March 2014 Motor Fuel Tax Update

Mar 28, 2014


Federal Motor Fuel Tax

President Obama’s FY2015 budget includes proposals related to two environmental taxes imposed on motor fuel and petroleum products that have become staples of his budget proposals. Neither of these proposals has made significant impact in Congress in previous years and it would not be expected that this year would be any different.

The first proposal is to increase the federal oil spill liability tax from $0.08 per barrel to $0.09 per gallon effective January 1, 2015 with a further increase to $0.10 per gallon effective January 1, 2017. Under current law, the oil spill tax is slated to increase to $0.09 per barrel on January 1, 2017. The oil spill tax proposal would also extend the tax to crude oil produced from bituminous deposits and kerogen-rich rock, both of which are currently exempt from the tax.

The second proposal is to reinstate the superfund tax effective January 1, 2014 through December 31, 2024. As with the oil spill tax the superfund tax would be extended to crude oil produced from bituminous deposits and kerogen-rich rock. The tax would be imposed at the following rates: $0.097 per barrel on domestic crude oil and imported crude oil; and from $0.22 per barrel to $4.87 per barrel on listed hazardous chemicals.

New Mexico

Effective July 1, 2014, New Mexico is increasing the fuel tax on CNG to $0.133 per gallon equivalent and on LNG to $0.206 per gallon equivalent. LPG will be taxed at the current rate of $0.12 per gallon. In the case of CNG, a gallon is equal to 5.66 pounds or 126.67 standard cubic feet of CNG. In the case of LNG, a gallon is equal to 6.06 pounds of LNG.

Additionally, effective July 1, 2014, there will be available a deduction from the generally applicable petroleum products loading fee for biodiesel that will subsequently be used for blending or resale by a “rack operator.” For these purposes, a “rack operator” is an operator of an in-state refinery or the owner of special fuel stored at a pipeline terminal within New Mexico. Biodiesel that is loaded in or imported into New Mexico, and then delivered to a rack operator for subsequent blending or resale by that rack operator, may be deducted from the gallons used to determine a load for purposes of calculating the petroleum products loading fee. The purpose of this deduction is to eliminate a double taxation problem whereby both pure biodiesel and blended biodiesel could be subject to the fee. A taxpayer that deducts an amount of biodiesel pursuant to this new provision must report the deducted amount separately with the taxpayer’s return.


Recently enacted legislation will allow users of CNG and propane to purchase a decal rather than pay the fuel tax at the pump when it is dispensed into the fuel tank of the vehicle. Decals will be optional and will be renewed annually. The legislation is set to take effect on July 1, 2015.