Natural Gas Laws and Incentives in California
The list below contains summaries of all California laws and incentives related to natural gas.
Alternative Fuel Infrastructure Grant – Santa Barbara County
The Santa Barbara County Air Pollution Control District (SBCAPCD) provides grants for the installation of alternative fuel infrastructure located in Santa Barbara County. Grants may cover 80% of project cost, up to $150,000. Eligible projects include electric vehicle supply equipment, hydrogen, and natural gas fueling stations. For more information, including current funding opportunities, see the SBCAPCD Clean Air Grants website.
Alternative Fuel Vehicle (AFV) Incentives - San Joaquin Valley
The San Joaquin Valley Air Pollution Control District administers the Public Benefit Grant Program, which provides funding to cities, counties, special districts (such as water districts and irrigation districts), and public educational institutions for the purchase of new AFVs, including electric, hybrid electric, natural gas, and propane vehicles. The maximum grant amount allowed per vehicle is $20,000, with a limit of $100,000 per agency per year. Projects are considered on a first-come, first-serve basis. For more information, see the Public Benefit Grant Program website.
Alternative Fuel Vehicle (AFV) Technical Training - San Joaquin Valley
The San Joaquin Valley Air Pollution Control District (SJVAPCD) administers the Alternative Fuel Vehicle (AFV) Mechanic Training Program, which provides incentives of up to $15,000 to educate personnel on the mechanics, operation safety, and maintenance of AFVs, fueling stations, and tools involved in the implementation of alternative fuel technologies. For more information, see the AFV Mechanic Training Component website.
Alternative Fuel and Advanced Vehicle Rebate - San Joaquin Valley
The San Joaquin Valley Air Pollution Control District (SJVAPCD) administers the Drive Clean! Rebate Program, which provides rebates for the purchase or lease of eligible new vehicles, including qualified natural gas, hydrogen fuel cell, propane, all-electric, plug-in electric vehicles, and zero emission motorcycles. The program offers rebates of up to $3,000, which are available on a first-come, first-served basis for residents and businesses located in the SJVAPCD. For more information, including a list of eligible vehicles and other requirements, see the SJVAPCD Drive Clean! Rebate Program website.
Alternative Fuel and Vehicle Incentives
The California Energy Commission (CEC) administers the Clean Transportation Program (Program) to provide financial incentives for businesses, vehicle and technology manufacturers, workforce training partners, fleet owners, consumers, and academic institutions with the goal of developing and deploying alternative and renewable fuels and advanced transportation technologies. Funding areas include:
- Electric vehicles and charging infrastructure;
- Hydrogen vehicles and refueling infrastructure;
- Medium- and heavy-duty zero emission vehicles;
- Natural gas vehicles and refueling infrastructure;
- Biofuels; and,
- Workforce development.
Clean Vehicle Rebate - El Dorado County
The El Dorado County Air Quality Management District (EDC AQMD) offers rebates of up to $599 to residents toward the purchase or lease of a new zero emission vehicle (ZEV) or partial-ZEV, as defined by the California Air Resources Board. To qualify, vehicles must be owned or leased for at least three years within El Dorado County. For more information, see the EDC AQMD Grants and Incentives website.
Compressed Natural Gas (CNG) and Electricity Tax Exemption for Transit Use
CNG and electricity that local agencies or public transit operators use as motor vehicle fuel to operate public transit services is exempt from applicable user taxes a county imposes. (Reference California Revenue and Taxation Code 7284.3)
Employer Invested Emissions Reduction Funding - South Coast
The South Coast Air Quality Management District (SCAQMD) administers the Air Quality Investment Program (AQIP). AQIP provides funding to allow employers within SCAQMD's jurisdiction to make annual investments into an administered fund to meet employers' emissions reduction targets. The revenues collected are used to fund alternative mobile source emissions and trip reduction programs, including alternative fuel vehicle projects, on an on-going basis. Programs such as low emission, alternative fuel, or zero emission vehicle procurement and old vehicle scrapping may be considered for funding. For more information, including current requests for proposals and funding opportunities, see the AQIP website.
