am going to gavel this meeting to order 

with my hand, because I have no gavel. I do have a thing up here 

that says ‘‘Mr. Bennet, Chairman,’’ but that is not going to be true 

for very long. So I want to thank my colleagues for not making it 

‘‘temporary.’’ 

In the interest of time, we are going to start with Senator Hatch, 

who has a witness to introduce, and then I will do my opening 

statement and turn it over to Senator Cornyn, and then we will introduce the rest of the witnesses, if that is okay with everybody. 

Great. 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Well, thank you, Mr. Chairman. It is a pleasure 

to be here today. I can only be here for a minute or two to introduce a fellow Utahan. 

Ron Jibson is the chairman, president, and CEO of The Questar 

Corporation, one of the largest natural gas companies in the country. Mr. Jibson has been with Questar for over 30 years. He started 

as a design engineer and has served as director of engineering, operations manager, general manager of operations, vice president of 

operations, and executive vice president. 

Just prior to his current role with the company, he was the president and CEO of a subsidiary, the Questar Gas Company. Mr. 

Jibson has been very involved in the natural gas industry at large, 

2 

having served as chairman of both the American Gas Association 

and the Western Energy Institute. 

He graduated from Utah State University. Go Aggies. BYU was 

very unkind to them the other night, but they are doing pretty 

good. He has a degree in civil engineering and has an MBA from 

Westminster College in Salt Lake City. 

Welcome, Ron, and we want to thank you for your participation 

today. I am sure the subcommittee will benefit greatly from your 

knowledge and your expertise in this important area. I cannot stay, 

but I did want to get here and introduce you so they realize how 

important you really are to all of us in Utah and really across this 

country. So I appreciate having you here, and I am sure these fellows are all going to treat you very, very well. 

Senator BENNET. We will. 

Senator HATCH. Plus Senator Stabenow. She can be a little rough 

from time to time, but—— 

Senator BENNET. Not today. 

Senator HATCH [continuing]. Not today. [Laughter.] 

Senator BENNET. Thank you, Senator Hatch. Thank you very 

much for coming by. 

OPENING STATEMENT OF HON. MICHAEL F. BENNET, A U.S. 

SENATOR FROM COLORADO, CHAIRMAN, SUBCOMMITTEE 

ON ENERGY, NATURAL RESOURCES, AND INFRASTRUCTURE, 

COMMITTEE ON FINANCE 

Senator BENNET. Good afternoon to everybody, and thank you to 

Senator Cornyn and to our distinguished panel and to our colleagues for being here today. The Subcommittee on Energy, Natural Resources, and Infrastructure will now come to order. 

I want to thank our witnesses for traveling here today. We have 

convened to discuss an incredibly important topic, natural gas, and 

specifically the use of natural gas as a transportation fuel in the 

United States. As most know, the country has undergone a dramatic change in our domestic energy picture over the last decade. 

Thanks to innovations in the drilling processes, our domestic production of natural gas has quadrupled since 2005. That is good for 

jobs, good for energy security, and, when natural gas is produced 

responsibly, it also can be good for the environment. 

I want to spend just a moment on that at the outset, because it 

is an important point. I am a firm believer that we can produce 

natural gas safely and in a way that protects drinking water, air 

quality, and adjacent communities. The State of Colorado has led 

the way in establishing a robust regulatory regime for natural gas 

production. 

From first-in-the-Nation standards that dramatically reduce fugitive methane emissions all the way to the innovative Clean Air, 

Clean Jobs Act, it has led to increased natural gas usage in Colorado’s power plants. This law and the associated fuel switching and 

efficiency targets will lead to sizable reductions in both criteria 

emissions and carbon pollution, which are two of the biggest environmental advantages of using more natural gas in power generation and transportation. 

More important, these initiatives were broadly supported both by 

the industry and by the environmental community. On this topic, 

3 

like many others, I think that Washington would do well to learn 

a lesson from how we work together in Colorado. 

While various aspects of natural gas have been discussed in front 

of the Energy and Environment Committees, we are here today to 

discuss natural gas as a transportation fuel. There is a huge opportunity to grow this market. It is amazing to me that over 40 percent of the country’s public buses are currently powered by alternative fuels or blends. We have seen this happen in Colorado: Weld 

County Public Works has recently converted many of their cargo 

vans, snowplows, and school buses to natural gas. They predict this 

will save the school district $100,000 a year and will reduce emissions of smog-producing pollutants. 

As we will hear today, this committee can do more to help this 

growing industry. Specifically, we can level the playing field on excise taxes on natural gas so that it is not taxed at a higher rate 

than diesel. Senators Burr, Hatch, and I have a bill that will do 

just that. It passed this committee and the full Senate during our 

consideration of the highway bill. It was stripped out of the House 

bill before final passage. 

The Finance Committee also has jurisdiction over a variety of alternative fuel tax credits, specifically the 50-cent per-gallon equivalent credit for selling natural gas as a transportation fuel—a credit 

that has expired—and the 30-percent credit for the installation of 

new natural gas refueling equipment, which also has expired. Our 

tax laws are critical to the development of the new infrastructure 

needed to aid the growth of these vehicles and to exploit the potential of this domestic resource. Both of these credits were included 

in the EXPIRE Act that passed the Finance Committee with bipartisan support. 

I would prefer, and I know that many in the Senate would too, 

that we move back to the bipartisan legislation that moved through 

this committee over 6 months ago. But in the meantime, we should 

pass the Senate Finance Committee bill, including the natural gas 

vehicle provisions, and get down to the hard work of tax reform. 

As we do this, it is important that Congress understands the 

growing natural gas vehicle industry and its positive effect on our 

economy, national security, and our environment. 

[The prepared statement of Senator Bennet appears in the appendix.] 

Senator BENNET. Once again, I want to thank our panel for being 

here and to tell you that we are looking forward to your testimony. 

I will now turn it over to Senator Cornyn for his opening remarks. 

Thank you. 

OPENING STATEMENT OF HON. JOHN CORNYN, 

A U.S. SENATOR FROM TEXAS 

Senator CORNYN. Well, thank you, Mr. Chairman, and thanks to 

each of the witnesses for being here today. Listening to Senator 

Bennet’s opening statement, I find that there is much that I agree 

with—not all, but most, which is a good start. 

Obviously, coming from States like Colorado and Texas, we are 

no strangers to energy and the natural gas renaissance that we 

have seen in this country—and its impact not only on low-cost energy, but also on the promise to perhaps help us with the geoVerDate Mar 15 2010 17:43 Jul 13, 2015 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 R:\DOCS\94819.000 TIMD
4 

politics of energy, as well as job creation, which is so important at 

home. We know the key in my State to the energy sector and producing a growing economy is a stable and secure supply of affordable energy. We, of course, have a diverse array of energy sources 

and industries that provide solid employment not just in Texas, but 

around the country, at the same time that they provide for the energy needs of working families across the country. 

I think one of the big challenges we are going to have is trying 

to figure out how to reconcile our tax policy with energy policy. It 

is no secret to any of us here that, while we all support an all-ofthe-above approach, not all energy sources are treated the same. 

Indeed, many of the energy sources, like the oil and gas industry, 

pay vast sums of money in taxes to the Federal Treasury. 

Other forms of energy depend on generous subsidies from the 

Federal Government, and obviously that is something we need to 

continue to study as we try to solve this puzzle of our tax code, 

which is so important. But we also need to remember and remind 

ourselves that a regulatory regime that makes it more difficult to 

produce and deliver affordable energy and to sustain and create 

jobs here at home is a recipe for more dependence and less independence. It can lead to more volatility and be a threat to our economy. 

I continue to be concerned about the administration’s pursuit of 

regulatory policies that will end up increasing the cost of energy for 

families and small businesses and, in the end, dampen the potential growth of our economy. Americans understand that raising 

taxes and piling on more regulations will translate into higher 

prices. Although I find myself in agreement again with Chairman 

Bennet’s comments, this is not to suggest we proceed ignorant or 

unaware or unconcerned about impact on the environment. That 

remains a common concern. 

I commend the chairman for holding today’s hearing and look 

forward to the testimony from the witnesses. 

Senator BENNET. Thank you, Senator Cornyn. We appreciate 

very much your leadership on this panel. And with that, we are 

blessed to be joined by our chairman, Ron Wyden, who is here to 

introduce the first witness. 

OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR 

FROM OREGON, CHAIRMAN, COMMITTEE ON FINANCE 

Senator WYDEN. Thank you very much, Chairman Bennet and 

Senator Cornyn. I very much appreciate both of you tackling this 

on a bipartisan basis, and I just have a couple of points to make. 

We are so glad to have Mr. Carrick here. It seems like eons ago 

when you participated in our natural gas roundtable, when I was 

chair of the Energy Committee. So we are very pleased you are 

here. 

So just a couple of quick points, and then I want to talk about 

his important work at Daimler, which, of course, is headquartered 

in my hometown. 

First, this is an especially important hearing, Chairman Bennet 

and Senator Cornyn. It is important that we tackle this in a bipartisan way, because the reality is that natural gas, particularly because of what has happened in the Bakken, is advantage America. 

5 

Natural gas is, of course, the cleanest of all the fossil fuels. It is 

50-percent cleaner than the other fossil fuels, and we have it, and 

the rest of the world wants it. It seems to me that this effort to 

look at how safely and efficiently we can use natural gas is especially important because of what is going on right now in discussions back and forth between the House and the Senate. 

This committee, on a bipartisan basis back in April, passed a 2- 

year extension of the 30-percent investment tax credit for refueling 

infrastructure and a 2-year extension of the 50-cent per-gallon tax 

credit for natural gas transportation fuel. Right now—certainly in 

the absence of an alternative—the House is about to vote on providing what Senator Cornyn and I talked about this morning: essentially 4 weeks, a grand total of 4 weeks of certainty, at a time 

when our economy—and particularly for business decisions and 

matters that are so important to working-class families—hungers 

for certainty and predictability. So my view is—and what I have 

spent most of my day on and what I will be walking out of here 

in a minute to do is—I think the American people deserve an upgrade on that kind of approach. They deserve a bipartisan alternative, and my hope is—and Senator Cornyn and I have been talking about this through the day, a number of colleagues have—that 

we can do that. 

Also, before we get to Mr. Carrick, I want to mention another bipartisan effort, which is Chairman Bennet and Senator Burr’s effort to equalize the tax treatment of liquefied natural gas with diesel fuel. This passed as part of the highway bill, as colleagues will 

recall, and I very much hope that what Senator Bennet and Senator Burr are trying to do, again on a bipartisan basis, will become 

law in the very near future. 

Mr. Carrick, you, of course, and Daimler are very much a part 

of Oregon’s economic future. We are glad you are in my hometown, 

manufacturing natural gas vehicles and supplying those trucks 

that are used for regional and short-haul applications, but are especially valuable for utility companies, for municipal solid waste 

companies, and for pickup and delivery. So to have you, Mr. Carrick, as a representative of Daimler, which consistently provides 

vehicles that are reliable, powerful, and clean, I guess I am glad 

you are a recidivist. You came to the Energy Committee, and now 

you are here at the Finance Committee. 

My apologies for having to go back to the extenders fray, but, colleagues, I think you are really going to enjoy his presentation, because this is the face of what the two of you are trying to do on 

a bipartisan basis, and I commend you for it and look forward to 

visiting with you at home as well, Mr. Carrick. 

Senator BENNET. Thank you very much, Mr. Chairman. I think 

Senator Isakson is going to introduce our next witness. 

OPENING STATEMENT OF HON. JOHNNY ISAKSON, 

A U.S. SENATOR FROM GEORGIA 

Senator ISAKSON. Thank you very much, Chairman Bennet. I 

commend you on calling this very important hearing on a very important subject. It is really a pleasure for me to introduce Mr. Mike 

Whitlatch of the UPS Corporation in Atlanta, GA. 

6 

As I think all of the committee knows and the audience knows, 

UPS is a preeminent logistics company, internationally and worldwide, in the delivery of packages. If anybody knows trucks, fuel, 

and logistics, it is UPS Corporation. 

Mike is vice president of global energy and procurement for UPS 

and is responsible for the energy strategy and energy supply chain 

that supports UPS in its worldwide enterprise. He is a 27-year veteran of UPS Corporation, and we are delighted to welcome you 

here today, Mr. Whitlatch. 

I am going to take liberty with your introduction by making two 

other acknowledgments. Half the panel has a Georgia tie. Mr. Carrick ships all of his trucks in the Port of Brunswick, if I am not 

mistaken, on the southeast coast of the State of Georgia. We appreciate that business. 

Mr. Harrison Clay’s father, Steve, is one of the most prominent 

attorneys in the city of Atlanta. I met him when he came in this 

afternoon, and I had worked with him and Boone Pickens on other 

projects before. 

We welcome you to the committee, and we welcome all of the 

panel members and their testimony today. Thank you, Mr. Chairman. 

Senator BENNET. Thank you, Senator Isakson. In fact, this entire 

effort was just a way to showcase Georgia. So I am glad you are 

here. [Laughter.] 

I know that Senator Portman wanted to introduce our next witness. He is not here, so I am going to take the liberty of introducing Joseph Calabrese. He is the CEO, general manager, and 

secretary-treasurer for the Greater Cleveland Regional Transit Authority. Mr. Calabrese was appointed to represent the public transit industry on the U.S. Department of Transportation’s Intelligent 

Transportation Systems Advisory Committee. Under his leadership, 

the Greater Cleveland Regional Transit Authority is now converting its fleet of diesel buses to natural gas. We look forward to 

hearing your testimony. 

Our next witness, Rich Kassel, is the senior vice president of east 

coast operations for Gladstein, Neandross, and Associates. He is an 

environmental policy advisor to governments, international organizations, nonprofits, and funders. Mr. Kassel is an expert in transportation, air pollution, clean energy, and climate change policy. In 

this capacity, he has played a major role in the development of government programs to reduce vehicle emissions, including new regulations and a set of programs. We are very glad that you are here 

as well. 

Our final witness, Harrison Clay, is the president of Clean Energy Renewable Fuels, which is a division of Clean Energy Fuels 

Corporation. Clean Energy Renewable Fuels is dedicated to the 

production of renewable natural gas and organic waste. Mr. Clay 

has expertise in the financing and development of renewable energy products as well as the sale of renewable energy and carbon 

credits. Prior to joining Clean Energy, he served as director of corporate development and general counsel to the San Francisco investment bank, WR Hambrecht and Company. 

We are delighted that all of you are here, and I think we will 

start, Mr. Carrick, with you and just go across. If you could try to 

7 

keep your comments to about 5 minutes or so, that will leave more 

time for questions, but we certainly want to hear your point of 

view. 

STATEMENT OF ROBERT CARRICK, SALES MANAGER, NATURAL GAS, DAIMLER TRUCKS NORTH AMERICA, PORTLAND, 

OR 

Mr. CARRICK. Thank you. My name is Robert Carrick, and I am 

the sales manager for natural gas for Daimler Trucks North America. We appreciate Chairman Bennet and Ranking Member Cornyn 

for holding this important hearing on the role of natural gas in the 

transportation sector. 

Daimler Trucks North America is headquartered in Portland, 

OR, as Senator Wyden mentioned, and we are a leader among U.S. 

truck manufacturers in introducing natural gas technology to the 

transportation sector. 

Since 2008, Daimler has sold and delivered over 5,000 natural 

gas heavy-duty trucks, Class 7 and 8 trucks, as well as thousands 

of school buses and step vans through our Thomas Built Buses and 

Freightliner Custom Chassis organizations. The Freightliner Business Class M2 112 has been ideal for utilities, refuse, municipalities, and other short- and regional-haul applications. 

Our Freightliner Cascadia Natural Gas has been on the road for 

just over a year. It offers the next step in super-regional haul and 

lane applications. Freightliner now offers natural gas technology in 

nearly all of its truck applications, including the Vocational 114SD. 

While DTNA is headquartered in Portland, much of our truck 

manufacturing is in North Carolina. DTNA operates four manufacturing plants in the State. Thomas Built Buses is headquartered 

in High Point; our parts manufacturing facility is located in Gastonia; the Freightliner truck manufacturing plant is in Cleveland, 

where we produce the Cascadia Natural Gas Truck; and in Mount 

Holly we manufacture our Freightliner Business Class M2 trucks, 

including the M2 and 114SD, powered by natural gas. 

With record order intake so far this year, DTNA is adding capacity and jobs in North Carolina. Daimler is committed to natural gas 

because of customer demand for high-performing, reliable trucks 

that run with near zero emissions. With natural gas, greenhouse 

gas emissions are reduced by at least 20 percent versus comparable 

diesel engines. And because the United States has an abundant 

supply of natural gas, the fuel supply is less constrained by overseas developments. 

