Seven Democratic U.S. senators have launched a probe into a $370 million “alternative fuel” payout to Cheniere Energy, made earlier this year by the IRS, that critics say the liquefied natural gas export company never should have received.
An earlier Inside Climate News investigation into the company’s push to get that tax credit for using LNG to power its tankers noted that such fuel is standard in the industry, not an alternative. The incentive is also intended for motor vehicles or motorboats, the latter of which are defined in federal shipping regulations as no more than 65 feet long. LNG vessels are typically 1,000 feet in length.
“We write to clarify whether the Internal Revenue Service has determined that companies using liquefied natural gas (LNG) for propelling LNG tankers qualify for credits under the Alternative Fuel Excise Tax (AFET),” the senators wrote to Scott Bessent, the IRS acting commissioner, on Tuesday. “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 investigation follows Cheniere Energy’s February announcement that it received a retroactive cash payment for using LNG as an alternative fuel in its export vessels prior to the credit’s expiration in 2024. The company is the largest producer and exporter of LNG in the United States.
Shipping experts and tax specialists questioned the tax credit when it was made public earlier this year, arguing that the money was never intended for LNG tankers.
President George W. Bush signed the alternative fuel excise tax credit into law in 2005. It incentivized the use of fuels other than gasoline and diesel for use in motor vehicles. The credit applied to the use of LNG and other alternative fuels “in a motor vehicle or motorboat.”
In their letter to the agency, the senators questioned whether the IRS “determined that LNG tankers are motorboats.” Also at issue is whether the use of LNG by an LNG vessel should be considered an alternative to other potential fuels.