Point of Contact
South Coast Air Quality Management District
Phone: (909) 396-3296
Heavy-Duty Truck Emission Reduction Grants - San Joaquin Valley
The San Joaquin Valley Air Pollution Control District (SJVAPCD) administers the Truck Replacement Program, which provides funding for fleets to replace old vehicles with lower emitting vehicles or to purchase new zero emission, hybrid, or low oxides of nitrogen (NOx) vehicles. Funding is available for the following projects:
- Replacement of model year (MY) 2009 or older diesel trucks with new trucks that meet or exceed the 2010 NOx emissions standard;
- Replacement of MY 2010 or newer trucks with new zero emission, hybrid, or low-NOx trucks; and
- Purchase of new zero emission, hybrid, or low-NOx trucks.
High Occupancy Vehicle (HOV) and High Occupancy Toll (HOT) Lane Exemption
Compressed natural gas, hydrogen, electric, and plug-in hybrid electric vehicles meeting specified California and federal emissions standards and affixed with a California Department of Motor Vehicles (DMV) Clean Air Vehicle sticker may use HOV lanes regardless of the number of occupants in the vehicle. Effective January 1, 2020, DMV issues Clean Air Vehicle stickers to first-time applicants that have a household income at or below 80% of the state median income. Stickers are valid through the following dates:
- Red stickers issued on or after March 1, 2018, for a vehicle that had previously been issued a sticker between January 1, 2017, and March 1, 2018, expire January 1, 2022;
- Purple stickers issued between January 1, 2019 and January 1, 2020, expire January 1, 2023; and,
- Orange stickers issued on or after January 1, 2020, expire January 1, 2024.
Low Emission Truck and Bus Purchase Vouchers
Through the Hybrid and Zero Emission Truck and Bus Voucher Incentive Project (HVIP) and Low NOx Engine Incentives, the California Air Resources Board provides vouchers to eligible fleets to reduce the incremental cost of qualified electric, hybrid, or natural gas trucks and buses at the time of purchase. Vouchers are available on a first-come, first-served basis. Only fleets that operate vehicles in California are eligible. Voucher amounts vary depending on whether the vehicles are located in a disadvantaged community. For more information, including a list of qualified vehicles and other requirements, see the HVIP website.
Technology Advancement Funding - South Coast
The South Coast Air Quality Management District's (SCAQMD) Clean Fuels Program provides funding for research, development, demonstration, and deployment projects that are expected to help accelerate the commercialization of advanced low-emission transportation technologies. Eligible projects include powertrains and energy storage or conversion devices, including fuel cells and batteries, and implementation of clean fuels, including the necessary infrastructure. Qualified clean fuels include, but are not limited to, natural gas, propane, and hydrogen. Projects are selected via specific requests for proposals on an as-needed basis or through unsolicited proposals. For more information, see the SCAQMD Research, Development, Demonstration, and Deployment website.
