Search Federal and State Laws and Incentives

Qualified and licensed ethanol and biobutanol producers are eligible for a $0.20 per gallon production incentive for ethanol and biobutanol that is fully distilled and produced in South Dakota. Ethanol must also be denatured, 99% pure, distilled from cereal grains, and blended with gasoline to create an ethanol blend. In addition, the producer must have produced ethanol on or before December 31, 2006, to be eligible. Annual production incentives paid to one facility may not exceed $1 million. Cumulative annual production incentives paid out to all facilities may not exceed $7 million per year. Funds are apportioned each month based on the claims submitted and the total funds available. This incentive expires on July 1, 2022. (Reference Senate Bill 183, 2018, and South Dakota Statutes 10-47B-162 and 10-47B-163)

Ethyl alcohol and methyl alcohol motor fuels are taxed at a rate of $0.14 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 South Dakota Statutes 10-47B-3 and 10-47B-4)

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

The South Dakota Department of Public Safety authorizes fuel quality standards and enforces fuel rules related to:

• Standards for the maximum volume percentages of ethanol and methanol in alcohol blended fuels;
• A program and prescribed methods for the inspection and testing of alcohol blended fuels, petroleum products, biodiesel, and biodiesel blends;
• Labeling requirements for devices dispensing alcohol blended fuels, biodiesel, and biodiesel blends;
• Standards setting the specifications and tolerance requirements for petroleum products, biodiesel, and biodiesel blends; and
• Regulations for filtering systems used on devices dispensing alcohol blended fuels.

All rules conform to appropriate ASTM standards. (Reference South Dakota Statutes 37-2-6)

The cost to submit an air quality permit application for an ethanol production plant is $1,000. An annual renewal fee is also 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 of particulate matter, sulfur dioxide, nitrogen oxide, volatile organic compounds, and hazardous air pollutants emitted 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-1-58.1)

The South Dakota Governor's Office of Economic Development administers the Ethanol Infrastructure Incentive Program, providing grants to offset the cost of installing ethanol blender pumps and underground storage tanks (UST) for ethanol at retail fueling stations throughout the state. Awardees may receive up to $29,054 per blender pump. Additionally, awardees may receive up to $40,000 per station for the installation of a UST that allows for the use of ethanol blender pumps. For eligibility requirements, application instructions, and annual program deadlines, see the Ethanol Infrastructure Incentive Program website. This incentive expires on July 1, 2022. (Reference Senate Bill 183, 2018, and South Dakota Statutes 10-47B-162 and 10-47B-164)

Franchise documents may not restrict a franchisee from participating in any of the following activities:

• Installing a biofuel pump or tank, except property leased from the franchisor;
• Converting an existing tank or pump for biofuels use;
• Advertising the sale of biofuels, including listing biofuel availability or prices on signage;
• Selling biofuels;
• Purchasing biofuel from other sources if the franchisor does not offer biofuel;
• Installing or operating an ethanol blender pump, if the pump is approved for use by the appropriate jurisdictional authority; or
• Selling a biofuel in place of one grade of gasoline, if the franchisee is required to sell three grades of gasoline.

Biofuels include biodiesel, biodiesel blends, ethanol, and ethanol blends. (Reference South Dakota Statutes 37-2-34, 37-2-35, and 37-2-37)