California Laws and Incentives for Natural Gas

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

State Incentives

Alternative Fuel and Vehicle Incentives

The California Energy Commission (CEC) administers the Alternative and Renewable Fuel and Vehicle Technology 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. The CEC must prepare and adopt an annual Investment Plan for the Program to establish funding priorities and opportunities that reflect program goals and to describe how program funding will be used to complement other public and private investments. Funded projects include:

• Commercial alternative fuel vehicle (AFV) demonstrations and deployment;
• Alternative and renewable fuel production;
• Research and development of alternative and renewable fuels and innovative technologies;
• AFV manufacturing;
• Workforce training; and
• Public education, outreach, and promotion.

(Reference Assembly Bills 2405, 2012, and California Code of Regulations, Title 13, Chapter 8.1 and California Health and Safety Code 44270-44274.7)

High Occupancy Vehicle (HOV) and High Occupancy Toll (HOT) Lane Exemption

Compressed natural gas (CNG), hydrogen, electric, and plug-in hybrid electric vehicles (PHEVs) meeting specified California and federal emissions standards and affixed with a California Department of Motor Vehicles Clean Air Vehicle sticker may use HOV lanes regardless of the number of occupants in the vehicle. White Clean Air Vehicle Stickers are available to an unlimited number of qualifying CNG, hydrogen, and electric vehicles. Green Clean Air Vehicle Stickers are available for the first 40,000 applicants that purchase or lease a qualified PHEV. Both stickers will expire January 1, 2015. These vehicles are also exempt from toll charges imposed on HOT lanes, unless prohibited by federal law. For more information, see the California Air Resources Board Carpool Lane Use Stickers website. (Reference Assembly Bill 2405, 2012, and California Vehicle Code 5205.5 and 21655.9)

Alternative Fuel Vehicle (AFV) and Fueling Infrastructure Grants

The Motor Vehicle Registration Fee 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 for more information about available grant funding and distribution from the Motor Vehicle Registration Fee Program. (Reference California Health and Safety Code 44220 (b))

Low Emissions School Bus Grants

The Lower-Emission School Bus Program (Program) provides grant funding for the replacement of older school buses and for the purchase of air pollution control equipment for in-use buses. The California Air Resources Board must verify that the air pollution control devices reduce particulate matter emissions by at least 85% for each retrofitted school bus. Public school districts in California that own their buses are eligible to receive funding. Private school transportation providers that contract with public school districts in California to provide transportation services are also eligible to receive funding for the retrofit of in-use buses. New buses purchased to replace older buses may be fueled with diesel or an alternative fuel, provided that the required emissions standards specified in the current guidelines for the Program are met. Funds are also available for replacing on-board natural gas tanks on older school buses and for updating deteriorating natural gas fueling infrastructure. Commercially available hybrid electric school buses may be eligible for partial funding. Contact local air districts for more information about grant funding availability and distribution from the Program. (Reference Assembly Bill 462, 2011; Senate Bill 570, 2011; and California Health and Safety Code 41081 and 44099))

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 Senate Bill 1257, 2012 and California Revenue and Taxation Code 7284.2)

Natural Gas Vehicle (NGV) Home Fueling Infrastructure Incentive - South Coast

South Coast Air Quality Management District (SCAQMD) residents may be eligible for up to $2,000 toward the purchase and installation of a qualified Phill NGV home fueling appliance. SCAQMD and the Mobile Source Air Pollution Reduction Review Committee provide funding for the program, which will continue until funds have been exhausted. For more information, refer to the SCAQMD website.

Employer Invested Emissions Reduction Funding - South Coast

The South Coast Air Quality Management District (SCAQMD) administers the Air Quality Investment Program (AQIP). The 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/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. Current requests for proposals and funding opportunities are listed on the AQIP website.

Technology Advancement Funding - South Coast

The South Coast Air Quality Management District's 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/conversion devices (e.g., fuel cells and batteries), and implementation of clean fuels (e.g., natural gas, propane, and hydrogen), including the necessary infrastructure. Projects are selected via specific requests for proposals on an as-needed basis or through unsolicited proposals. Approximately $10 million in funding is available annually with expected cost-share from other project partners and stakeholders.

