Kentucky Laws and Incentives for Natural Gas

The list below contains summaries of all Kentucky laws and incentives related to Natural Gas.

State Incentives

Alternative Fuel Research, Development, and Promotion

The Kentucky New Energy Ventures (KNEV) program provides grants and investments to companies for research, development, and commercialization of alternative fuels and renewable energy. KNEV is designed to: 1) grow Kentucky-based alternative fuel and renewable energy companies to promote commonwealth-wide, innovation-driven economic growth; 2) stimulate private investment in Kentucky-based alternative fuel and renewable energy enterprises; 3) expand the alternative fuel and renewable energy knowledge base, talent force, and industry in Kentucky; 4) develop an alternative fuel and renewable energy resource network to build the technical and business capacity of entrepreneurs through informal and formal strategic support; and 5) build commonwealth-wide awareness of the economic development opportunities Kentucky's alternative fuel and renewable energy industry offers. For the purposes of KNEV, alternative fuels include biodiesel, ethanol, cellulosic ethanol, synthetic natural gas, fuels produced from coal, waste coal, or extract oil from oil shale, and other fuels produced from a renewable or sustainable source. Eligible companies must be based in Kentucky, have 150 or fewer employees, and work to develop or commercialize alternative fuel and renewable energy products, processes, and services. For more information, including information on the application process, see the KNEV program website. (Reference Kentucky Revised Statutes 154.20-410 and 154.20-415)

Laws and Regulations

Clean Transportation Fuels for School Buses

The Kentucky Department of Education (Department) must consider the use of clean transportation fuels in school buses as part of its regular procedure for establishing and updating school bus standards and specifications. If the Department determines that school buses may operate using clean transportation fuels while maintaining the same or a higher degree of safety as fuels currently allowed, it must update the standards and specifications to allow for such use. (Reference Kentucky Revised Statutes 156.153)

Compressed Natural Gas (CNG) Deregulation

The Kentucky Public Service Commission (Commission) may not regulate the rates, terms, or conditions of service for the sale of CNG to a fueling station, retailer, or to any end-user for use as a motor vehicle fuel. However, transporting, distributing, or delivering natural gas to a CNG retailer or end-user is subject to Commission regulations. (Reference Kentucky Revised Statutes 278.508)

Natural Gas Vehicles Safety Regulations

Vehicles converted to operate on compressed natural gas (CNG), liquefied natural gas (LNG), or a bi-fuel system must be inspected for compliance with applicable Federal Motor Vehicle Safety Standards (FMVSS). The inspection must occur proximate to the conversion; every three years or 36,000 miles after the conversion, whichever comes first; and following any collision in which the vehicle was traveling at five miles per hour or greater. Vehicles originally designed and manufactured to use CNG or LNG must also be inspected for safety following any collision in which a vehicle was traveling at five miles per hour or greater. Any person who performs natural gas vehicle conversions must certify to the vehicle owner that the conversion does not affect any existing vehicle emissions or diagnostic systems, except as necessary for the conversion. The Kentucky Transportation Cabinet may establish regulations to qualify persons to perform safety inspections; modify FMVSS for state use; and identify converted vehicles and ensure compliance with applicable regulations. (Reference Kentucky Revised Statutes 186.752)

Alternative Fuel Tax

An excise tax rate of 9% of the average wholesale price on a per gallon basis applies to all special fuels, including diesel, natural gas, liquefied petroleum gas (propane), ethanol, biodiesel, hydrogen, and any other combustible gases and liquids, excluding gasoline, used to propel motor vehicles. For taxation purposes, one gasoline gallon equivalent (GGE) of compressed natural gas (CNG) is equal to 5.66 pounds (lbs.) or 126.67 cubic feet. One GGE of liquefied natural gas (LNG) is equal to 6.06 lbs. (Reference Kentucky Administrative Regulations 103.43:330 and Kentucky Revised Statutes 131.130(1), 138.210, 138.220, and 138.226(1))

Alternative Fuel and Conversion Definitions

Clean transportation fuels include liquefied petroleum gas (or propane), compressed natural gas (CNG), liquefied natural gas (LNG), electricity, and other transportation fuels determined to be comparable with respect to emissions. CNG is defined as pipeline-quality natural gas that is compressed and provided for sale or use as a motor vehicle fuel. LNG is defined as pipeline-quality natural gas treated to remove water, hydrogen sulfide, carbon dioxide, and other components that will freeze and condense into liquid form for sale or use as a motor vehicle fuel. Propane is defined as a hydrocarbon mixture produced as a by-product of natural gas processing and petroleum refining and condensed into liquid form for sale or use as a motor fuel.

A bi-fuel system is defined as the power system for motor vehicles powered by gasoline and either CNG or LNG. Bi-fuel systems are considered clean fuel systems. Conversion is defined as repowering a motor vehicle or special mobile equipment by replacing its original gasoline or diesel powered engine with one capable of operating on clean transportation fuel or retrofitting a motor vehicle or special mobile equipment with parts that enable its original gasoline or diesel engine to operate on clean transportation fuel.

(Reference Kentucky Revised Statutes 186.750)

Vehicle Acquisition Priorities and Alternative Fuel Use Requirement

The Kentucky Finance and Administration Cabinet (Cabinet) must develop a strategy to replace at least 50% of commonwealth motor fleet light-duty vehicles with energy-efficient vehicles including hybrid electric, advanced lean burn, fuel cell, and alternative fuel vehicles. The Cabinet must also develop a strategy to increase the use of ethanol (including cellulosic ethanol), biodiesel, and other alternative fuels in commonwealth motor vehicle fleets. The Cabinet must report targeted vehicle and fuel usage amounts annually. (Reference Kentucky Revised Statutes 45A.625)

  

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