Natural Gas Laws and Incentives in Utah
The list below contains summaries of all Utah laws and incentives related to natural gas.
Alternative Fuel Tax Exemptions and Reductions
Propane, natural gas, electricity, and hydrogen, also known as clean fuel or special fuel, used to operate motor vehicles are exempt from state fuel taxes, but subject to a special fuel tax at the rate of three-nineteenths of the conventional motor fuel tax. A reduction in special fuel tax is permissible if the fuel is already taxed by the Navajo Nation. Retailers, wholesalers, and suppliers of special fuel are eligible for a refund of the special fuel tax if dyed diesel fuel is mixed with special fuel and the mixed special fuel is returned to the refinery. For more information, see the Clean Fuel Vehicle Tax Credit website or the Utah State Tax Commission Fuel Taxes website. (Reference Utah Code 59-13-102, 59-13-201, 59-13-301, and 59-13-322)
Alternative Fuel Vehicle Conversion Grants for Businesses
The Utah Conversion to Alternate Fuel Grant Program provides grants to businesses that install conversion equipment on eligible vehicles that allow the vehicles to operate on alternative fuel or reduce a vehicle’s emissions of regulated pollutants. Businesses are required to pass these savings along to the individual who purchases the converted vehicle. Grants are available for 50% of the cost of conversion, up to $2,500. Eligible alternative fuels include propane, natural gas, and electricity. For more information, see the Utah Conversion to Alternative Fuel Grant Program website. (Reference Utah Code 19-1-401, 19-1-402, 19-1-403.3, and 19-1-405)
Alternative Fuel Vehicle Decal and High Occupancy Vehicle (HOV) Lane Exemption
Vehicles operating solely on propane, natural gas, or electricity are permitted to use HOV lanes, regardless of the number of passengers. Qualified vehicles must display the special clean fuel decal issued by the Utah Department of Transportation (UDOT); a limited number of decals are available. This exemption expires September 30, 2025. For more information about qualifying vehicles and decal availability, see the Clean Fuel Vehicle Decal and Permit website. (Reference Utah Code 41-1a-416, 41-1a-418, 41-6a-702, 59-13-102, and 72-6-121)
Hydrogen Fuel Production Incentives
Businesses that convert natural gas to hydrogen fuel, or produce natural gas solely for use in the production of hydrogen fuel for zero emission vehicles (ZEVs), may be eligible for an oil and gas severance tax credit. Each eligible applicant may receive a tax credit equal to the amount of the severance tax owed, up to $5 million per year. Entities that produce hydrogen fuel for use in ZEVs or hydrogen fueled trucks may also qualify for grant funding or loans from the Community Impact Fund. (Reference Utah Code 35A-8-302 and 59-5-102)
Natural Gas Vehicle (NGV) Weight Exemption
A vehicle primarily powered by natural gas may exceed the state's gross vehicle weight limits by a weight equal to the difference between the weight of the vehicle with the natural gas tank and fueling system and the weight of a comparable vehicle with a diesel tank and fueling system. The NGV maximum gross weight may not exceed 82,000 pounds. (Reference Utah Administrative Code R909-2-5)
Qualified Heavy-Duty Alternative Fuel Vehicle (AFV) Tax Credit
Qualified taxpayers are eligible for a tax credit for the purchase of a qualified heavy-duty AFV. Qualifying fuels include natural gas, electricity, and hydrogen. Each qualified heavy-duty AFV is eligible for the following tax credit amounts:
At least 50% of the qualified vehicle's miles must be driven in the state. A single taxpayer may claim credits for up to 10 AFVs or $500,000 annually. If more than 30% of the total available tax credits in a single year have not been claimed by May 1, a taxpayer may apply for credits for an additional eight AFVs. Up to 25% of the tax credits are reserved for taxpayers with small fleets of less than 40 vehicles. This credit expires December 31, 2020. Additional conditions and restrictions may apply. For more information, see the Alternative Fuel Heavy Duty Vehicle Tax Credit Program website.
