South Dakota Incentives and Laws

Last Updated April 2008

State Incentives

Ethanol and Methanol Tax Credit

Licensed fuel blenders may be eligible for a tax credit for gasoline blended with ethanol or methanol to create E85 or M85. The tax credit is granted on a per gallon basis, in the amount that the rate for motor fuel exceeds the rate for E85 or M85. The credit is used to offset any tax liability resulting from the blending of previously untaxed ethanol or methanol. E85 and M85 are taxed at a rate of $0.10 per gallon, and other ethanol blends are taxed at a rate of $0.20 per gallon. (Reference South Dakota Statutes 10-47B-4 and 10-47B-136)

Biodiesel Production Facility Tax Refund

A tax refund is available for contractors' excise taxes and sales or use taxes paid for the construction of a new agricultural processing facility, which includes an expansion to an existing soybean processing facility if the expansion will be used for the production of biodiesel. The project cost must exceed $4.5 million in order to qualify for the refund. (Reference South Dakota Statutes 10-45B)

Ethanol Production Incentive

A $0.20 per gallon production incentive is available to ethanol producers for ethanol that is fully distilled and produced in South Dakota. To be eligible for this incentive, the ethanol must be denatured and blended with gasoline to create an ethanol blend. Cumulative annual production incentives paid out may not exceed $7 million. (Reference South Dakota Statutes 10-47B-162)

State Laws and Regulations

Biofuels Promotion

The South Dakota Legislature supports a "25 x 25" vision in which agricultural products will provide 25% of the total energy consumed in the United States by the year 2025. Biodiesel and ethanol will be used to meet this goal. (Reference House Concurrent Resolution 1010, 2007)

Regional Biofuels Promotion Plan

South Dakota has joined Indiana, Iowa, Kansas, Michigan, Minnesota, Ohio, and Wisconsin in adopting the Energy Security and Climate Stewardship Platform Plan (Platform) (PDF 2 MB), which establishes shared goals for the Midwest region, including increased biofuels production and use. Specifically, the Platform sets the following goals:

• Produce commercially available cellulosic ethanol and other low-carbon fuels in the region by 2012;
• Increase E85 availability at retail fueling stations in the region to 15% of stations by 2015, 20% by 2020, and 33% of all fueling stations in the region by 2025;
• Reduce the amount of fossil fuel that is used in the production of biofuels by 50% by 2025;
• By 2025, at least 50% of all transportation fuels consumed by the Midwest will be from regionally produced biofuels and other low-carbon transportation fuels.

The Platform also establishes a regional biofuels corridor program. The program directs state transportation, agriculture, and regulatory officials to develop a system of coordinated signage across the region for biofuels and advanced transportation fuels and to collaborate to create regional E85 corridors. The program requires standardized fuel product coding at fueling stations as well as increased education for retailers about converting existing fueling infrastructure to dispense E85. The state transportation, agriculture, and regulatory officials were required to report their corridor implementation plans to the Midwest Governors Association by April 1, 2008.

Biofuels Economic Development Plan

The South Dakota Legislature has resolved to develop a biofuels economy in the state by investing in the development of perennial biomass crops, including switchgrass and other native grasses by supporting long-term research and development of crops and cropping systems; and providing opportunities to purchase biofuels by promoting the development of vehicles that operate on biofuels, expanding the government purchase of biofuels, and offering incentives for fueling stations offering blends of biofuels such as E85 and B20. (Reference Senate Concurrent Resolution 8, 2007)

Ethanol Production Facility Fee

A fee of $1,000 is required with the submittal of an air quality permit application for an ethanol production plant. In addition, there is an annual renewal fee required for the duration of the air quality permit. The annual fee includes an administrative fee of $1,000 and an emissions fee equaling $40 per ton particulate matter, sulfur dioxide, nitrogen oxide, volatile organic compounds, and hazardous air pollutants emitted by the ethanol production plant during the previous calendar year. The annual fee must be paid to the South Dakota Department of Revenue and Regulation by July 31 following the year in which the permit is issued and annually thereafter. (Reference South Dakota Statutes 34A-1)

Biodiesel Fuel Use

The South Dakota Department of Transportation and state employees using state diesel vehicles are directed to stock and use a minimum of 2% biodiesel blended fuel which meets or exceeds the most current ASTM specification D6751, whenever it is available and financially prudent to do so. (Reference Executive Order 2006-01)

