North Dakota Incentives and Laws for Ethanol

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

State Incentives

Biofuels Infrastructure Grants

Through the Biofuels Blender Pump Program, the North Dakota Department of Commerce offers cost-share grants of up to $5,000 per fueling pump, up to $20,000 per retail location, to motor fuel retailers who install qualified biofuel blender pumps and associated equipment. Qualified retailers are also eligible for grants of up to $14,000 at each retail location for tanks and piping installed at the same time the blender pump is installed. A qualified ethanol retail blender pump must: 1) dispense a blend of gasoline and ethanol in the ratio the purchaser selects; 2) meet an industry standard and carry a warranty for compatibility with dispenser components and storage and piping systems; 3) have at least four hoses and dispense either a blend of 10% ethanol (E10) or the minimum blend percentage the U.S. Environmental Protection Agency has approved for use in all vehicles, a blend of at least 20% ethanol (E20), and E85; and 4) comply with all alternative fuel, biofuel, and flexible fuel requirements established by law. A qualified biodiesel retail blender pump must dispense varying blends of biodiesel and diesel fuels in the ratio the purchaser selects, and comply with all alternative fuel, biofuel, and flexible fuel requirements established by law. Grant recipients must continue to sell biofuel blends for at least 12 months after receiving funding. This incentive is available through April 30, 2013. (Reference North Dakota Century Code 17-80)

Biofuel Loan Program

The Biofuels Partnership in Assisting Community Expansion (PACE) Loan Program provides an interest buy down of up to 5% below the note rate to: biodiesel, ethanol, or green diesel production facilities; livestock operations feeding by-products produced at a biodiesel, ethanol, or green diesel facility; and grain handling facilities which provide storage of grain used in biofuels production. Qualified biodiesel, ethanol, and green diesel production facilities located in North Dakota may receive up to $500,000 of interest buy down for the purchase, construction, or expansion of a production facility, or the purchase or installation of equipment at the facility. A biodiesel production facility must produce fuel that is comprised of mono-alkyl esters of long chain fatty acids derived from vegetable oil or animal fats and that meets ASTM specification D6751. An ethanol production facility must produce agriculturally-derived denatured ethanol that is suitable for blending with a petroleum product for use in internal combustion engines. A green diesel production facility must produce fuel from renewable resources that meets applicable ASTM specifications. Loan terms vary based on the project type, and recipients of Biofuels PACE loans are not eligible for regular PACE loans. (Reference Senate Bill 2034, 2011, and North Dakota Century Code 17-03 and 57-43.2-01)

Agriculturally-Derived Fuel Production Facility Loan Guarantees

The Bank of North Dakota offers loan guarantees for eligible entities constructing facilities using biomass for agriculturally-derived fuel production. The loan guarantee may not exceed 25% of the total loan or $12.5 million. The total value of loan guarantees under this program may not exceed $25 million at any one time. Loan guarantees are available through July 31, 2013. Additional restrictions apply. (Reference Senate Bill 2306, 2011, and North Dakota Century Code 6-09.7)

Agriculturally-Based Fuel Production Wage and Salary Tax Credit

New ethanol, biodiesel, green diesel, and biogas producers may be eligible for an income tax credit equal to a percentage of wages and salaries paid each year. A corporation involved in processing an agricultural product, including ethanol, biodiesel, and biogas feedstocks, may claim an income tax credit equal to 1% of wages and salaries paid during the tax year for each of the first three years of operation and 0.5% of wages and salaries paid during the tax year for the fourth and fifth years. Only corporations doing business in North Dakota for the first time are eligible. A corporation created from the reorganization or acquisition of an existing business does not qualify, nor does a business that receives a property or income tax exemption under North Dakota Century Code 40-57.1. (Reference North Dakota Century Code 57-38-30.1)

Ethanol Production Incentive

The Ethanol Production Incentive provides qualified ethanol producers with quarterly payments based on production volume during times when ethanol prices are unusually low and/or corn prices are unusually high. If an ethanol production facility was in operation in North Dakota before July 1, 1995, it is only eligible to receive incentive payments if that facility increases its production by 10 million gallons or 50% of its production capacity, whichever is less, during any 12-month period beginning on or after July 1, 2005. The incentive amount is based on the average North Dakota wholesale ethanol price for the preceding quarter and the average North Dakota corn price for the preceding quarter. The total cumulative incentive available to all eligible producers in any single year is $1.6 million. A single eligible facility may not receive more than $10 million in incentive payments over the life of the facility. (Reference North Dakota Century Code 17-02)

Laws and Regulations

Authorization to Provide Advanced Biofuel Incentives

The North Dakota Industrial Commission may provide incentives to support research and development projects and obtain matching grants for projects involving advanced and sugar-based biofuel. Advanced biofuel is defined as fuel derived from renewable biomass and includes biofuel derived from cellulose, hemicellulose, or lignin; biofuel derived from sugar and starch other than ethanol derived from corn kernel starch; biofuel derived from waste material, including crop residue, other vegetative waste material, animal waste, food waste, and yard waste; diesel-equivalent fuel derived from renewable biomass, including vegetable oil and animal fat; biogas, including landfill gas and sewage waste treatment gas, produced through the conversion of organic matter from renewable biomass; butanol or other alcohols produced through the conversion of organic matter from renewable biomass; or other fuel derived from cellulosic biomass. (Reference North Dakota Century Code 54-63-03)

Alternative Fuel Labeling Requirement

Alternative fuel retailers must label retail dispensing units with the price, name, and main components of the alternative fuel or alternative fuel blend being sold. The labeling must follow established labeling specifications for petroleum-based fuels. An alternative fuel producer may provide the retailer with a label promoting the benefits of the alternative fuel if the label meets the specified requirements. Alternative fuel is defined as a fuel used in an engine or vehicle other than a petroleum-based fuel, including biodiesel and green diesel. Alcohol fuel blends containing at least 1% of alcohol by volume must also be clearly labeled at the dispenser and on any price advertisements. (Reference Senate Bills 2034 and 2127, 2011, and North Dakota Century Code 19-10-03.1 and 19-10-03.3)

Alternative Fuel Tax Rates

A special excise tax rate of 2% is imposed on the sale of propane (liquefied petroleum gas) and a tax of $0.04 per gallon is imposed on all special fuels sales, including compressed natural gas. Retailers must obtain a license from the Office of the State Tax Commissioner to sell special fuels. Exceptions apply. (Reference Senate Bill 2197, 2011, and North Dakota Century Code 57-43.2-02 through 57-43.2-05)

Regional Biofuels Corridor

North Dakota has joined Indiana, Iowa, Kansas, Michigan, Minnesota, Nebraska, South Dakota, and Wisconsin in adopting a cooperative initiative under the Energy Security and Climate Stewardship Platform Plan (Platform). The Platform establishes a regional biofuels corridor program and directs state transportation, agriculture, and regulatory officials to develop a system of coordinated signage across the Midwest 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.

Renewable Fuels Promotion

Recognizing that biofuels such as ethanol and biodiesel will be an important part of the state's energy economy and advanced research in biofuels production from biomass will be critical to the long-term viability of biofuels, the North Dakota Legislature adopted the goal that 25% of the nation's energy consumption will come from renewable sources by the year 2025. (Reference North Dakota Century Code 17-01-01)

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