A bloc of Democratic U.S. senators pressed Treasury Secretary Scott Bessent on Tuesday over whether giant vessels transporting liquefied natural gas are eligible for an excise tax credit designed for much smaller boats that burn alternative fuels.
The lawmakers' inquiry centers on the Alternative Fuel Excise Tax (AFET) credit, enacted in 2005 under former President George W. Bush. The provision was intended to reduce U.S. reliance on oil by encouraging a transition among smaller motorboats to alternative fuels including natural gas, propane and LNG.
In their correspondence, the senators highlighted a key distinction they say undermines the policy rationale: many modern LNG tankers are engineered to consume LNG that boils off during transit. Because those vessels are designed to use that gas, critics argue, their fuel use does not represent a meaningful switch away from liquid marine fuels, such as bunker fuel. The boiled-off gas otherwise might be vented or recondensed back into LNG.
"Providing tankers with AFET credits would unnecessarily waste taxpayer money while doing nothing to protect the environment, reduce costs for everyday Americans, or lessen the United States' dependence on oil," the senators wrote.
Senators Jeff Merkley, Elizabeth Warren and Chuck Schumer, along with four other Democratic senators, signed the letter to the Treasury secretary.
The lawmakers noted that AFET was aimed at motorboats, a category some federal regulations define as under 65 feet long (20 metres) - a scale that contrasts sharply with LNG carriers, which can reach roughly the length of three football fields.
In February, Cheniere Energy disclosed receiving a $370 million tax break tied to burning LNG aboard its tankers. Cheniere declined to comment on the matter. The Treasury Department did not immediately respond to requests for comment.
The senators are in the minority in the Senate at present, which limits their immediate leverage, though the letter pointed out that chamber control could shift following the November midterm elections.
Context and implications
- The AFET credit was created to promote alternative fuel adoption by smaller recreational and commercial motorboats.
- Lawmakers argue that applying the credit to large LNG carriers departs from that purpose because those ships are already equipped to burn boil-off gas.
- The issue involves policy questions about the appropriate use of tax incentives, environmental outcomes, and federal spending.