As I travel around the country, I get asked a lot of questions 

from perspective truck buyers whether natural gas is right for their 

business. For some, the decision to go with natural gas makes 

sense, but for others, natural gas is not the best, most economical 

choice. 

For example, natural gas-powered trucks are perfect for shortand regional-haul trucking. Today’s natural gas trucks are ideally 

suited for 300 to 500 miles per day usage. For companies that operate in that environment, for example at ports and in regional huband-spoke distribution, natural gas is both economical and efficient. 

8 

Good examples of what I mean are delivery companies like UPS 

here on the panel with me today, food and beverage distributors, 

utility vehicles, and refuse and public transit vehicles that stay 

within a relatively compact radius and return to a dedicated depot 

or station to fill up daily. 

Although natural gas trucks have distinct advantages, challenges 

do exist, particularly for long-haul trucking. The lack of a national 

network of natural gas stations is a leading obstacle facing natural 

gas long-haul trucking. Less than 1,500 CNG natural gas stations 

exist in the U.S., and only about half are publicly available. On the 

LNG side, there are approximately 100 retail stations in operation 

today. By comparison, there are about 168,000 gas and diesel stations out there. 

Technology costs also remain high. The incremental cost of a typical natural gas truck is $45,000 to $60,000 more expensive than 

a comparable truck with a conventional diesel engine. And do not 

forget to add the Federal Excise Tax on top of that figure as well. 

Engine technology is still a work in process, but the good news 

is that there are some new engine products on the market that 

have the potential to deliver game-changing results, particularly in 

the long-haul truck segment. 

Thank you for this opportunity to participate on this panel today, 

and we look forward to addressing all of your questions. 

Senator BENNET. Thank you, Mr. Carrick. 

[The prepared statement of Mr. Carrick appears in the appendix.] 

Senator BENNET. Mr. Whitlach? 

STATEMENT OF MIKE WHITLATCH, VICE PRESIDENT, 

GLOBAL ENERGY AND PROCUREMENT, UPS, ATLANTA, GA 

Mr. WHITLATCH. Thank you, Senator, for the introductions. 

Thank you for the kind words. Chairman Bennet, Ranking Member 

Cornyn, and members of the subcommittee, thank you for allowing 

me to testify in front of you today. 

I think he referred to it, Senator Cornyn, as a renaissance in the 

U.S. with natural gas, and we do believe that, in fact, natural gas 

is revolutionizing transportation within the United States, especially for heavy-duty trucking—UPS included and the rest of the 

industry. 

I have submitted my prepared testimony, and I would like to 

make three points to you today. 

First, UPS is absolutely committed to developing transportation 

alternatives that reduce our dependence on petroleum-based fuels. 

In fact, UPS operates over 4,700 alternative fuel vehicles. Natural 

gas is a key part of that strategy. In fact, we operate over 100,000 

pieces of equipment worldwide. Seventeen thousand of those pieces 

of equipment are heavy-duty, Class A over-the-road trucks that operate on diesel fuel. Out of those, 1,243 are LNG or CNG long-haul 

trucks that we have added to our fleet. 

In fact, all of the heavy-duty trucks that we are buying this year, 

2014, for a domestic U.S. small package operation which is the core 

of our business, will run on natural gas. The natural gas supply 

situation in the U.S. provides a tremendous opportunity to adopt 

9 

a cleaner-burning alternative fuel, and removing barriers will be 

the key to this transformation. 

My second point is, although UPS has tested virtually every type 

of alternative fuel technology in our fleet, we have found that natural gas is one of the best alternatives for long-haul heavy-duty 

trucks. Natural gas heavy trucks are ideal because heavy trucks 

simply burn the most fuel. In fact, if you look at it, to put this into 

perspective, there are 2.4 million heavy-duty trucks on the road 

today. They only account for 1 percent of the vehicles on the road, 

but they consume 17 percent of the transportation fuel. 

There is also a price for technology. Mr. Carrick just referred to 

that in his opening statement. Each natural gas-powered alternative vehicle costs significantly more than a conventional diesel 

truck, and it requires investment in infrastructure. 

This incremental up-front cost for a Class A tractor can run between $60,000–$70,000 per unit depending on how it is equipped. 

But in addition to the investment risk, we face a 12-percent excise 

tax that is applied to the total purchase price. This simply means 

that we pay extra taxes for purchasing alternative fuel vehicles. 

So for example, 12 percent on an incremental investment of 

$70,000 is $8,400 in extra taxes when compared to a diesel truck, 

all for investing in a vehicle that uses domestic fuel, creates jobs 

here in America, and makes for cleaner air. 

My third point is, the biggest impediment to greater adoption of 

LNG trucks in the U.S.—in the heavy-duty truck market—is a very 

simple glitch in how the Federal excise tax is applied to fuel. So 

you may ask what is the glitch—and I think everyone in this subcommittee understands the glitch very well. Today the Federal excise tax on both diesel and LNG fuel is 24.3 cents per gallon. This 

is a volumetric tax. I think it was mentioned earlier that not all 

of these fuels are equal in their energy content, and this is definitely not the case with LNG. 

So, to illustrate this, a gallon of LNG only has 58 percent of the 

energy content when compared to a gallon of diesel fuel. This requires you to burn 1.7 gallons of LNG for the same work that 1 

gallon of diesel fuel would require. So in short, we are effectively 

taxed at 170 percent of the rate of an equivalent diesel fuel gallon 

on an equivalent energy basis. So this means that LNG is disadvantaged from the start, costing 17 cents more for every diesel 

gallon equivalent. So another way to look at this is that the effective tax rate on an LNG-equivalent gallon is 41.3 cents compared 

to 24.4 cents on diesel. 

Seventeen cents does not sound like a lot, but it adds up over the 

life of the vehicle. In fact, for a company like UPS, the extra LNG 

fuel tax will cost more than the incremental investment of that vehicle over the life of the truck. So in short, the glitch with this 

LNG excise tax is probably the biggest impediment to the general 

adoption of LNG trucks. 

If the Congress wants to accelerate the adoption of alternative 

fuels, fuels like LNG, increase the use of domestic natural gas to 

enhance our energy security, and clean the air, then we must start 

with just fixing the LNG glitch in the tax code. That is my primary 

message here today. Let us just provide simple parity for this fuel. 

10 

Consequently, UPS is pleased to support Senate Bill 1103, the 

LNG Excise Tax Equalization Act of 2013, which Chairman Bennet—we thank you very much—sponsored and Senator Burr of this 

subcommittee cosponsored. We commend you for your leadership on 

this matter and hope that we can get LNG taxed at the same rate 

as diesel fuel. 

Again, I would like to thank the subcommittee for allowing me 

to testify. Thank you. 

[The prepared statement of Mr. Whitlatch appears in the appendix.] 

Senator BENNET. Mr. Calabrese? 

STATEMENT OF JOSEPH A. CALABRESE, CEO, GENERAL MANAGER, AND SECRETARY-TREASURER, GREATER CLEVELAND 

REGIONAL TRANSIT AUTHORITY, CLEVELAND, OH 

Mr. CALABRESE. Yes. Thank you very much. I thank the chairman and the committee for giving me this opportunity to talk and 

testify on the importance of continuing the alternative fuels tax 

credit. 

Public transit ridership is growing, and projections are it will 

continue to grow at an increasing rate. Our cities are growing in 

population, our seniors are getting older and relying on public 

transportation both in our urban and our rural areas, and the 

younger generation is using public transit much more than their 

parents and even their grandparents. 

While public transit is important for both rural and urban areas, 

certainly the bulk of it is in the urban areas where environmental 

concerns are the greatest. I think that is a very important point. 

Without public transit, an additional 4.2 billion gallons of gasoline 

will be burned in the Nation—4.2 billion. Now I think that is a 

very important service we provide. And my agency, the Regional 

Transit Authority in Greater Cleveland—we are a multi-modal 

agency with heavy rail, light rail, bus, Bus Rapid Transit, and 

paratransit service—we serve about 200,000 customers on a typical 

weekday and, as in other cities, the appreciation and value of public transit is growing, not just in terms of mobility, but also in 

terms of economic development. 

