Seven Democratic U.S. senators have initiated an investigation into a $370 million payout to Cheniere Energy by the IRS for an “alternative fuel” tax credit. Critics argue that the liquefied natural gas (LNG) export company should not have received this benefit.
An earlier investigation highlighted that using LNG to power tankers is standard in the industry, not an alternative. The tax credit was intended for motor vehicles or motorboats, defined as no longer than 65 feet, while LNG vessels are typically 1,000 feet long.
The senators’ letter to IRS Acting Commissioner Scott Bessent questions if the IRS determined LNG tankers qualify for credits under the Alternative Fuel Excise Tax (AFET). They argue that providing these credits would waste taxpayer money without benefiting the environment or reducing dependence on oil.
Sen. Jeff Merkley (D-Ore.), along with Senate Minority Leader Chuck Schumer (D-N.Y.), Elizabeth Warren (D-Mass.), Edward J. Markey (D-Mass.), Sheldon Whitehouse (D-R.I.), Peter Welch (D-Vt.), and Chris Van Hollen (D-Md.), announced this probe into IRS handling of tax subsidies for LNG exporters.
The investigation follows Cheniere Energy’s announcement of a retroactive cash payment for using LNG in its vessels before the credit’s expiration in 2024. The company is the largest LNG producer and exporter in the U.S.
Shipping experts and tax specialists questioned the tax credit, arguing it was not intended for LNG tankers. The alternative fuel excise tax credit, signed into law by President George W. Bush in 2005, incentivized non-gasoline and non-diesel fuels for motor vehicles.
The senators’ letter queries whether the IRS classified LNG tankers as motorboats and if LNG use by these vessels is truly an alternative. Kirsten Sinclair Rosselot, an environmental performance analyst, noted that LNG vessels traditionally use this fuel, as explored in a 2023 study she authored.
Rosselot explained LNG vessels naturally “boil off” a portion of LNG to maintain the fuel’s cold state. If not used, it must be flared, vented, or re-liquefied.
The senators argue that allowing AFET credits for LNG tankers permits tax breaks for routine activities, on vessels apparently unqualified for such credits.
William Henck, a former IRS attorney, mentioned that external influences can override tax regulations, particularly if decision-makers are influenced directly.
Cheniere Energy’s spokesperson, Bernardo Fallas, stated the company pursued alternative fuel credits across multiple administrations, culminating in IRS approval after an extensive review by tax credit specialists.
Friends of the Earth, an organization tracking Cheniere’s tax credit claim, is also seeking IRS information through a public records request.
The senators provided Bessent 45 days to respond to their inquiries about the tax credit, including communications with affected parties or the White House.
The Washington Post reported that Cheniere Energy CEO Jack Fusco met with then-presidential candidate Trump in April 2024, later donating nearly $500,000 to a Trump-affiliated PAC and the Republican National Committee, according to FEC data.
Neither the IRS nor the White House commented on these inquiries. Raena Garcia from Friends of the Earth speculates the IRS might disregard the senators’ letter but could face a subpoena if Congress changes after midterm elections.
Original Story at insideclimatenews.org