Zero Emission Vehicle (ZEV) and Near-ZEV Weight Exemption
ZEVs and near-ZEVs may exceed the state's gross vehicle weight limits by an amount equal to the difference of the weight of the near-zero emission or zero emission powertrain and the weight of a comparable diesel tank and fueling system, up to 2,000 pounds. A ZEV is defined as a vehicle that produces no criteria pollutant, toxic air contaminant, or greenhouse gas emissions when stationary or operating. A near-ZEV is a vehicle that uses zero emission technologies, uses technologies that provide a pathway to zero emission operations, or incorporates other technologies that significantly reduce vehicle emissions. (Reference California Business and Professions Code 12725 and California Vehicle Code 35551)
Laws and Regulations
Alternative Fuel Tax
The excise tax imposed on compressed natural gas (CNG), liquefied natural gas (LNG), and propane used to operate a vehicle can be paid through an annual flat rate sticker tax based on the following vehicle weights:
|All passenger cars and other vehicles 4,000 pounds (lbs.) or less||$36|
|More than 4,000 lbs. but less than 8,001 lbs.||$72|
|More than 8,000 lbs. but less than 12,001 lbs.||$120|
|12,001 lbs. or more||$168|
Alternatively, owners and operators may pay an excise tax on CNG of $0.0887 per gasoline gallon equivalent (GGE) measured at standard pressure and temperature, $0.1017 for each diesel gallon equivalent (DGE) of LNG, and $0.06 per gallon of propane. One GGE is equal to 126.67 cubic feet or 5.66 lbs. of CNG and one DGE is equal to 6.06 lbs. of LNG. The excise tax on ethanol and methanol fuel blends containing up to 15% gasoline or diesel fuel is one-half the tax on gasoline and diesel prescribed by California Revenue and Taxation Code section 8651.
Alternative Fuel Vehicle (AFV) Parking Incentive Programs
The California Department of General Services (DGS) and California Department of Transportation (DOT) must develop and implement AFV parking incentive programs in public parking facilities operated by DGS with 50 or more parking spaces and park-and-ride lots owned and operated by DOT. The incentives must provide meaningful and tangible benefits to drivers, such as preferential spaces, reduced fees, and fueling infrastructure. Fueling infrastructure built at park-and-ride lots is not subject to restricted use by those using bicycles, public transit, or ridesharing. (Reference California Public Resources Code 25722.9)
Alternative Fuel Vehicle (AFV) and Fueling Infrastructure Grants
The Motor Vehicle Registration Fee Program (Program) provides funding for projects that reduce air pollution from on- and off-road vehicles. Eligible projects include purchasing AFVs and developing alternative fueling infrastructure. Contact local air districts and see the Program website for more information about available grant funding and distribution from the Program. (Reference California Health and Safety Code 44220 (b))
Alternative Fuel and Hybrid Electric Vehicle Retrofit Regulations
Converting a vehicle to operate on an alternative fuel in lieu of the original gasoline or diesel fuel is prohibited unless the California Air Resources Board (ARB) has evaluated and certified the retrofit system. ARB will issue certification to the manufacturer of the system in the form of an Executive Order once the manufacturer demonstrates compliance with the emissions, warranty, and durability requirements. A manufacturer is defined as a person or company who manufactures or assembles an alternative fuel retrofit system for sale in California; this definition does not include individuals wishing to convert vehicles for personal use. Individuals interested in converting their vehicles to operate on an alternative fuel must ensure that the alternative fuel retrofit systems used for their vehicles have been ARB certified. For more information, see the ARB Alternative Fuel Retrofit Systems website.
A hybrid electric vehicle that is Model Year 2000 or newer and is a passenger car, light-duty truck, or medium-duty vehicle may be converted to incorporate off-vehicle charging capability if the manufacturer demonstrates compliance with emissions, warranty, and durability requirements. ARB issues certification to the manufacturer and the vehicle must meet California emissions standards for the model year of the original vehicle.
Alternative Fuel and Vehicle Policy Development
The California Energy Commission (CEC) must prepare and submit an Integrated Energy Policy Report (IEPR) to the governor on a biannual basis. The IEPR provides an overview of major energy trends and issues facing the state, including those related to transportation fuels, technologies, and infrastructure. The IEPR also examines potential effects of alternative fuels use, vehicle efficiency improvements, and shifts in transportation modes on public health and safety, the economy, resources, the environment, and energy security. The IEPR's primary purpose is to develop energy policies that conserve resources, protect the environment, ensure energy reliability, enhance the state's economy, and protect public health and safety. For the current IEPR, see the CEC California's Energy Policy website.