If the first thing RTA is about is mobility, the second thing it is 

about is sustainability. During our mission in greater Cleveland, 

we remove about 50,000 cars each day from the streets and the 

congestion and pollution associated with that. 

I am pleased to talk about two programs that are underway in 

greater Cleveland in terms of alternative fuels. The first relates to 

our paratransit service, which is designed to serve people with disabilities. We have 20 propane-powered 12-passenger vehicles that 

run on propane, modified by Rousch Corporation. These cutaways 

travel about 150 miles a day serving, again, exclusively people with 

disabilities. 

The cost of these vans is more than the cost of the diesel vehicles 

they replaced. We think over the life of the vehicle—about 6 or 7 

years—that up-front capital cost will be addressed through a lower 

fuel cost; however, we still have the up-front cost of the infrastructure to deal with. The good news is, over the same life cycle of the 

vehicles, we will drastically reduce particulate matter and elimiVerDate Mar 15 2010 17:43 Jul 13, 2015 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 R:\DOCS\94819.000 TIMD
11 

nate 20 percent of the NOX compared to the diesel vehicles they 

have replaced. We hope this pilot is successful. If it is, we will replace all of our vehicles in that fleet with propane vehicles. 

In our big bus fleet, we just received a delivery of the first of 240 

CNG 40-foot transit buses. They are being produced in California 

by Gillig Corporation. We hope to eventually replace the other 500 

vehicles with CNG. Again, the capital costs for the CNG buses 

were more than the diesel buses they replaced—about a $40,000 

differential. We feel that, over the life of the vehicle, that $40,000 

would be more than offset by lower fuel costs. 

And again, the great news is that one diesel coach emits 170 tons 

of CO2 annually, but one CNG coach emits only 4 tons of equivalent CO2 annually. When we transition the entire fleet to CNG, we 

will save over 41,000 tons, really a tremendous improvement in air 

quality. 

For both projects, in addition to the increased capital costs, really 

the big thing is increased infrastructure costs. With stagnant, at 

best, Federal investments, allocating discretionary funds for the 

purchase of vehicles that are more expensive, and then investing 

in infrastructure needed to fuel and maintain the CNG vehicles, is 

a real, real challenge. We are investing right now between $15 million and $20 million in the two facilities that we are upgrading so 

the CNG vehicles can be serviced and operated. 

So the good news is, alternative fuel is cleaner. The good news 

is, it is being produced locally, it is helping American jobs, and 

there is significant interest—as you are hearing here at this 

table—by fleet operators to go to CNG. 

The bad news is, the vehicles cost more. There is an issue in the 

public transit industry—in the State of Ohio, for example, 1,000 of 

the 3,000 vehicles, or over one-third, right now are already beyond 

their useful lives. So we are having a difficult time replacing buses 

of any type, let alone buses that cost more up front. 

The third and probably the biggest challenge is the cost of the 

infrastructure, as I have mentioned. In making our decision, we relied on the alternative fuels tax credits, and we hope to rely on 

them to finance some of the infrastructure investments that we are 

going through right now. 

Transit has been moving to alternate fuels in big numbers, as 

the chairman mentioned. Over 40 percent of the Nation’s buses 

now operate on alternative fuels or blends, over 20 percent on CNG 

or LNG. For many, what made that possible was the alternative 

fuels tax credit, and many systems are weighing the alternatives 

right now. And the future of the alternative fuels tax credit is 

going to be the make-or-break in those decisions. So there is a real 

opportunity to expand the use of CNG buses in public transit, but 

the alternative fuels tax credit is so very important to make that 

happen, especially in times of very critical funding. 

I strongly request that the alternative fuels tax credit be extended. I certainly also have to say that we encourage a bipartisan 

approach to the mass transit and transit bill in general because, 

without that bill, we really cannot move forward on this or any 

other important project. 

Thank you very much. 

Senator BENNET. Thank you very much. 

12 

[The prepared statement of Mr. Calabrese appears in the appendix.] 

Senator BENNET. Mr. Jibson? 

STATEMENT OF RONALD JIBSON, CHAIRMAN, 

PRESIDENT, AND CEO, QUESTAR, SALT LAKE CITY, UT 

Mr. JIBSON. Thank you and good afternoon. 

Senator BENNET. Good afternoom. 

Mr. JIBSON. Chairman Bennet, Ranking Member Cornyn, thank 

you for this opportunity. I am pleased and appreciate the opportunity to appear before you today. 

I would like to begin by thanking the committee for holding today’s hearing. It is critical that Congress remains current on the 

dynamic discussion regarding natural gas brought about by the obvious shale gas revolution. The new abundance of natural gas reserves in our country has fundamentally shifted our energy landscape. 

A decade ago it seemed inevitable that the United States would 

become a major importer of natural gas, yet today we are the 

world’s leading producer of natural gas, with over 100 years of supply of natural gas right here at home. We have made great strides 

in turning down the curve of petroleum imports through increased 

domestic petroleum production and landmark fuel economy standards for light-duty vehicles. 

But energy security means more than reducing our petroleum 

imports below the 50-percent mark. In past decades, we have successfully reduced or virtually eliminated petroleum use in other 

sectors, such as in electrical generation and in home heating. Yet 

our transportation sector depends on petroleum for 94 percent of 

its primary energy. 

Our singular dependence on oil for transportation fuel makes us 

vulnerable to economic and national security risks. Every American 

recession over the past 4 decades has been preceded by or occurred 

concurrently with an oil price spike, including the most recent. 

Our armed forces expend enormous financial and human resources ensuring that oil transit routes remain open and critical infrastructure is protected. Our relations with foreign governments 

are too often influenced by our need to minimize disruptions to the 

flow of oil. 

The path that we are on is not sustainable, and it is not smart. 

The smart path forward includes diversifying our transportation 

energy mix and seeking to displace high-cost imports with lowercost domestic alternatives. Greater use of natural gas as a transportation fuel delivers on both of these objectives. While natural 

gas provides 24 percent of the primary energy used to drive our 

economy, only 0.1 percent is currently being used for transportation. 

Natural gas has tremendous potential for the transportation sector, and many nations are ahead of the United States in grasping 

this opportunity. There are currently over 18 million natural gas 

vehicles in use worldwide today. That is up from over 4 million 

over a decade ago. Yet only about 150,000, less than 1 percent of 

the global total, are on U.S. roadways. 

13 

There is good news, however, and this is that the market is recognizing that switching from gasoline to diesel to natural gas, as 

has been discussed by other witnesses today, can mean significant 

costs savings. Major fleet operators, like Swift Trucking, obviously 

UPS, Waste Management, Verizon, Ryder, and many others are 

switching to natural gas vehicles because of the business case that 

is obviously there. 

But good policy choices can support the adoption of natural gas 

vehicles by leveling the playing field with other fuels. Currently, 

liquefied natural gas is taxed at a higher rate than the diesel fuel 

it competes with, working against NGV adoption in the heavy 

truck market. Resetting the tax rate so that it is applied on an 

energy-content basis is a common-sense measure that would remove an artificial barrier from the market. 

The alternative fuels tax credit should also be reset to apply on 

an energy-content basis for natural gas fuels like LNG and CNG 

and for all other alternative fuels. Weight restrictions on trucks 

using natural gas also work against NGV adoption in the heavytruck market because of the weight of storage tanks and the lower 

energy density of the fuel compared to a diesel. To comply with 

Federal highway weight restrictions, NGV operators must compensate with smaller payloads. Allowing an adjustment for these 

vehicles would remove an unfairly imposed market disadvantage. 

As this market continues to grow, natural gas utilities will play a 

key role in supplying the fueling infrastructure needed to support 

these vehicles. 

The gas utilities in our membership maintain over 2 million 

miles of natural gas distribution pipelines nationwide. This distribution network means that we can place compressed natural gas 

fueling stations around the country without the need to truck that 

fuel. Currently, there are over 1,400 compressed natural gas stations in the United States, and many of these are owned and operated by our gas utilities. 

Natural gas utilities like Questar can help greatly in building a 

national fueling infrastructure for natural gas vehicles. Working 

with their regulators, a number of natural gas distribution companies are exploring many innovative methods for supplying this gas 

infrastructure for participation in this market. 

Research to develop affordable, reliable home refueling for natural gas vehicles could greatly expand the appeal for natural gas 

vehicles to residential customers. As that technology matures, companies again, like ours and others, will be involved in ensuring the 

safe and reliable operation of home-refueling appliances, just as we 

have ensured safe and reliable natural gas services to homes and 

businesses today. 

