South Dakota Incentives and Laws
Listed below are the summaries of all current South Dakota incentives, laws, regulations, funding opportunities, and other initiatives related to alternative fuels and vehicles, advanced technologies, or air quality. You can go directly to summaries of:
State Incentives
Biodiesel Blend Tax Credit
Licensed biodiesel blenders are eligible for a tax credit for special fuel, including diesel, blended with biodiesel to create a biodiesel blend. The tax credit is granted on a per gallon basis, in the amount that the rate for special fuel exceeds the rate for the biodiesel blend. The purpose of the credit is to offset any tax liability resulting from the blending of previously untaxed biodiesel. (Reference South Dakota Statutes 10-47B-121.1)
Ethanol Production Incentive
Qualified and licensed ethanol producers are eligible for a $0.20 per gallon production incentive 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, and the producer must have produced ethanol on or before December 31, 2006. Annual production incentives paid to one facility may not exceed $1 million. Cumulative annual production incentives paid out to all facilities may not exceed $7 million in 2012 and 2013, $4.5 million in 2013 through 2016, and $7 million each year thereafter. Funds are apportioned each month based on the claims submitted that month and the total funds available. (Reference Senate Bill 196, 2011, and South Dakota Statutes 10-47B-162-163)
Tax Refund for Methanol Used in Biodiesel Production
A licensed biodiesel producer may apply for and obtain a tax refund for state fuel taxes paid on methanol used to produce biodiesel. (Reference South Dakota Statutes 10-47B-120.1)
Propane Tax Exemption
Liquified petroleum gas (propane) is exempt from the fuel excise tax when sold from a licensed propane vendor to a licensed propane user or a propane vehicle owner if it is delivered into a bulk storage tank that can then be used to deliver fuel into a motor vehicle. Purchasers must obtain a propane user license before propane is delivered into a storage tank. (Reference South Dakota Statutes 10-47B-167)
Laws and Regulations
Ethanol Grant Program Development
The South Dakota Office of Economic Development (Office) may establish a grant program to distribute funds for:
- Purchasing and/or installing publicly available E85 fueling infrastructure or ethanol blender pumps and the associated systems and equipment;
- Purchasing flexible fuel vehicles; and
- Encouraging increased ethanol use and infrastructure development in South Dakota.
The Office is responsible for developing rules for grant application submission, eligibility, application procedures, evaluation criteria, and grantee reporting. (Reference Senate Bill 196, 2011)
Biofuels Production Protection
The South Dakota Legislature urges the U.S. Congress and federal agencies to resist implementing indirect land use change provisions that may unfairly impact biofuels production in the United States. (Reference House Concurrent Resolution 1016, 2010)
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. (Reference House Concurrent Resolution 1010, 2008)
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), 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; and
- By 2025, at least 50% of all transportation fuels consumed in 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.
Biofuels Economic Development Plan
The South Dakota Legislature 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 biodiesel blends of 20% (B20). (Reference Senate Concurrent Resolution 8, 2007)
Ethanol Production Facility Fee
A fee of $1,000 is required with the submission 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 renewal fee includes an administrative fee of $1,000 and an emissions fee equaling $40 per ton of particulate matter, sulfur dioxide, nitrogen oxide, volatile organic compounds, and hazardous air pollutants the ethanol production plant emitted 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-1-58.1)
Biodiesel Fuel Use
The South Dakota Department of Transportation and employees using state diesel vehicles are directed to stock and use blends containing a minimum of 2% biodiesel (B2) that 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 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 and prescribed methods for the inspection and testing of alcohol blended fuels, petroleum products, biodiesel, and biodiesel blends; 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 Tax
Biodiesel and biodiesel blends are taxed at the motor fuel excise tax rate of $0.22 per gallon. Beginning the fiscal quarter after which a biodiesel production facility in the state reaches a name plate capacity of at least 20 million gallons per year and fully produces at least 10 million gallons of biodiesel within one year, the tax on biodiesel and biodiesel blends is reduced to $0.20 per gallon. 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. Biodiesel must meet the requirements of ASTM specification D6751 and the U.S. Environmental Protection Agency's registration and health effects testing program, as of January 1, 2008. Biodiesel blends are defined as blended special fuel containing a minimum of 5% biodiesel (B5). (Reference South Dakota Statutes 10-47B-3 through 10-47B-10)
Biofuel Franchising Contract Regulations
Franchise documents may not restrict a franchisee from any of the following activities:
- Installing a biofuel pump or tank, except property leased from the franchisor;
- Converting an existing tank or pump for biofuels use;
- Advertising the sale of biofuels, including listing biofuel availability or prices on signage;
- Selling biofuels;
- Purchasing biofuel from other sources if the franchisor does not offer biofuel;
- Installing or operating an ethanol blender pump, if the pump is approved for use by the appropriate jurisdictional authority; or
- Selling a biofuel in place of one grade of gasoline, if the franchisee is required to sell three grades of gasoline.
Biofuels include biodiesel, biodiesel blends, ethanol, or ethanol blends. (Reference House Bill 1216, 2011, and South Dakota Statutes 37-2-34, 37-2-35, and 37-2-37)
Ethanol Blend Definition
An ethanol blend is defined as a blended motor fuel containing ethyl alcohol that is at least 99% pure, derived from agricultural products, and is blended exclusively with gasoline. (Reference South Dakota Statutes 10-47B-3)
Ethanol and Methanol Tax
Ethyl alcohol and methyl alcohol motor fuels are taxed at a rate of $0.08 per gallon when used as a motor fuel. Ethyl alcohol is defined as a motor fuel that is typically derived from agricultural products that have been denatured. Methyl alcohol is a motor fuel that is most commonly derived from wood products. (Reference South Dakota Statutes 10-47B-3 and 10-47B-4)
Compressed Natural Gas (CNG) Tax
Ethyl alcohol and methyl alcohol motor fuels are taxed at a rate of $0.08 per gallon when used as a motor fuel. Ethyl alcohol is defined as a motor fuel that is typically derived from agricultural products that have been denatured. Methyl alcohol is a motor fuel that is most commonly derived from wood products. (Reference South Dakota Statutes 10-47B-3 and 10-47B-4)
Propane Tax
For taxation purposes, liquefied petroleum gas (propane) used as a motor vehicle fuel must be converted to gasoline gallon equivalents (GGE) using the conversion factor of 4.24 pounds per gallon of liquid at 60 degrees Fahrenheit per GGE. Propane is taxed at a rate of $0.20 per GGE. (Reference South Dakota Statutes 10-47B-3 and 10-47B-4)