As of November 1, 2015, and every four years thereafter, the CEC must also include in the IEPR strategies to maximize the benefits of natural gas in various sectors. This includes the use of natural gas as a transportation fuel. For more information, see the 2020 Integrated Energy Policy Report. (Reference California Public Resources Code 25302 and 25303.5)
The California Public Utility Commission must adopt policies and programs to promote in-state production and distribution of biomethane to meet energy and transportation needs. (Reference California Public Utilities Code 399.24)
Fleet Emissions Reduction Requirements - South Coast
The South Coast Air Quality Management District (SCAQMD) requires government fleets and private contractors under contract with public entities to purchase non-diesel lower emission and alternative fuel vehicles. The rule applies to transit bus, school bus, refuse hauler, and other vehicle fleets of at least 15 vehicles that operate in Los Angeles, San Bernardino, Riverside, and Orange counties. (Reference SCAQMD Rules 1186.1 and 1191-1196)
Fleet Vehicle Procurement Requirements
When awarding a vehicle procurement contract, every city, county, and special district, including school and community college districts, may require that 75% of the passenger cars and/or light-duty trucks acquired be energy-efficient vehicles. By definition, this includes hybrid electric vehicles and alternative fuel vehicles that meet California's advanced technology partial zero emission vehicle standards. Vehicle procurement contract evaluations may consider fuel economy and life cycle factors for scoring purposes. (Reference California Public Resources Code 25725-25726)
Freight Efficiency Action Plan
The California State Transportation Agency, the California Environmental Protection Agency, the Natural Resources Agency, and other state departments implemented the California Sustainable Freight Action Plan (Plan), which establishes targets to improve freight efficiency and transition to zero emission technologies. The Plan identifies state policies, programs, and investments to achieve the following targets:
- Improve freight system efficiency by 25% by 2030; and
- Deploy over 100,000 zero emission freight vehicles and associated equipment, maximizing the number of vehicles powered by renewable energy, by 2030.
Low Carbon Fuel Standard
California's Low Carbon Fuel Standard (LCFS) Program requires a reduction in the carbon intensity of transportation fuels that are sold, supplied, or offered for sale in the state by a minimum of 10% by 2020. The California Air Resources Board (ARB) regulations require transportation fuel producers and importers to meet specified average carbon intensity requirements for fuel. In the regulations, carbon intensity reductions are based on reformulated gasoline mixed with 10% corn-derived ethanol and low-sulfur diesel fuel. Propane is exempt from LCFS requirements, as are non-biomass-based alternative fuels that are supplied in California for use in transportation at an aggregated volume of less than 3.6 million gasoline gallon equivalents per year. Other exemptions apply for transportation fuel used in specific applications. The LCFS Program allows producers and importers to generate, acquire, transfer, bank, borrow, and trade credits. Fuel producers and importers regulated under the LCFS must meet quarterly and annual reporting requirements. For more information, see the LCFS Program website. (Reference California Code of Regulations Title 17, Section 95480-95490 and California Health and Safety Code 38500-38599)
Low Emission Vehicle (LEV) Standards
California's LEV II exhaust emissions standards apply to Model Year (MY) 2004 and subsequent model year passenger cars, light-duty trucks, and medium-duty passenger vehicles meeting specified exhaust standards. The LEV II standards represent the maximum exhaust emissions for LEVs, Ultra LEVs, and Super Ultra LEVs, including flexible fuel, bi-fuel, and dual-fuel vehicles when operating on an alternative fuel. MY 2009 and subsequent model year passenger cars, light-duty trucks, and medium-duty passenger vehicles must meet specified fleet average greenhouse gas (GHG) exhaust emissions requirements. Each manufacturer must comply with these fleet average GHG requirements, which are based on California Air Resources Board (ARB) calculations. Bi-fuel, flexible fuel, dual-fuel, and grid-connected hybrid electric vehicles may be eligible for an alternative compliance method.