The attractive price of natural gas is creating momentum in the 

market that is translating into growth in our fueling infrastructure 

for natural gas vehicles. Since 2008, the number of CNG stations 

has grown by over 11 percent per year. This sustained growth has 

occurred even as we have weathered one of the worst economic recessions our Nation has seen in decades. 

Our domestic abundance of natural gas and the fact that, unlike 

petroleum, its price is not set on a global market, means that we 

are likely to see low and stable prices for natural gas for many 

14 

years to come. To stay on the smart path forward, we need policies 

that help us sustain the momentum we are seeing in the adoption 

of natural gas vehicles and fueling infrastructure. The most important component of this is maintaining a level playing field that allows natural gas vehicles to compete fairly in the market. 

Developing the market for natural gas vehicles enhances our energy security and our competitiveness and encourages the expansion of transportation fueling infrastructure and technological advances. The American Gas Association, with member companies 

like Questar, urges the Congress and appreciates what you are 

doing in regards to this important issue. 

Senator BENNET. Thank you very much, Mr. Jibson. 

[The prepared statement of Mr. Jibson appears in the appendix.] 

Senator BENNET. Mr. Kassel? 

STATEMENT OF RICH KASSEL, SENIOR VICE PRESIDENT, EAST 

COAST OPERATIONS, GLADSTEIN, NEANDROSS, AND ASSOCIATES, NEW YORK, NY 

Mr. KASSEL. Chairman Bennet, Ranking Member Cornyn, members of the committee, thank you for the opportunity to testify 

today. My name is Rich Kassel, and I am a senior vice president 

with Gladstein, Neandross, and Associates or GNA. 

For more than 20 years, GNA products around the country have 

helped to demonstrate the feasibility of natural gas vehicles. More 

personally, I have been involved with natural gas vehicles since the 

mid-1990s when I was working with the Natural Resources Defense Council and we put together a project to bring hundreds of 

natural gas buses to New York City. 

For more than 30 years, I have worked in a variety of capacities 

to reduce emissions from vehicles across a range of fuels and vehicle types. From this work, we know that natural gas vehicles can 

provide clean, safe, cost-effective transportation, while reducing our 

dependence on oil and creating American jobs. 

In my remarks, I am going to limit my focus to the air quality 

and the energy side of this discussion. But in brief, as we have already heard, here is the challenge: converting operations to natural 

gas pairs up-front capital costs with considerable savings in fuel 

costs. For many fleets, these up-front costs are a barrier that keeps 

them invested in older, dirtier diesel trucks. 

All new truck engines are at least 90 percent cleaner than the 

ones they replace, regardless of the fuel they use. So our main challenge is to create mechanisms that accelerate the replacement of 

today’s legacy fleet of roughly 7 to 8 million so-called ‘‘dirty diesels’’ 

with cleaner engines in the most cost-effective manner possible. 

We will not be able to use natural gas everywhere cost effectively. We know that. But using natural gas in those niches where 

it is most cost-effective to do so will reduce costs for operators and 

thereby accelerate the overall cleanup of our transportation sector. 

Switching to natural gas tends to be most cost-effective, as you 

have already heard, as the engine gets larger or its fuel consumption goes up. Thus, the most cost-effective natural gas applications 

are found among truck and bus fleets that use a great deal of fuel 

or in high-horsepower applications like mining and locomotives and 

marine engines. 

15 

From an air quality and an energy perspective, this approach 

also yields the greatest benefits. I would like to share with you a 

couple of quick examples. On the energy side, switching to natural 

gas for a long-haul truck can displace 20,000 gallons of diesel fuel 

each year. Using it in a locomotive can displace 250,000 gallons 

each year. Using it in a ferry vessel can displace 800,000 gallons, 

more than 40 trucks, in a single year. And converting a small container ship to liquefied natural gas or LNG can displace more than 

35 million gallons of fuel each year. That is a lot of petroleum displaced. 

In a moment, you will hear about renewable natural gas or RNG. 

RNG moves us off of fossil fuels entirely and emits 90 percent less 

greenhouse gases than diesel. That is the energy side. 

Now I would like to shift to the air quality perspective and provide a few examples there as well. A recent California and West 

Virginia University study found that natural gas trucks used in 

port drayage—one of the areas of most concern about dirty diesels—emitted 91 percent less smog-forming nitrogen oxide emissions than comparable trucks. Just to be clear, these are diesel and 

natural gas trucks that are certified at the exact same emission 

levels by the EPA in the State of California. What happens in the 

real world, as this study shows, is that the natural gas trucks in 

real hard-duty applications, are emitting much less nitrogen oxides. 

Second example: by 2017, we should see new direct-injection 

technologies that will enable natural gas engines to meet not only 

EPA’s upcoming Tier 4 emission standards, but also create the potential for up to 25 percent lower greenhouse gas emissions. 

Third example: container ships and cruise lines are increasingly 

looking at liquefied natural gas as a significantly less expensive 

way to comply with the fuel and emission requirements of the 

emission control area that is being put into effect on our coastlines. 

With LNG currently roughly 25 to 35 percent lower than diesel on 

an energy-equivalent basis—that is about $1 a diesel gallon equivalent—we can see why there is so much interest in the marine sector in liquefied natural gas. In fact, there are 19 different projects 

around the country that are investing in LNG on the marine side. 

Fourth and last, natural gas engines are already on the path to 

meeting California’s optional low NOX emission standards for highway truck and bus engines. These are engines that will be up to 

90 percent lower than even EPA’s cleanest in the world standard. 

To put it into perspective, these are what we call in our world 

‘‘power plant equivalent emissions levels.’’ In other words, they are 

competitive with what we see from fuel cell vehicles and electric vehicles, yet with the mileage range and the cost-competitiveness of 

natural gas that we do not yet see on the fuel cell and electric side. 

These are the kinds of numbers that are necessary for sustainable, 

cost-effective goods movement. 

To close, at GNA we believe that well-framed tax policy, such as 

basing the highway excise tax on the energy content of the fuel, is 

necessary—as Senator Cornyn said in his opening remarks—to conform our tax policy with our energy policies. Taking these kinds of 

steps can help end-users accelerate the positive return on their investments, and they are going to be more likely to make those investments. 

16 

That is great for individual companies for sure, but from a broader perspective, doing so will accelerate the overall cleanup of the 

transportation sector, the legacy fleet of 7 to 8 million dirty diesels 

that are still out there. Doing so will translate into increased economic benefits, increased energy security, reduced oil consumption, 

and less air pollution for everybody. 

Thank you for the opportunity to testify. 

Senator BENNET. Thank you, Mr. Kassel. 

[The prepared statement of Mr. Kassel appears in the appendix.] 

Senator BENNET. Mr. Clay, you are going to bring us home here. 

The testimony has just been excellent. Thank you. Not to put any 

pressure on you. [Laughter.] 

STATEMENT OF HARRISON CLAY, PRESIDENT, 

CLEAN ENERGY RENEWABLE FUELS, NEWPORT BEACH, CA 

Mr. CLAY. Mr. Chairman, members of the committee, thank you 

for inviting me to testify before you today. I work for Clean Energy 

Fuels. We are the largest LNG and CNG fuel provider in North 

America today. 

Within Clean Energy, I am responsible for leading our efforts to 

produce and sell renewable natural gas, or biomethane, that is derived from the decomposition of organic waste such as that found 

in landfills or in wastewater treatment plants. 

By fully utilizing the enormous natural gas resources that are 

just below our feet and developing the inexhaustible potential of renewable natural gas, this Nation has the building blocks for a 

cleaner, greener future with more jobs and opportunities, less reliance on foreign oil imports, and a healthier environment than we 

have seen in generations. 

Natural gas is an increasingly important vehicle fuel for heavyduty trucks, taxis, transit vehicles, airport shuttles, and fleets. 

Clean energy fuels fleets at airports and cities across the country, 

and we have built a network of fueling stations within 43 States 

to allow heavy-duty trucks to travel coast-to-coast fueled entirely 

by natural gas. 

We have also innovated in renewable natural gas. Renewable 

natural gas is the only alternative fuel available in commercial 

quantities today that can meet 100 percent of the fuel requirements of an 18-wheeler, achieve a 90-percent reduction in greenhouse gas emissions, compared to diesel, leverage existing infrastructure, and be cost effectively sold at a substantial discount to 

current diesel prices. 