Alternative Fuel and Advanced Vehicle Rebate - San Joaquin Valley

The San Joaquin Valley Air Pollution Control District (SJVAPCD) administers the Drive Clean! Rebate Program (Program), which provides rebates for the purchase or lease of eligible new vehicles, including qualified natural gas and plug-in electric vehicles. 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 that purchase a qualified vehicle on or after March 15, 2012. For a list of eligible vehicles and other requirements, refer to the Program website.

Alternative Fuel Vehicle (AFV) and Fueling Infrastructure 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, natural gas, and propane vehicles, as well as hybrid electric 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. As of October 2012, incentives for electric vehicle supply equipment and other alternative fueling infrastructure projects are under development.

Low Emission Vehicle Incentives and Technical Training - San Joaquin Valley

The San Joaquin Valley Air Pollution Control District (SJVAPCD) administers the REMOVE II program, which provides incentives for cost-effective projects that result in motor vehicle emissions reductions and long-term impacts on air pollution in the San Joaquin Valley. As of October 2012, REMOVE II is providing funding for vanpool agencies that reduce or replace single occupant vehicle commutes in the San Joaquin Valley. To participate, vanpool agencies must submit an application to SJVAPCD and sign a contract to become a Vanpool Voucher Incentive Program partner. REMOVE II also includes an Alternative Fuel Vehicle (AFV) Mechanic Training Component that provides incentives to educate personnel on the mechanics, operation safety, and maintenance of AFVs, fueling stations, and tools involved in the implementation of alternative fuel technologies.

Utility/Private Incentives

Alternative Fuel Vehicle (AFV) and Hybrid Electric Vehicle (HEV) Insurance Discount

Farmers Insurance provides a discount of up to 10% on all major insurance coverage for HEV and AFV owners. To qualify, the automobile must be designed to use a dedicated alternative fuel as defined in the Energy Policy Act of 1992, or a HEV. A complete vehicle identification number is required to validate vehicle eligibility.

Clean Vehicle Electricity and Natural Gas Rate Reduction - PG&E

Pacific Gas & Electric (PG&E) offers a discounted Experimental Residential Time-of-Use rate for electricity used for plug-in electric vehicle charging and natural gas vehicle (NGV) home fueling appliances. Special rates are also available for natural gas that residential customers compress using home fueling appliances. For more information, see the PG&E EV Rate Options and NGV Rates websites.

Plug-In Electric Vehicle (PEV) and Natural Gas Infrastructure Charging Rate Reduction - SDG&E

San Diego Gas & Electric (SDG&E) offers lower rates to customers for electricity used to charge PEVs. SDG&E's PEV Time-of-Use rates are available in two variations: EV-TOU-2 bills home and vehicle electricity use on a single meter; and EV-TOU bills vehicle electricity use separately, requiring the installation of a second meter. Lower rates are also available to customers who own a natural gas vehicle and use a qualified compressed natural gas fueling appliance at home. For more information about PEV Time-of-Use rates, see the SDG&E EV Rates website.

Natural Gas Rate Reduction - SoCalGas

Southern California Gas Company (SoCalGas) offers natural gas at discounted rates to customers fueling natural gas vehicles (NGVs). Schedule G-NGVR, Natural Gas Service for Home Refueling 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 NGVs website.

Laws and Regulations

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 Assembly Bill 2583, 2012; California Public Resources Code 25722.9; and California Vehicle Code 22518)

Biomethane Promotion

The California Public Utility Commission (Commission) must adopt policies and programs to promote in-state production and distribution of biomethane to meet energy and transportation needs. (Reference Assembly Bill 1900, 2012, and California Public Utilities Code 399.24)

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. Liquefied petroleum gas (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.

In December 2011, the U.S. District Court issued an injunction preventing ARB from implementing the LCFS because it violates the Commerce Clause of the U.S. Constitution by interfering with and discriminating against interstate commerce. In January 2012, ARB filed a notice of appeal of the U.S. District Court ruling, but is withholding enforcement of the LCFS requirements until a final decision is made. In April 2012, U.S. Court of Appeals for the Ninth Circuit granted the request to stay the injunction, allowing ARB to continue implementation and enforcement of the rule until the District Court makes a final decision.