In December 2012, ARB finalized regulatory requirements, referred to as LEV III, which allow vehicle manufacturer compliance with the U.S. Environmental Protection Agency's GHG requirements for MY 2017-2025 to serve as compliance with California's adopted GHG emissions requirements for those same model years. For more information, see the ARB LEVII and LEV III Program websites for more information. (Reference California Code of Regulations Title 13, Section 1961-1961.3)
Mobile Source Emissions Reduction Requirements
Through its Mobile Sources Program, the California Air Resources Board (ARB) has developed programs and policies to reduce emissions from on-road heavy-duty diesel vehicles through the installation of verified diesel emission control strategies (VDECS) and vehicle replacements.
The on-road heavy-duty diesel vehicle rule (i.e., truck and bus regulation) requires the retrofit and replacement of nearly all privately owned vehicles operated in California with a gross vehicle weight rating (GVWR) greater than 14,000 pounds (lbs.). School buses owned by private and public entities and federal government owned vehicles are also included in the scope of the rule. By January 1, 2023, nearly all vehicles must have engines certified to the 2010 engine standard or equivalent. The drayage truck rule regulates heavy-duty diesel-fueled vehicles that transport cargo to and from California's ports and intermodal rail facilities. The rule requires that certain drayage trucks be equipped with VDECS and that all applicable vehicles have engines certified to the 2007 emissions standards. By January 1, 2023, all applicable vehicles must have engines certified to 2010 standards. The solid waste collection vehicle rule regulates solid waste collection vehicles with a gross vehicle weight rating of 14,000 lbs. or more that operate on diesel fuel, have 1960 through 2006 engine models, and collect waste for a fee. The fleet rule for public agencies and utilities requires fleets to install VDECS on vehicles or purchase vehicles that run on alternative fuels or use advanced technologies to achieve emissions requirements by specified implementation dates.
(Reference California Code of Regulations Title 13, 2021-2027)
Point of Contact
California Air Resources Board
Phone: (866) 6DIESEL (634-3735)
Public Utility Definition
A corporation or individual that owns, controls, operates, or manages a facility that supplies electricity to the public exclusively to charge light-duty battery electric and plug-in hybrid electric vehicles, compressed natural gas to fuel natural gas vehicles, or hydrogen as a motor vehicle fuel is not defined as a public utility. (Reference California Public Utilities Code 216)
State Agency Low Carbon Fuel Use Requirement
At least 3% of the aggregate amount of bulk transportation fuel purchased by the state government must be from very low carbon transportation fuel sources. The required amount of very low carbon transportation fuel purchased will increase by 1% annually until January 1, 2024. Some exemptions may apply, as determined by the California Department of General Services (DGS). Very low carbon fuel is defined as a transportation fuel having no greater than 40% of the carbon intensity of the closest comparable petroleum fuel for that year, as measured by the methodology in California Code of Regulations Title 17, Sections 95480-95486. DGS will submit an annual progress report to the California Legislature. (Reference California Health and Safety Code 43870, and California Code of Regulations Title 17, Section 95480-95486)
State Transportation Plan
The California Department of Transportation (Caltrans) must update the California Transportation Plan (Plan) by December 31, 2020, and every five years thereafter. The Plan must address how the state will achieve maximum feasible emissions reductions, taking into consideration the use of alternative fuels, new vehicle technology, and tailpipe emissions reductions. Caltrans must consult and coordinate with related state agencies, air quality management districts, public transit operators, and regional transportation planning agencies. Caltrans must also provide an opportunity for general public input. Caltrans must submit a final draft of the Plan to the legislature and governor. A copy of the 2016 report is available on the Caltrans website. Caltrans must also review the Plan and prepare a report for the legislature and governor that includes actionable, programmatic transportation system improvement recommendations every five years. (Reference California Government Code 65070-65073)
Vehicle Acquisition and Petroleum Reduction Requirements
The California Department of General Services (DGS) is responsible for maintaining specifications and standards for passenger cars and light-duty trucks that are purchased or leased for state office, agency, and department use. These specifications include minimum vehicle emissions standards and encourage the purchase or lease of fuel-efficient and alternative fuel vehicles (AFVs). Specifically, DGS must reduce or displace the fleet's consumption of petroleum products by 20% by January 1, 2020, as compared to the 2003 consumption level. Beginning in fiscal year 2024, DGS must also ensure that at least 50% of the light-duty vehicles purchased by the state are zero emission vehicles (ZEVs). Further, at least 15% of DGS' fleet of new vehicles with a gross vehicle weight rating of 19,000 pounds or more must be ZEVs by 2025, and at least 30% by 2030.