Fuel Quality Standards

The Secretary of the South Dakota Department of Public Safety may promulgate rules establishing the following: 1) standards for the maximum volume percentages of ethanol and methanol in alcohol blended fuels; 2) a program for the inspection and testing of alcohol blended fuels, petroleum products, biodiesel, and biodiesel blends and prescribing the methods to be used; 3) labeling requirements for devices dispensing alcohol blended fuels, biodiesel, and biodiesel blends; 4) standards setting the specifications and tolerance requirements for petroleum products, biodiesel, and biodiesel blends; and 5) regulations for filtering systems used on devices dispensing alcohol blended fuels. All rules must conform to appropriate ASTM standards. (Reference South Dakota Statutes 37-2-6)

Biodiesel and Biodiesel Blend Definitions

Biodiesel is defined as a fuel comprised of mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats, designated B100, and meeting the requirements of ASTM specification D6751 as of January 1, 2005. Biodiesel must also be registered with the U.S. Environmental Protection Agency as a fuel and fuel additive under section 211(b) of the Clean Air Act as of January 1, 2006. Biodiesel blends are defined as blended special fuel containing a minimum of 2% by volume of biodiesel. (Reference South Dakota Statutes 37-2-5)

Reduced Biodiesel Tax

Biodiesel and biodiesel blends are defined as special fuels and are taxed at the special fuel excise tax rate of $0.22. Beginning the fiscal quarter after which biodiesel production facilities in the state reach a name plate capacity of at least 20 million gallons per year and fully produce at least 10 million gallons of biodiesel within one year, the tax on biodiesel and biodiesel blends is reduced to $0.20 per gallon. This reduction expires after 35 million gallons of taxed biodiesel and biodiesel blended fuel is sold. (Reference Senate Bill 148, 2008, and South Dakota Statutes 10-47B-3 through 10-47B-10)

E85 and Ethanol Blend Definitions

E85 is a petroleum product that is a blend of agriculturally derived denatured ethanol and gasoline or natural gasoline that typically contains 85% ethanol by volume, but at a minimum must contain 75% ethanol by volume. E85 produced for use as a motor fuel must comply with ASTM specification D5798-99. An ethanol blend is defined as a blended motor fuel containing a minimum of 10% by volume of ethyl alcohol of at least 99% purity derived from cereal grain which is blended exclusively with gasoline. (Reference South Dakota Statutes 10-47B-3)

Ethanol Fuel Tax

E85 is taxed at a rate of $0.10 per gallon when used as a motor fuel. Ethanol blends are taxed at a rate of $0.20 per gallon. (Reference South Dakota Statutes 10-47B-4)

Compressed Natural Gas (CNG) Tax

CNG must be converted for purposes of taxation to gasoline gallon equivalents (GGE) at the rate of 120 cubic feet of natural gas per one gasoline gallon equivalent. CNG is taxed at a rate of $0.10 per GGE. (Reference South Dakota Statutes 10-47B-3 and 10-47B-4)

Liquefied Petroleum Gas (LPG) Tax

LPG, when used as a motor vehicle fuel, must be converted for purposes of taxation to a liquid gross gallon equivalent using the conversion factor of 4.24 pounds per gallon of liquid at 60 degrees Fahrenheit. LPG is taxed at a rate of $0.20 per GGE. (Reference South Dakota Statutes 10-47B-3 and 10-47B-4)

Liquefied Petroleum Gas (LPG) License

LPG may be exempt from the fuel excise tax when sold from a licensed LPG vendor to a licensed LPG user or an LPG vehicle owner if it is delivered into a bulk storage tank that can then be used to deliver fuel into a motor vehicle. LPG purchasers must obtain a propane user license before LPG is delivered into a storage tank. (Reference South Dakota Statutes 10-47B-167)

Utilities/Private Incentives

There are currently no known utility or private incentives offered in South Dakota.

Points of Contact:

NAME/EMAIL	AGENCY	TITLE	PHONE/FAX
Ernie Oakes ernie.oakes@go.doe.gov	U.S. Department of Energy, Golden Field Office	Project Manager	Phone: (303) 275-4817 Fax: (303) 275-4830
Chris Ott chris.ott@state.sd.us	South Dakota Department of Transportation	Financial Analyst	Phone: (605) 773-4114 Fax: (605) 773-3921
David Knigge david.knigge@state.sd.us	South Dakota Department of Transportation	Assistant Finance Director	Phone: (605) 773-4555 Fax: (605) 773-3921
Gordon Lancaster gordon.lancaster@gsa.gov	U.S. General Services Administration	Transportation Operations Specialist	Phone: (303) 236-7599 Fax: (303) 236-7590