(Reference Utah Code 59-7-618, 59-10-1033, and 59-13-201)
Laws and Regulations
Alternative Fuel Use and Vehicle Acquisition Requirement
At least 50% of new or replacement light-duty state agency vehicles must meet Bin 2 emissions standards established in Title 40 of the U.S. Code of Federal Regulations, or be propelled to a significant extent by electricity, natural gas, propane, hydrogen, or biodiesel. (Reference Utah Code 63A-9-401 and 63A-9-403)
Alternative Fuel Vehicle (AFV) Road Usage Charge Program
Beginning January 1, 2020, the owner or lessee of an AFV may apply for enrollment in the mileage-based revenue collection program. If approved by the Utah Department of Transportation (UDOT), the owner or lessee of an AFV may participate in the program in lieu of paying AFV registration fees. To participate, the owner or lessee of an AFV must report mileage driven, pay the road usage fee for each payment period, and comply with all provisions and requirements.
UDOT will administer the program and establish terms and conditions for participation, including payment periods and standards for mileage recording and payment processing. UDOT will make recommendations to and consult with the Transportation Commission regarding road usage mileage rates for each type of AFV. Additional conditions apply. For more information, see the UDOT Road Usage Charge website.
(Reference Utah Code 72-1-213)
Alternative Fuel Vehicle Inspection and Permit
The Utah State Tax Commission (Commission) may require vehicles operating on clean fuels to be inspected for safe operation. In addition, clean fuel vehicles that have a gross vehicle weight rating of more than 26,000 pounds or have more than three axels are required to obtain a special fuel user permit from the Commission. Clean fuels are defined as propane, natural gas, electricity, and hydrogen. (Reference Utah Code 59-13-102, 59-13-303, and 59-13-304)
Compressed Natural Gas (CNG) Vehicle Aftermarket Conversion Requirements
Vehicles converted to operate on CNG must be inspected and certified in accordance with relevant safety standards by a CSA America-certified CNG Fuel System Inspector. The vehicle must also be tested to ensure that it meets emissions standards in the applicable county, or the county with the most lenient emissions standards if the vehicle is registered in a county without its own emissions standards. A person who performs a conversion must certify to the vehicle owner that the conversion does not tamper with, circumvent, or otherwise affect the vehicle's on-board diagnostic system, if applicable. A CSA America-certified CNG Fuel System Inspector must also inspect the vehicle every three years, or every 36,000 miles, and after a collision occurring at a speed greater than five miles per hour.
The Utah Division of Air Quality may develop programs to facilitate coordination between government agencies and the private sector regarding emissions and anti-tampering compliance testing, vehicle safety, and potential improvements in the air quality of the state.
(Reference Utah Code 19-1-406)
Natural Gas Rate and Cost Recovery Authorization
The Utah Public Service Commission (Commission) may allow a gas corporation to set a natural gas vehicle fuel rate that is less than full cost of service if it is reasonable and in the interest of the public. If the Commission approves such a request, the remaining costs may be spread to other customers of the gas corporation.
The Commission may also allow a gas corporation to recover expenditures directly related to the construction, operation, and maintenance of natural gas fueling stations and related facilities through an incremental surcharge to all of its rate classes. The Commission may allow this only if it finds that the expenditures are reasonable, do not exceed $5 million in any calendar year, are in the interest of the public, and will result in an annual incremental increase in revenue greater than 50% of the corporation's annual revenue requirement for the stations and facilities.
The Commission may also allow a gas corporation to establish a natural gas incentive or program to support the use of natural gas, including renewable natural gas, if it is reasonable and in the interest of the public. If the Commission approves such a request, the remaining costs may be spread to other customers of the gas corporation.
(Reference Utah Code 54-4-13.1 and 54-4-13.4)
Natural Gas and Hydrogen Tax
Compressed natural gas (CNG) and hydrogen are taxed at a rate of $0.165 per gasoline gallon equivalent (GGE). Liquefied natural gas (LNG) is taxed at a rate of $0.165 per diesel gallon equivalent (DGE). One GGE is equal to 5.660 pounds (lbs.) of CNG or 2.198 lbs. of hydrogen. One DGE is equal to 6.06 lbs. of LNG. The tax rate for natural gas and hydrogen will be annually adjusted by the State Tax Commission (Commission) not to exceed $0.225 per GGE or DGE. The Commission will publish the adjusted fuel tax no later than 60 days prior to the effective date. (Reference Utah Code 59-13-102 and 59-13-301)
Support for Clean Fuel School Buses
The Utah Legislature supports dedicating its portion of theVolkswagen Environmental Mitigation Trust to replace diesel school buses that are Model Year 2006 and older with clean fuel school buses. (Reference House Concurrent Resolution 5, 2017)
More Laws and Incentives
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