Kentucky E85 Laws and Incentives
State Incentives
Ethanol Production Tax Credit
Qualified ethanol producers are eligible for an income tax credit of $1.00 per gallon of corn- or cellulosic-based ethanol that meets ASTM standard D4806. The total credit amount for all corn and cellulosic ethanol producers is $5 million for each taxable year. Unused credits may not be carried forward and applied to a future tax return. However, unused ethanol credits from one ethanol-based cap, such as corn, may be applied to another ethanol-based cap, such as cellulosic, in the same taxable year. (Reference Kentucky Revised Statutes 141.4244 to 141.4248)
Alternative Fuel Production Tax Incentives
The Kentucky Economic Development and Finance Authority (KEDFA) provides tax incentives to construct, retrofit, or upgrade an alternative fuel production or gasification facility that uses coal or biomass as a feedstock. The incentives may consist of: 1) a refund of up to 100% of the state sales tax paid on the purchase of personal property used to construct the facility; 2) a credit of up to 100% of an approved company's state income tax and limited liability entity tax that is generated by the project; 3) up to 4% of the wage assessment of employees whose jobs were created as a result of the construction, retrofit, upgrade or operation of a qualified facility; and 4) a credit for up to 80% of the coal severance tax paid for coal used as a feedstock. The incentives expire at the time of receipt of the authorized incentives or 25 years from activation of the project, whichever occurs first. Approved companies may recover up to 50% of their capital investment via the authorized tax incentives. The minimum capital investment for incentive eligibility is $25 million for an alternative fuel or gasification facility that uses biomass as the primary feedstock and $100 million for a facility that uses coal as the primary feedstock. (Reference Kentucky Revised Statutes 154.27-010 to 154.27-090)
Alternative Fuel Research, Development, and Promotion
The Kentucky New Energy Ventures (KNEV) program, established by the Kentucky Alternative Fuel and Renewable Energy Fund Program, provides project funding to companies for research, development, and commercialization of alternative fuels and renewable energy. Specifically, KNEV is designed to: 1) grow Kentucky-based alternative fuel and renewable energy companies to promote commonwealth-wide, innovation-driven economic growth; 2) stimulate private investment in Kentucky-based alternative fuel and renewable energy enterprises; 3) expand the alternative fuel and renewable energy knowledge base, talent force, and industry in Kentucky; 4) develop an alternative fuel and renewable energy resource network to build the technical and business capacity of entrepreneurs through informal and formal strategic support; and 5) build commonwealth-wide awareness of the economic development opportunities offered by Kentucky's alternative fuel and renewable energy industry. (Reference Kentucky Revised Statutes 154.20-410 and 154.20-415)
Alternative Fuel and Vehicle Promotion
The Kentucky Department for Energy Development and Independence (Department) encourages the responsible use of transportation fuels by supporting academic research, public education, and collaborative partnerships involving alternative fuels and alternative fuel vehicles (AFVs). The Department has implemented a number of projects to promote the use of AFVs and establish alternative fuel infrastructure in Kentucky.
State Laws and Regulations
Vehicle Acquisition Priorities and Alternative Fuel Use Requirement
The Finance and Administration Cabinet (Cabinet) is required to develop a strategy to replace at least 50% of commonwealth motor fleet light-duty vehicles with energy-efficient vehicles including hybrid electric vehicles, fuel cell vehicles, and alternative fuel vehicles. The Cabinet must also develop a strategy to increase the use of ethanol, biodiesel, and other alternative fuels in commonwealth motor vehicle fleets. The Cabinet must report targeted vehicle and fuel usage amounts annually. (Reference Kentucky Revised Statutes 45A.625)
State Energy Plan Alternative Fuel Requirements
The Governor's Office of Energy Policy oversees the development and implementation of Kentucky's comprehensive energy strategy. Specifically, the Governor's Office of Energy Policy is directed to develop and implement a strategy for the production of alternative transportation fuels and synthetic natural gas from fossil energy resources and biomass resources, including biodiesel and ethanol. The commonwealth energy plan, Intelligent Energy Choices for Kentucky's Future, was developed in 2008 and proposes seven strategies to support a renewable and efficiency portfolio standard, an alternative transportation fuel standard, and fuel production goals. (Reference Kentucky Revised Statutes 152.720 and Intelligent Energy Choices for Kentucky's Future (PDF 2.39 MB)) Download Adobe Reader
Biofuels Use
The Kentucky Transportation Cabinet and the Finance and Administration Cabinet are directed to establish procurement contracts that maximize the market availability of ethanol and biodiesel fuel blends. Additionally, employees using conventional vehicles in the Transportation Cabinet's fleet are directed to use either a 10% blend of ethanol (E10) or a 2% blend of biodiesel (B2) as their primary fueling option, and the Transportation Cabinet is directed to maximize the use of E85 in its flexible fuel vehicle fleet. The Transportation Cabinet is directed to promote clean fuels through employee education, vendor identification, and by holding employees accountable for electing to use clean fuels in commonwealth vehicles. (PDF 108 KB)) Download Adobe Reader