We have a branded biomethane vehicle fuel product we call Redeem. We are the largest producer and marketer of renewable natural gas as a vehicle fuel in North America. We sold 14 million gallons last year. We expect to sell 20 million this year and 45 million 

next. 

When the EPA classified renewable natural gas as a cellulosic 

biofuel earlier this year under the renewable fuel standard, it was 

really a game changer for us and our industry. It is really an important program for those of us producing low-carbon alternative 

fuels, and I am asking that you ensure the long-term viability of 

the renewable fuel standard. Any efforts to gut it will derail the 

17 

promise of viable fuel solutions like Redeem that are just coming 

to market today. 

Bringing stability to the RFS and the Renewable Identification 

Number market will spur further development with a commitment 

to long-term investment and innovation. I urge every member of 

the committee to consider standing up for what is becoming an 

amazing opportunity for our Nation’s energy future. I also believe 

that adopting a performance-based, technology-neutral renewable 

energy tax incentive would be a game changer. 

We recognize the importance of current and expired tax incentives to our businesses. We believe that a permanent long-term incentive can provide the kind of business certainty that would supercharge the industry. 

In addition, correcting the highway excise and fuel tax treatment 

of LNG and addressing other barriers currently hindering LNG 

adoption are important. LNG competes directly with diesel in 

heavy-duty vehicles. The Federal highway excise tax credit on diesel and LNG is set at 24 cents per gallon. LNG effectively pays 170 

percent of the diesel rate, since it has less energy per liquid gallon. 

This applies to every gallon of Redeem LNG we sell as well. 

So our renewable, low-carbon, domestically produced, and cleaner 

fuel is being taxed at a higher rate than diesel. The proposal we 

support, promoted by Senators Bennet and Burr, would change the 

excise tax on LNG so that it is imposed on the energy content of 

a gallon of diesel fuel or a diesel gallon equivalent. 

There is also the Federal highway excise tax credit of 12 percent 

on heavy-duty trucks and tractors and interstate weight limits, 

both of which put LNG and Redeem-powered heavy-duty trucks at 

a competitive disadvantage compared to diesel-fueled counterparts. 

We are asking for a level playing field for LNG, whether it comes 

from renewable or conventional natural gas, and we appreciate the 

leadership that so many of you have shown to address it. 

Lastly, I want to stress the importance of enacting a retroactive 

reinstatement and expansion of the expired alternative fuels tax 

credit as well as the alternative fuel vehicle refueling property 

credit. These important infrastructure and alternative fuels tax 

credits provide critical incentives for individuals and businesses to 

increase their use of natural gas as an alternative transportation 

fuel. Both of these provisions were proposed for retroactive reinstatement, as well as extension, in Chairman Wyden’s EXPIRE Act 

of 2014 and the Bridge to a Clean Energy Future Act of 2014 in 

the House. 

We joined more than 30 others, from the American Trucking Association and Cummins Westport to UPS and Waste Management, 

to ask for consideration of the LNG fix and several tax-based actions in a recent letter that I hope you will consider, which was included with my written testimony. 

Congress has a key role to play in ensuring that the journey that 

we have started, leading to a cleaner future using domestic renewable energy, does not get derailed. I hope you will consider taking 

action on these important regulatory matters, tax incentives, and 

extensions, as well as addressing the technical corrections I have 

outlined. 

18 

Thank you for your leadership in the area and the time and attention you have dedicated to it. I will be more than happy to answer any questions or provide any further information you might 

need. 

Senator BENNET. Thank you, Mr. Clay. 

[The prepared statement of Mr. Clay appears in the appendix.] 

Senator BENNET. Thank you, again, to all of the witnesses for 

your great testimony. It is down to the two of us, and we are going 

to go in 5-minute rounds. Thank you, Senator Cornyn, for hanging 

in there. 

I think what is clear, if you listen to this, is that there is a revolution going on out there, the beginnings of one anyway, that 

American entrepreneurs are figuring out how to invent the future 

when it comes to driving our fleets. But there are some things Congress can do to help along the way to create an ecosystem that 

actually gets us to a place where maybe we can get off refined petroleum imported from other places and on to our own cleanerburning natural gas. 

In that spirit, I would like to start with you, Mr. Jibson. You 

mentioned in your testimony that other countries have moved 

ahead of where we are in terms of their implementation of natural 

gas as a transportation fuel. I wonder if you could talk a little more 

about that: the conditions that have allowed that to happen and 

what you think the hang-up has been here. 

Mr. JIBSON. Yes, thank you, Chairman Bennet. I appreciate the 

question. 

I think it is something that we have wrestled with for a long 

time. I think it has a lot of dynamics associated with it. Back in 

the mid-1990s, when we were starting to see more vehicles being 

converted to natural gas, I think we were keeping up a little bit 

better at that time with the rest of the world. 

What we saw was that engines became very model-specific, very 

computerized, requiring specific kits for each engine. We also, I 

think, had a time period there where we saw gasoline prices being 

much lower, and I think, as a Nation, we probably did not see the 

need to go to smaller vehicles or more efficient-type vehicles. That 

is, obviously, open for debate, but I think at that point, we saw a 

lot of different models of vehicles being introduced throughout the 

world, certainly in South America, Europe, and some other countries, where economics was emphasized more, but also there was 

the willingness to have a smaller-type vehicle. 

I think that is the point where we started to see that divergence, 

and we are now seeing that turn around. I think, as far as the 

growth we are seeing in the U.S., including infrastructure as well 

as the move to natural gas by so many tremendous companies that 

you have heard from today and referenced today, that we are starting to obviously catch up. 

But I think cost is a big issue. I talked about home refueling 

units. In other parts of the world, we are seeing home refueling 

units in the $1,000 to $1,200 range. That is making it more possible for those personal vehicles. 

I also think air standards, other things maybe, are of greater importance than they are in the U.S. I think that has also fueled that 

conversion. 

19 

Senator BENNET. Thank you. Mr. Whitlatch, you were kind 

enough to mention the bill that I have with Senator Burr that 

would tax natural gas and diesel by energy content instead of by 

volume. I wonder if you could talk a little bit about what that 

would mean economically to UPS or to others in your industry and 

what kind of effect that might have on the adoption of vehicle technology across the country. How big a deal is it? 

Mr. WHITLATCH. Sure. So I think we heard that a Class 8 vehicle 

can burn 20,000 gallons-plus of fuel per year. So, if you do the 

math, and, at the end of the day, you are operating a fleet of, say, 

1,000 Class 8 vehicles, that is 20 million gallons of fuel. A 17-cent 

conversion on that is almost $4 million—$4 million to the bottom 

line just in excise tax when compared to diesel. 

So when this scales, you can see this is a recurring tax forever. 

So, getting back to your leadership on this bill here, this equalizes 

this and makes it on parity with diesel fuel, which is what we 

need. 

Senator BENNET. I will turn it over to you, Senator Cornyn. 

Senator CORNYN. Well, thank you all for your testimony. This 

has been very encouraging, but it seems to me—and I would like 

to have you comment on this—it boils down to four different points. 

I would like to get your advice, because I think this is something 

we are going to need your help to figure out. 

First of all, these vehicles are more expensive than traditional 

diesel vehicles, and the question is, do the advantages of natural 

gas provide enough benefit to the owner of the vehicle that they are 

going to pay the extra money without some additional help from 

the Federal Government in terms of tax credits and subsidies? I 

know when the Pickens Plan was being proposed, that was one of 

the hang-ups because, frankly, while everybody thought it was a 

good idea, at the same time that we are talking about flattening 

the tax code and doing tax reform, we are, on the other hand, talking about adding additional credits and subsidies. 

The second thing is, obviously, there need to be refueling stations. I was interested, Mr. Jibson, in what you had to say about 

the role of natural gas utilities and the capacity there. 

Third, we basically have a tax code problem that I alluded to a 

moment ago, and, of course, every tax deduction, subsidy, and the 

like essentially comes from the taxpayer. And when you start 

thinking about tax expenditures with our $18 trillion in debt, you 

can see how this starts to get to be pretty complicated. 

And then there is the Highway Trust Fund. If we do what Mr. 

Whitlatch and Senator Bennet have proposed, it cries out as a fair 

resolution, but at the same time, that is less money going into the 

Highway Trust Fund, which is already operating at a deficit. 

