South Dakota Incentives and Laws

Last Updated April 2009

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)

Ethanol Production Incentive

A $0.20 per gallon production incentive is available to ethanol producers 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. Cumulative annual production incentives paid out may not exceed $7 million. (Reference South Dakota Statutes 10-47B-162)

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

Ethanol Blends Promotion

The South Dakota Legislature urges the U.S. Environmental Protection Agency and other appropriate federal agencies to authorize the use of ethanol blends higher than 10% in non-flexible fuel vehicles. (Reference Senate Concurrent Resolution 11, 2009)

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)

Ethanol Production Facility Fee

A fee of $1,000 is required with the submittal 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 particulate matter, sulfur dioxide, nitrogen oxide, volatile organic compounds, and hazardous air pollutants emitted by the ethanol production plant 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)

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)

Ethanol Blend Definition

An ethanol blend is defined as a blended motor fuel containing ethyl alcohol that is at least 99% pure and derived from agricultural products, which is blended exclusively with gasoline. (Reference Senate Bill 21, 2009, and South Dakota Statutes 10-47B-3)

Ethanol and Methanol Fuel 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 Senate Bill 21, 2009, and South Dakota Statutes 10-47B-3 and 10-47B-4)

Compressed Natural Gas (CNG) Tax

For taxation purposes, CNG must be converted to gasoline gallon equivalents (GGE) at the rate of 120 cubic feet of natural gas per one gasoline gallon equivalent. CNG is taxed at a rate of $0.10 per GGE. (Reference South Dakota Statutes 10-47B-3 and 10-47B-4)

Liquefied Petroleum Gas (LPG) Tax

For taxation purposes, LPG used as a motor vehicle fuel must be converted to a liquid gross gallon equivalent using the conversion factor of 4.24 pounds per gallon of liquid at 60 degrees Fahrenheit. LPG is taxed at a rate of $0.20 per GGE. (Reference South Dakota Statutes 10-47B-3 and 10-47B-4)

Liquefied Petroleum Gas (LPG) License

LPG may be exempt from the fuel excise tax when sold from a licensed LPG vendor to a licensed LPG user or an LPG vehicle owner if it is delivered into a bulk storage tank that can then be used to deliver fuel into a motor vehicle. LPG purchasers must obtain a propane user license before LPG is delivered into a storage tank. (Reference South Dakota Statutes 10-47B-167)

Utilities/Private Incentives

There are currently no known utility or private incentives offered in South Dakota.

Points of Contact:

NAME/EMAIL/TITLE	AGENCY	PHONE/FAX
Kay Kelly Project Manager	U.S. Department of Energy, Golden Office	Phone:(303) 275-6037 Fax:
Chris Ott Financial Analyst	South Dakota Department of Transportation	Phone:(605) 773-4114 Fax:(605) 773-2804
David Knigge Assistant Finance Director	South Dakota Department of Transportation	Phone:(605) 773-4555 Fax:(605) 773-2804
Anna Friend Transportation Operations Specialist	U.S. General Services Administration	Phone:(303) 236-7221 Fax:(303) 236-7590