(Reference California Code of Regulations Title 17, Section 95480-95490; Executive Order S-01-07, 2007; and California Health and Safety Code 38500-38599)

State Transportation Plan

The California Department of Transportation (Caltrans) must update the California Transportation Plan (Plan) by December 31, 2015, 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 prepare and submit an interim report to the California Transportation Commission and to the Senate and Assembly committees related to transportation, environmental quality, natural resources, and local government by December 31, 2012. 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. (Reference California Government Code 65071-65073)

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 Low Emission Vehicles, and Super Ultra Low Emission Vehicles, including flexible fuel, bi-fuel, and dual-fuel vehicles when operating on an alternative fuel. New MY2009 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 calculations. Bi-fuel, flexible fuel, dual-fuel, and grid-connected hybrid electric vehicles may be eligible for an alternative compliance method. Manufacturers may earn credits for fleet average GHG values lower than the fleet average GHG requirement applicable to MY2012.

In August 2012, ARB submitted a regulatory proposal, referred to as LEV III, which would allow vehicle manufacturer compliance with the U.S. Environmental Protection Agency's GHG requirements for model years 2017-2025 to serve as compliance with California's adopted GHG emissions requirements for those same model years. See the LEV III Program website for more information.

(Reference California Code of Regulations Title 13, Section 1961-1961.1)

Alternative Fuel and Plug-in 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 System 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.

(Reference California Code of Regulations Title 13, Section 2030-2032, and California Vehicle Code 27156)

Alternative Fuel Tax

The excise tax imposed on compressed natural gas (CNG), liquefied natural gas (LNG), and liquefied petroleum gas (LPG or propane) used to operate a vehicle can be paid through an annual flat rate sticker tax based on the following vehicle weights:

Unladen Weight	Fee
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 $0.07 per 100 cubic feet measured at standard pressure and temperature, $0.06 per gallon of LNG, and $0.06 per gallon of propane. The excise tax on ethanol and methanol fuel blends containing up to 15% gasoline or diesel fuel is half of the current tax on gasoline and diesel.

(Reference California Revenue and Taxation Code 8651-8651.8)

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 (AT PZEV) standards. Vehicle procurement contract evaluations may consider fuel economy and lifecycle factors for scoring purposes. (Reference California Public Resources Code 25725-25726)

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). 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. Additionally, the California State and Consumer Services Agency, in consultation with DGS and other appropriate state agencies, must develop, implement, and submit to the California Legislature and governor a plan to increase the state fleet's use of alternative fuels, synthetic lubricants, and fuel-efficient vehicles. This must be done by reducing or displacing the fleet's consumption of petroleum products by 20% by January 1, 2020, as compared to the 2003 consumption level. DGS must also:

• 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; and
• 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.

(Reference Assembly Bill 2583, 2012; Executive Order S-14-09, 2009; and California Public Resources Code 25722.5, 25722.6, and 25722.8)

Alternative Fuel and Vehicle Policy Development

The California Energy Commission 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. (Reference California Public Resources Code 25302)

Mobile Source Emissions Reduction Requirements

Through its Mobile Sources Program, the California Air Resources Board 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.

An on-road heavy-duty diesel vehicle rule 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. School buses owned by private and public entities and federal government owned vehicles are also included in the scope of the rule. The requirements include a phase-in period for the installation of VDECS on certain heavier in-use vehicles beginning January 1, 2012, and require the replacement of older vehicles starting January 1, 2015. By January 1, 2023, nearly all vehicles must have engines certified to the 2010 engine standard or equivalent. A drayage/port 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, 2014. A public transit agency fleet rule regulates public transit fleets and sets emissions reduction standards for new transit vehicles. A solid waste collection vehicle rule regulates solid waste collection vehicles with a gross vehicle weight rating of 14,000 pounds 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.

A summary of Requirements for Diesel Truck and Equipment Owners can be found in the Multi-Rule Summary Fact Sheet. (Reference California Code of Regulations Title 13, 2021-2027)

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)