Maybe you will start, Mr. Clay, and I will give other people a 

chance to comment, but you mentioned a performance-based, 

technology-neutral tax policy, and that that would be a game 

changer. What would that look like? 

Mr. CLAY. We would be supportive of something comparable to 

what Senator Baucus introduced, last year I believe. That was a 

really, I thought, interesting idea. It provided long-term incentives 

for renewable energy production—without regard to whether it was 

solar, wind, or biofuels—entirely based on the performance, based 

20 

on the greenhouse gas emission reductions that that particular renewable fuel or energy would provide. 

And we have something comparable to that in California with a 

low-carbon fuel standard as a technology-neutral, performancebased carbon credit generation program, which I think is very effective. It really gets the government out of the game of trying to 

figure out what the solution will be, but rather just saying, these 

are the qualities of the renewable energy that we want to incentivize, whether it is reduction of carbon or fuel diversity or moving 

away from petroleum, to get to more domestic fuel sources. We can 

set those kinds of guidelines out there and then let the industry 

figure out what the most cost-effective solution is. 

A perfect example is what we produce: biomethane. It was not 

even on the radar when the renewable fuel standard was put together 5 years ago, and now we are the largest generator of cellulosic biofuel RINs by a wide magnitude of any biofuel. That was 

not something anyone anticipated, but it is something we have 

been able to accomplish. 

I think that incentivizes the industry. And programs that do not 

pick the fuels but rather provide technology-neutral incentive programs are the most effective in stimulating that kind of activity. 

Senator CORNYN. Mr. Whitlatch, do companies like UPS need tax 

benefits to make this commercially viable? 

Mr. WHITLATCH. Yes. I think you saw in our prepared remarks 

that incentives have played a key role in the initial adoption. I 

think what we would like to stress is that, when you have a new 

technology, getting to scale, getting to the tipping point, is absolutely critical. 

I think what you have seen with the folks on this panel is, when 

you have incentives, they can make a marginal business case attractive. Once you get to that level of scale, it brings the cost down 

for everyone across the board. Infrastructure comes down, cost per 

unit comes down, which leads to widespread adoption, which leads 

to greater scale. 

So initially we believe, like any other alternative fuel that we 

have seen, you need to have some sort of incentives, and they do 

help. You get to scale. It is just a matter of how you achieve that. 

Senator CORNYN. I was smiling as you were making those remarks. I agree with your analysis. The problem Congress has is, 

for example, in the case of the Production Tax Credit for wind, I 

think it is 20 years old, and we are still having a debate about 

whether this is a mature enough industry to not require Congress 

to provide additional subsidies. We all see the benefits of it, but 

that is the challenge. 

Mr. Carrick, let me just close with you, in the time I have, and 

just ask, in terms of your business and producing these engines 

and these trucks, how critical is the tax treatment? 

Mr. CARRICK. Thank you for the question. It is a very good one 

and there are a lot of different answers to it. 

Senator CORNYN. Okay. 

Mr. CARRICK. Our customers today that we are selling larger volumes of product to, like UPS—and I could go down a list of them— 

probably 80 percent of them have installed their own fuel stations 

and operate in applications where they are running very high mileVerDate Mar 15 2010 17:43 Jul 13, 2015 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 R:\DOCS\94819.000 TIMD
21 

ages, turning the vehicles 100,000 to 200,000 miles a year, burning 

a lot of fuel, and they are making this work. They are making this 

pencil out. 

So where incentives may be needed or tax credits may be needed 

is with the smaller customers; 30,000 miles a year beverage distributors want to be green but cannot afford to because they do not 

burn enough fuel to make the return on investment. When we meet 

with CFOs in these different companies, they do very, very extensive business plans to make sure that this is going to work for 

them. 

The 50-cent tax credit, if you look at that—these CFOs want certainty. I think Senator Wyden brought that word up. It is a great 

word. They want certainty. What is this 50 cents going to entail? 

Is it going to be here for the next 3 years, or is it going to be here 

for a year and they might get something retroactive? So really 

what we need to do is—we certainly appreciate what is going on 

right now and the chance of getting it extended—if we could come 

out with a plan that was 3 years in duration and said, until 2018, 

you have this, I think it would make a remarkable difference in 

some of the adoption rates of some of these big fleets. 

Senator CORNYN. Okay. 

Senator BENNET. Thank you, Senator Cornyn, very much for 

being here. 

I just have a few more questions, although I want to say, for the 

record, that the bill I have with Richard Burr is not one that would 

create a tax credit for anything. What it is doing is removing a disincentive that is making people make a choice they would not make 

if the Congress were allowing the market to work properly. And 

that is what we are trying to do. We are going to get through it 

one of these days, but, in the meantime, you are going to have to 

stick with us. 

Mr. Calabrese, would you talk a little bit more about the development of the fueling infrastructure in the Cleveland Transit Authority and how your decisions would have been different—this is actually apropos the conversation we were just having—if the alternative fuels tax credit for natural gas financing had not been in 

place? 

Mr. CALABRESE. Yes, thank you. When I went from New York to 

Cleveland in 2000, Cleveland really had a CNG-only policy on diesel buses and full-size transit buses. When we looked at that—we 

had about 400 buses that needed to be replaced—I just could not 

come up with the money to replace the diesel buses with CNG 

buses because, number one, it was $70,000 additional per unit and, 

number two, because of the additional infrastructure costs we 

would incur. 

So I really went to my board and said, ‘‘We really cannot afford 

this.’’ We went away from CNG back to diesel because I felt that 

the best thing we could do as an organization was to be sustainable, and the best thing we could do in terms of sustainability was 

to put as much high-quality public transit on the road as possible, 

as opposed to a cleaner versus a less-clean bus. 

So we went away from it. The bottom line is, what I said to the 

community was, at a time in the future when the incentives were 

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22 

tial cost between the CNG and diesel buses had come down, we 

would reevaluate that. 

That is what we did 2 years ago. Part of that evaluation was the 

alternative fuels tax credit, and we made the decision to go back 

to CNG in a very big way. Number one, the tax credit was important. Number two, the cost of diesel fuel had risen significantly 

from 2002 to 2012. We did the analysis, and Mr. Clay’s organization helped us with the analysis, by the way, really to make the 

decision. 

And that tax credit was a very important piece of it, not just for 

us, but for my counterparts in the industry. I think that credit is, 

in many cases, a deciding factor. 

Senator BENNET. So how do you think your counterparts in the 

industry are thinking about this now? 

Mr. CALABRESE. Well, I think that the American Public Transportation Association in a very strong way is supporting the continuation. When we make a decision to buy a CNG bus, that is 

probably a 14-year decision, so that consistency and continuity, I 

think, are very important. I think there are a number of people in 

my industry who are waiting on the fence right now to see if that 

tax credit is there and makes it financially worthwhile to go ahead 

with the increased cost of the vehicle and the increased costs necessary for the fueling infrastructure. 

Senator BENNET. Thank you. Mr. Kassel, could you talk a little 

bit more, elaborate a little bit about the technological changes that 

you are seeing in these engines? I was curious about that, just because that also is going to contribute to adoption rates, I think, 

going forward. Do you think, ultimately, this could end up going as 

far as passenger cars? You had mentioned railroads and marine 

craft as well. Where are we on the technology curve, and what does 

the future look like? 

Mr. KASSEL. I think there are three different things going on 

that I would like to touch on. The first is, we are in a moment 

where there is finally some regulatory certainty in some of these 

high-horsepower applications that is driving investment in new 

technologies, whether it is high-pressure direct-injection for large 

natural gas engines or other technology pathways that companies 

are taking on. What is driving it is, on both the locomotive side and 

on the marine side, there is regulatory certainty. 

So on the marine side, we now are implementing the emission 

control area, which requires low-sulfur fuels and much lower emissions from ships. We are essentially going from a world of 35,000 

parts per million sulfur bunker fuel and no emission controls to a 

world of a low-sulfur distillate fuel combined with some form of 

scrubbers or selective catalytic reduction or LNG. 

So that regulatory certainty is driving everybody to say, ‘‘How 

am I going to comply? What is the most cost-effective way for me 

to do that? And I am going to have to invest in something, so what 

will I invest in?’’ 

It changes completely the analysis from where the shipping industry would have been, which is: we have our stock. We are continuing to use it for as long as we were going to use it, and we are 

not looking to make major capital investments. Everybody has to 

do something because of this. What will they do? 

