Ethanol Laws and Incentives in Kentucky
The list below contains summaries of all Kentucky laws and incentives related to ethanol.
Laws and Regulations
Alternative Fuel Tax
An excise tax rate of 9% of the average wholesale price on a per gallon basis applies to all special fuels, including diesel, natural gas, propane, ethanol, biodiesel, hydrogen, and any other combustible gases and liquids, excluding gasoline, used to propel motor vehicles. Additionally, a highway motor fuel tax of $0.02 per gallon applies to all special fuels. For taxation purposes, one gasoline gallon equivalent of compressed natural gas (CNG) is equal to 5.66 pounds (lbs.) or 126.67 cubic feet. One diesel gallon equivalent of liquefied natural gas (LNG) is equal to 6.06 lbs.
Alternative Fuel and Conversion Definitions
Clean transportation fuels include propane, compressed natural gas (CNG), liquefied natural gas (LNG), electricity, and other transportation fuels determined to be comparable with respect to emissions. Propane is defined as a hydrocarbon mixture produced as a by-product of natural gas processing and petroleum refining and condensed into liquid form for sale or use as a motor fuel. CNG is defined as pipeline-quality natural gas that is compressed and provided for sale or use as a motor vehicle fuel. LNG is defined as pipeline-quality natural gas treated to remove water, hydrogen sulfide, carbon dioxide, and other components that will freeze and condense into liquid form for sale or use as a motor vehicle fuel.
A bi-fuel system is defined as the power system for motor vehicles powered by gasoline and either CNG or LNG. Bi-fuel systems are considered clean fuel systems. Conversion is defined as repowering a motor vehicle or special mobile equipment by replacing its original gasoline or diesel powered engine with one capable of operating on clean transportation fuel or retrofitting a motor vehicle or special mobile equipment with parts that enable its original gasoline or diesel engine to operate on clean transportation fuel.
(Reference Kentucky Revised Statutes 186.750)
Ethanol Production Tax Credit
Qualified ethanol producers are eligible for an income tax credit of $1.00 per gallon of corn- or cellulosic-based ethanol that meets ASTM Standard D4806. The total credit amount available for producers is $5 million for each fuel type in each taxable year. Unused ethanol credits from one ethanol-based cap, such as corn, may be applied to another ethanol-based cap, such as cellulosic, in the same taxable year. Unused credits may not be carried forward. Feedstock eligibility restrictions may apply.
On-Farm Biofuel Production Grants
The Governor's Office of Agricultural Policy provides grants through the County Agricultural Investment Program for on-farm energy efficiency and renewable energy production projects, including funding for equipment, structures, or other supplies necessary to convert biomass crops into useable energy or to convert grains and oilseeds into ethanol or biodiesel for use in on-farm equipment. Fuels produced on a farm with assistance through this program may not be used as transportation fuels for highway use. Applicants are encouraged to review manufacturers' warranties and specifications before using the fuels in any on-farm equipment. For more information, see the Kentucky Agricultural Development Fund Program Portal website.
More Laws and Incentives
To find laws and incentives for other alternative fuels and advanced vehicles, search all laws and incentives.