Key Points:
- Democratic senators demand answers from Treasury Secretary Scott Bessent over massive liquefied natural gas tankers claiming a tax credit meant for small motorboats.
- Cheniere Energy recently claimed a massive $370 million tax break using the 2005 Alternative Fuel Excise Tax credit.
- Lawmakers argue the tax credit was originally designed for boats under 65 feet long, not massive shipping vessels measuring 3 football fields in length.
- Senators warn that the loophole wastes taxpayer money because these massive tankers already burn boil-off gas during normal shipping operations.
A group of Democratic senators sent a firm letter to Treasury Secretary Scott Bessent on Tuesday. They want to know why massive shipping corporations use a specific tax loophole to save hundreds of millions of dollars. The lawmakers argue that giant liquefied natural gas tankers currently exploit a tax credit that lawmakers created for tiny motorboats.
Senators Jeff Merkley, Elizabeth Warren, and Chuck Schumer led the charge, signing the letter alongside 4 other Democratic colleagues. They expressed deep frustration with the way the government currently administers the Alternative Fuel Excise Tax credit. Former President George W. Bush signed this specific credit into law back in 2005. At the time, the legislation held a very clear purpose. The original goal was to reduce American dependence on traditional oil by paying small-boat owners to switch their engines to cleaner alternatives such as natural gas, propane, and liquefied natural gas. The law never intended to hand out corporate welfare to multi-billion-dollar energy giants.
The vast size difference between the intended recipients and the current corporate beneficiaries highlights the absurdity of the loophole. The senators pointed out that federal regulations strictly define motorboats as vessels measuring less than 65 feet long, or roughly 20 meters; meanwhile, the massive international shipping tankers claiming the credit dwarf those dimensions. A typical liquefied natural gas tanker easily measures 3 football fields in length. Lawmakers argue that applying a small motorboat tax credit to these ocean leviathans violates the basic spirit of the 2005 law.
The financial numbers involved show exactly why the senators feel so angry about the current situation. In February, Cheniere Energy disclosed to its shareholders that it received an astonishing $370 million tax break simply by burning liquid natural gas in its massive tankers. To everyday taxpayers, $370 million represents a massive loss of public revenue that could fund schools, roads, or real environmental programs. When reporters asked Cheniere Energy about the massive tax break and the subsequent letter from the senators, the energy company refused to provide any comment.
Beyond the size of the boats, critics point out a major technical flaw in how this money is handed out. Burning fuel in these massive tankers does absolutely nothing to help the global shipping industry transition away from dirty bunker fuels. Marine engineers actually design these large tankers specifically to burn the liquid natural gas that naturally boils off during long ocean voyages.
If the ships did not burn this boiled-off gas, the crew would either have to vent it directly into the atmosphere or spend extra energy chilling it back into a liquid state. Because the ships already burn this gas as a normal, necessary part of their daily operations, the senators argue that paying them for it serves no actual environmental purpose. The companies simply collect government money for doing exactly what their ships must do anyway.
The senators did not mince words in their letter to the Treasury Department. They wrote that providing these massive international tankers with tax credits unnecessarily wastes taxpayer money. They added that the corporate payout does absolutely nothing to protect the environment, lower energy costs for everyday Americans, or reduce the United States’ overall dependence on foreign oil.
As of Tuesday afternoon, the Treasury Department, under Secretary Bessent, had not provided an immediate response to the inquiry. Right now, Senate Democrats have limited power to force immediate changes because they are in the political minority. However, the lawmakers plan to keep this $370 million tax loophole in the public eye. They hope to gain more traction on the issue and pressure the Treasury Department to change the rules if the political balance of power shifts after the highly anticipated November midterm elections.
