Minnesota Incentives and Laws for Ethanol

The list below contains summaries of all Minnesota incentives and laws related to Ethanol.

State Incentives

Cellulosic Ethanol Production Grants

A facility that produces transportation fuels derived from cellulosic material may be eligible for a grant to cover 50% of the cost of research, technical assistance, or production equipment for the facility, up to $500,000. To be eligible, a qualified engineer must certify the technology and fuel source. (Reference Senate File 1016, 2011, and Minnesota Statutes 41A.105)

Cellulosic Ethanol Investment Tax Credit

A tax credit is available for investments in a qualified small business that uses or is involved in the research or development of a proprietary technology related to cellulosic ethanol. The tax credit is equal to 25% of the qualified investment, up to $250,000 annually. The credit is available for an investment of up to $1 million over the life of a qualified small business. Eligible small businesses must receive state certification and meet other requirements, such as being headquartered in Minnesota. The tax credit expires January 1, 2015. (Reference House File 1219, 2011, and Minnesota Statutes 13.4967 and 116J.8737)

E85 Fueling Infrastructure Grants

Funding is available to assist fuel retailers with the installation or conversion of equipment to dispense E85 to the public. A retailer may apply for a grant in the amount of 50% of project costs, up to a maximum of $15,000, if program guidelines are met. Funding is limited and not guaranteed.

Alternative Fuel and Technology Grants

The University of Minnesota's Initiative for Renewable Energy and the Environment offers various types of grants to promote statewide economic development; sustainable, healthy and diverse ecosystems; and national energy security through development of biobased and other renewable resources and processes. Eligible projects include those focused on environmentally sound production of energy, including transportation fuels such as hydrogen and biofuels, from renewable sources; development of energy conservation and efficient energy utilization technologies; energy storage technologies; and analysis of policy options to facilitate adoption of technologies that use or produce low-carbon renewable energy. Funds are available through 2012. (Reference Minnesota Statutes 116C.779)

Ethanol Production Facility Environmental Assessment Exemption

An ethanol production facility producing less than 125 million gallons of ethanol annually that is located outside of the seven-county metropolitan area is exempt from preparing an environmental impact statement. In addition, an environmental assessment worksheet is not required for the expansion of an ethanol or biobutanol production facility, or the conversion of an ethanol facility to produce biobutanol. Exceptions may apply. (Reference Senate File 1115, 2011, and Minnesota Statutes 41A.09, 41A.105, and 116D.04)

Laws and Regulations

Ethanol Blend Mandate

All gasoline sold or offered for sale in Minnesota must contain at least 10% ethanol (E10), or the maximum percent of denatured ethanol the U.S. Environmental Protection Agency (EPA) allows in all vehicles regardless of model year. Gasoline-ethanol blends must comply with ASTM specification D4814-08b. Effective August 30, 2013, all gasoline sold or offered for sale in the state must contain at least 20% ethanol (E20), unless, by December 31, 2012, ethanol has already replaced 20% of all motor vehicle fuel sold in the state, or EPA has not granted approval for the use of E20 in all vehicles regardless of model year. Certain exemptions apply. (Reference Minnesota Statutes 239.761 and 239.791)

Ethanol Fuel Blend Dispensing Regulations

Gasoline blended for use in an alternative fuel vehicle (AFV) may contain any percentage of agriculturally derived, denatured ethanol, up to and including 85% (E85). Ethanol and gasoline blended at the point of retail sale in an ethanol-blending fuel dispenser must be clearly labeled "FLEX-FUEL VEHICLES ONLY." If a retailer sells both ethanol blends for use in AFVs as well as ethanol blends for use in standard combustion engines, the ethanol blends for use in a standard combustion engine must be dispensed from dedicated hoses, nozzles, or other equipment, and clearly labeled for use in conventional vehicles. Retailers are not responsible for customers' self-service fueling actions as long as these requirements are met. (Reference Minnesota Statutes 239.761 and 296A.01)

State Agency Sustainability Plan and Requirements

State agencies must establish interagency teams to develop and implement sustainability goals that reduce state vehicle petroleum consumption. In addition, each state department or agency must prepare an annual sustainability plan that includes ways to modify vehicle use practices, and report annually on progress towards implementing their plan. Each state agency plan must be based on following targets and mandates:

• Using 2005 as a baseline, the state must achieve a 50% reduction in gasoline used to operate state agency owned on-road vehicles by 2015;
• Using 2005 as a baseline, the state must achieve a 25% reduction in the use of petroleum-based diesel fuel for state owned on-road vehicles by 2015;
• When reasonably possible, state agencies must purchase on-road vehicles that use alternative fuels, including biodiesel blends of 20% (B20) or greater, compressed or liquefied natural gas, ethanol blends of 70% (E70) or greater, hydrogen, propane, or electricity, or (with the exception of buses, snowplows, and construction vehicles) have a fuel economy rating that exceeds 30 miles per gallon (mpg) in the city and 35 mpg on the highway;
• When reasonably possible, state employees must fuel vehicles capable of operating on an alternative fuel with that fuel;
• State agencies must increase the use of renewable fuels derived from agricultural products or waste products; and
• State agencies must increase the use of technology for delivering information and services in order to reduce reliance on the state's fleet.

(Reference Executive Order 11-13, 2011, and Minnesota Statutes 16C.135 and 16C.137)

Biofuels Promotion

The Minnesota Department of Agriculture (Department) must pursue available resources to promote and increase the production and use of biofuels in the state. These efforts should include increasing the availability of E85 fuel dispensers and ethanol blends. The Department outlined the federal, state, and local opportunities under this initiative in their report to the Minnesota Legislature entitled Bioenergy Development. (Reference Senate File 2737, 2010)

Biofuel Use Requirement

State agencies must take all reasonable actions to develop the infrastructure necessary to increase the availability and use of E85 and biodiesel throughout the state. Employees using state vehicles are expected to use E85 fuel when operating flexible fuel vehicles, whenever E85 is reasonably available. The Minnesota's SmartFleet Committee sets goals for reducing state government consumption of petroleum-based transportation fuels and reports annually on the use of E85 in the state fleet. (Reference Executive Orders 04-10, 2004, and 06-03, 2006)

Alternative Fuel Tax

The Minnesota Department of Revenue imposes an excise tax on the first licensed distributor that receives E85 fuel products in the state and on distributors, special fuel dealers, or bulk purchasers of other alternative fuels. E85 is taxed at the pump at a rate of $0.1985 per gallon, propane is taxed at $0.2105 per gallon, liquefied natural gas is taxed at $0.168 per gallon, and compressed natural gas is taxed at the rate of $0.2474 per hundred cubic feet. Gasoline is taxed at the rate of $0.28 per gallon. (Reference Minnesota Statutes 296A.07 and 296A.08)

Regional Biofuels Promotion Plan

Minnesota has joined Indiana, Iowa, Kansas, Michigan, Ohio, South Dakota, 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;
• 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.