On an annual basis, DGS must compile information including, but not limited to, the number of AFVs and hybrid electric vehicles acquired, the locations of the alternative fuel pumps available for those vehicles, and the total amount of alternative fuels used. Vehicles the state owns or leases that are capable of operating on alternative fuel must operate on that fuel unless the alternative fuel is not available. DGS is also required to:
- Take steps to transfer vehicles between agencies and departments to ensure that the most fuel-efficient vehicles are used and to eliminate the least fuel-efficient vehicles from the state's motor vehicle fleet;
- Submit annual progress reports to the California Department of Finance, related legislative committees, and the general public via the DGS website;
- Encourage other agencies to operate AFVs on the alternative fuel for which they are designed, to the extent feasible;
- Encourage the development of commercial fueling infrastructure at or near state vehicle fueling or parking sites;
- Work with other agencies to incentivize and promote state employee use of AFVs through preferential or reduced-cost parking, access to electric vehicle charging, or other means, to the extent feasible; and
- Establish a more stringent fuel economy standard than the 2007 standard.
(Reference California Public Resources Code 25722.5-25722.11 and 25724)
Compressed Natural Gas (CNG) Credit - PG&E
Pacific Gas & Electric (PG&E) administers the Clean Fuel Rebate program, which offers an annual bill credit for CNG account holders that purchase CNG as a transportation fuel from a PG&E station. Customers must have an active CNG transportation fueling account. The program is available through 2023, or until funds are exhausted. Additional terms and conditions apply. For more information, see the Clean Fuel Rebate website.
Natural Gas Rate Reduction - SoCalGas
Southern California Gas Company (SoCalGas) offers natural gas at discounted rates to customers fueling natural gas vehicles (NGVs). G-NGVR, Natural Gas Service for Home Fueling of Motor Vehicles, is available to residential customers; G-NGV, Natural Gas Service for Motor Vehicles, is available to commercial customers. For more information, see the SoCalGas NGV Incentives and Grants website.
Natural Gas Vehicle Loan - SoCalGas
Southern California Gas Company’s (SoCalGas) Truck Loan Program provides short-term loans of up to two weeks for medium- and heavy-duty compressed natural gas vehicles at no cost to qualifying customers. For more information, see the SoCalGas NGV Incentives and Grants website.
Plug-In Electric Vehicle (PEV) and Compressed Natural Gas (CNG) Rate Reduction - PG&E
Pacific Gas & Electric (PG&E) offers discounted residential time-of-use rates for electricity used for PEV charging during off-peak hours. Discounted rates are also available for CNG or uncompressed natural gas used in vehicle home fueling appliances. For more information, see the PG&E Electric Vehicle Rate Plans and CNG for Vehicles websites.
Plug-In Electric Vehicle (PEV) and Natural Gas Infrastructure Charging Rate Reduction - SDG&E
San Diego Gas & Electric (SDG&E) offers three PEV Time-of-Use (TOU) rates to customers, using a single meter or requiring the installation of a second meter. Lower natural gas rates are available to customers who own a natural gas vehicle (NGV) and use a qualified compressed natural gas fueling appliance at home. For more information about rates, see the SDG&E EV Plans and NGV Rates websites.
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