Senators Question LNG Tanker Tax Credits

A group of Democrat U.S. senators found themselves asking an unusual question this week — one that cuts to the heart of how a decades-old tax policy is being used today: Should massive liquefied natural gas (LNG) tankers qualify for a tax credit that was originally designed for small boats?

The senators on Tuesday sent a letter to Treasury Secretary Scott Bessent, raising concerns about the Alternative Fuel Excise Tax (AFET) credit. The policy datesto 2005, when former President George W. Bush signed it into law as part of a broader effort to reduce America's dependence on oil.

At the time, the goal was straightforward: encourage smaller motorboats to switch from traditional fuels to cleaner alternatives like natural gas, propane, or LNG.

But nearly two decades later, the senators argue the credit may be drifting far from its original purpose.

Today, some of the world's largest ships — LNG tankers stretching the length of three football fields — are benefiting from the same tax break. These vessels already run on LNG, often burning gas that naturally evaporates, or "boils off," during transport. Without being used as fuel, that gas would either be vented into the atmosphere or re-liquefied.

Critics say this means the tax credit isn't actually driving any meaningful transition away from traditional fuels. Instead, they argue, it's subsidizing a practice that would happen anyway.

"Providing tankers with AFET credits would unnecessarily waste taxpayer money while doing nothing to protect the environment, reduce costs for everyday Americans, or lessen the United States' dependence on oil," the senators wrote. The letter was signed by prominent lawmakers including Jeff Merkley, Elizabeth Warren, and Chuck Schumer, along with four others.

The issue gained attention earlier this year when Cheniere Energy revealed it had received a $370 million tax break tied to its LNG tankers. The company declined to comment, and the Treasury Department has yet to respond publicly to the senators' concerns.

For now, Democrats in the Senate have limited power to force changes, as they remain in the minority. But with midterm elections approaching in November, that balance could shift — potentially giving new momentum to efforts to revisit how the tax credit is applied.