23 

On the locomotive side, it is the EPA Tier 3 regulations that, 

again, are driving towards much, much cleaner low-sulfur fuels and 

emissions that are 90 percent or more, depending on the pollutant, 

lower than where they are. That gets the operators to say, ‘‘What 

am I going to do?’’ That, in turn, gets the engine makers, everybody 

involved in the chain of companies that produces the locomotive or 

a piece of mining equipment or a ship, to ask, ‘‘How are we going 

to provide what our customers need, which is a fuel-efficient vessel, 

an energy-efficient vessel, that meets these standards and is costeffective?’’ 

With car buyers, we buy our cars because we like the car. Most 

people do not walk in to the dealer and say, the only thing I care 

about is energy efficiency or the lifetime fuel costs of my vehicle. 

In the trucking sector, in the mining sector, in locomotives and marine applications, we are talking about asset turnover that is very, 

very slow and companies and operators that are facing that sort of 

life cycle. 

So regulatory certainty is number one. That is what is driving 

it. 

Two is, of course, the race to figure out how you create a product 

that is going to meet not just the regulatory goals, but the operating goals of your customers, which include maintenance and durability and low cost of energy, because, after all, energy is a huge, 

huge variable. Think of a container ship; there are not a lot of 

labor costs, but there are a lot of fuel costs. So I think that is the 

second attribute. 

I think the third is, really, that the word is getting around. When 

we did a study recently of what is happening in the marine sector, 

we looked at 19 different projects around the country. And really, 

wherever you are in that sector, if you are operating ferries, if you 

are operating cruise ships, if you are operating container vessels, 

if you are operating dry bulk vessels in the Great Lakes, you can 

save a million dollars a year by converting, so everybody is looking 

at these different issues. I think that is what is really driving it. 

Senator BENNET. Mr. Carrick, do you have anything you would 

like to add? You talked about potential game-changing technology 

changes. 

Mr. CARRICK. Well today, on the transportation side, there really 

is nothing new on the horizon. There is no silver bullet. Cummins 

just came out with the 12-liter engine. It came out about a year 

ago and has made a big change in the applications we were able 

to take from a 9-liter engine to a 12-liter engine, which is now up 

in the 400 horsepower, 1,450 torque range, which is required by 

most heavy customers. 

So they were looking at a 15-liter engine. They put that on the 

back burner for the time being, and I think it is really because the 

adoption rate has slowed down. It is still growing at about 40 or 

50 percent a year, which is not bad except that it is from a very, 

very low base, and, until we start to get more adoption of these vehicles, I do not think you are going to see any engine manufacturers step in at this time. 

Senator BENNET. So that is the problem of scale that we talked 

about earlier? 

Mr. CARRICK. That is right. 

24 

Senator BENNET. I have two more questions, and we are done— 

one for Mr. Whitlatch and one for Mr. Clay. 

UPS’s commitment to this has been really very strong, and you 

had to make a business case—or somebody had to make a business 

case—to build the infrastructure that is required. A lot of the fueling stations are yours, right? They are not commercial. There are 

more than 1,100 natural gas fueling stations in the United States. 

In Colorado, we have 21 compressed natural gas fueling stations, 

which is obviously a tiny number compared to more than 100,000 

traditional gas stations across the country. 

So could you talk a little bit about your approach, why it made 

sense in your context, if it did, and then any other thoughts you 

have about our trying to get to scale, other than the stuff we have 

already talked about? What have we left out? 

Mr. WHITLATCH. I think you have covered it. From our perspective, we are kind of in a unique situation. We have a very large 

home base where we domicile vehicles, and those vehicles go out 

and they drive a lot of miles and they come back to the same refueling point. So for us, we have a very captive network. 

So you asked how we got there. It is really based upon the cost 

of the technology, the spread of the fuel prices, and how many 

miles do you run it. So in our case, how we make it pencil out is— 

and we do make it pencil out—it makes absolute sense for us to 

do this. We run a lot of miles, and we refuel back at one main station. And for us, that allows us to amortize the cost of this over 

that network. So having a captive network is one of the keys, as 

is running lots of miles and having the right equipment density to 

do that. 

So we are fine. We are finding LNG works. Now we will see 

where CNG works. In our network, our scale allows us to do that 

and for it to pencil out. 

Senator BENNET. Mr. Clay, you have a very different kind of network that you are thinking about, including a station at Denver 

International Airport. 

Mr. CLAY. Yes. 

Senator BENNET. Can you talk about that and what that buildout 

looks like? 

Mr. CLAY. Sure. So we supply renewable natural gas to clean energy stations, and the decision to build those stations is somewhat 

independent of the buildout of our renewable and natural gas production facilities. 

As a company, when we are looking to build CNG or LNG stations, typically what we look for is an anchor tenant. So we will 

go out and build a station anywhere where there is a fleet that is 

willing to commit to convert their vehicles over time to run on natural gas and has enough fuel demand to justify the capital investment in the station so that we can get a minimal level of capital 

return on that station. 

Then, over time, we market the availability of that station to 

other fleets in the area and build demand on the station. So today, 

our most successful and largest sales stations are three that we 

have at the Los Angeles International Airport, at LAX. We sell 

20,000 gallons a day from those facilities to shuttles and fleets, but 

it sure did not start out that way. 

25 

We had to go out and find the customers, create programs for 

them to finance vehicles, and look for creative ways to get them 

into natural gas vehicles that could fuel at those stations. With the 

over-the-road trucking—— 

Senator BENNET. What kind of customers are those? 

Mr. CLAY. So it is typically return-to-base fleets; high fuel consumers are really the kind of customers you are looking for, people 

who purchase a lot of gas because they are going to get the most 

economic benefit, produce the most environmental benefit, per customer. If you look at a heavy-duty truck burning 20,000 gallons a 

year, versus a passenger car burning 500, it is pretty clear you can 

get a lot more bang for your buck building a station for 20 heavyduty trucks than trying to build one for the passenger car market. 

So it is high fuel consumers, return-to-base fleets where they can 

fuel at one centralized fueling infrastructure. So airports are great 

markets for us. The station you see in Denver has fueling for taxis 

that come to the airport regularly, airport shuttle buses, airport 

service vehicles, small trucks, those kinds of light-duty and 

medium-duty refuse trucks, which are another great market for us. 

This year, 60 percent of the trash trucks that will be bought in 

North America will run on natural gas. It is perfect for refuse 

trucks. They are return-to-base fleets, they can fuel overnight, they 

can get enough fuel onboard to run their route during the day, and 

they can see significant savings on the fuel that they are buying. 

Senator BENNET. When I interrupted you, you were going to—— 

Mr. CLAY. With the over-the-road trucks in the long-haul trucking industry, we did, as a company, make a decision to go out and 

vary from our usual strategy of building stations only where there 

was already a committed customer or one that would be at that 

station. We went out and did build those stations for LNG and 

CNG heavy-duty trucking because we felt, with the introduction of 

the Cummins Westport 12-liter engine and the availability of that 

vehicle, that in order to get those vehicles out on the road, somebody had to build the stations. 

We had to kind of solve the chicken-and-egg question. So we did. 

We went out and built the stations to enable over-the-road trucks 

to run from coast to coast fueling on natural gas. 

Senator BENNET. Thank you, everybody. I really appreciate the 

thoughtfulness. The testimony will help us as we try to make the 

case moving forward. 

I am also a strong believer that we ought to be moving toward 

technology-neutrality in our tax code. How we do that and what 

that transition looks like is going to be very complicated, but I 

think it is essential that we do it, for a lot of reasons. 

One of the reasons is that, every time I hear somebody on the 

television say that the government should not pick winners and 

losers, that is when I hold onto my wallet, because they say it as 

if the government has not already made decisions to pick winners 

and losers. If you happen to be in the winning category, you happen to be an incumbent interest that earned something deep in the 

last century in our regulatory code, our tax code, that is great for 

you, but it is not great for innovation in this country. That is why 

I think this set of issues is so critical, beyond even the discussion 

of natural gas. 

26 

So I thank you all for what you do, for being here, for being willing to take time out to come here, and I give you an open invitation 

on behalf of the entire committee that, as we go forward, please do 

not be shy about coming to us with your ideas or suggestions for 

how we can actually get this stuff done. 

Thank you. We are adjourned. 

[Whereupon, at 3:50 p.m., the hearing was concluded.] 

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