Seven Democratic senators are challenging Treasury Secretary Scott Bessent over whether massive liquefied natural gas shipping vessels should receive tax incentives originally created for small watercraft that use alternative fuels.
The controversy centers on the Alternative Fuel Excise Tax credit, legislation signed into law by former President George W. Bush in 2005. The tax incentive was designed to reduce America’s oil dependency by encouraging smaller motorboats to switch to alternative energy sources including natural gas, propane, and LNG.
However, critics argue that giving these credits to LNG tankers defeats the original purpose. These enormous ships – which can stretch the length of three football fields – already use LNG that naturally evaporates during transport. Without burning this boiled-off gas, it would either be released into the atmosphere or converted back to liquid form.
“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 lawmakers wrote in their letter. The correspondence was signed by Senators Jeff Merkley, Elizabeth Warren, Chuck Schumer, and four additional colleagues.
The senators emphasized that federal regulations define motorboats as vessels under 65 feet in length – dramatically smaller than the massive LNG carriers currently claiming the credits.
Energy company Cheniere disclosed in February that it received a $370 million tax reduction for using the fuel in its LNG tankers. When contacted for comment, Cheniere declined to respond.
The Treasury Department has not yet provided a response to the senators’ concerns.
While Senate Democrats currently hold minority status and have limited legislative power, the political landscape could shift following November’s midterm elections.
