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South Dakota Biodiesel Laws and Incentives


State Incentives

Biodiesel Blend Tax Credit

Licensed biodiesel blenders may be eligible for a tax credit for special fuel 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 Senate Bill 21, 2009, and Reference South Dakota Statutes 10-47B)

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 Senate Bill 16, 2009, and South Dakota Statutes 10-47B)

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, 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) (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.

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)

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)

Reduced Biodiesel Tax

Biodiesel and biodiesel blends are taxed at the special 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. This reduction expires after 35 million gallons of taxed biodiesel and biodiesel blended fuel is sold.

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, 2008. Biodiesel must also be registered with the U.S. Environmental Protection Agency as a fuel and fuel additive under section 211 of the Clean Air Act as of January 1, 2008. Biodiesel blends are defined as blended special fuel containing a minimum of 5% by volume of biodiesel.

(Reference South Dakota Statutes 10-47B-3 through 10-47B-10)