Natural Gas Laws and Incentives in Minnesota
The list below contains summaries of all Minnesota laws and incentives related to natural gas.
Laws and Regulations
Alternative Fuel Tax
The Minnesota Department of Revenue imposes an excise tax on the first licensed distributor that receives E85 fuel products in the state and on distributors, special fuel dealers, or bulk purchasers of other alternative fuels. The Minnesota Department of Revenue Commissioner must determine the tax rate for alternative fuel sales annually. The tax rate for E85 is set by the Minnesota Highway Construction Cost Index. Propane is taxed at a minimum rate of $0.1875 per gallon, liquefied natural gas is taxed at a minimum rate of $0.15 per gallon, and compressed natural gas is taxed at a minimum rate of $1.974 per thousand cubic feet. Exemptions apply for certain categories of fuel purchasers.
(Reference Minnesota Statutes 296A.07 and 296A.08 and House Bill 2887, 2023)
Electric Vehicle (EV) and Natural Gas Vehicle (NGV) Initiatives
All solicitation documents that include the purchase of passenger automobiles issued under the jurisdiction of the Minnesota Department of Administration must assert the intention of the state to begin purchasing all-electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), neighborhood electric vehicles, and natural gas vehicles (NGVs). For this requirement to apply, vehicles must meet the state’s performance specifications and have a total life-cycle cost of ownership less than or comparable to that of gasoline-powered vehicles.
An EV is defined as a motor vehicle that can be powered by an electric motor drawing current from rechargeable storage batteries, fuel cells, or other portable sources of electrical current, and meets or exceeds applicable requirements in Title 49 of the Code of Federal Regulations, section 571, and future regulations. A PHEV is defined as an EV that contains an internal combustion engine and uses a battery-powered electric motor to deliver power to the drive wheels. When connected to the electrical grid via an electrical outlet, the vehicle must be able to recharge its battery. The vehicle must have the ability to travel at least 20 miles powered substantially by electricity. An NGV is defined as motor vehicle that is capable of being propelled by natural gas, including compressed natural gas and liquefied natural gas.
(Reference Minnesota Statutes 16C.138 and 169.011)
Public Utility Definition
An individual, corporation, or other legal entity that resells compressed natural gas as a vehicular fuel or electricity to recharge a battery that powers an electric vehicle is not defined as a public utility.
(Reference Minnesota Statutes 216B.02)
State Agency Sustainability Plan and Requirements
Each state department or agency must prepare a biennial sustainability plan, that includes ways to modify vehicle use practices, and report annually on progress towards implementing their plan. Each state agency plan must prioritize the purchase of on-road vehicles that use alternative fuels. Vehicle purchasing priority is as follows:
1. Electric vehicles
2. Hybrid electric vehicles
3. Vehicles that use alternative fuels, including biodiesel blends of 20% (B20) or greater, compressed or liquefied natural gas, ethanol blends of 70% (E70) or greater, hydrogen, or propane
4. Gasoline or diesel vehicles
High priority vehicle types may be rejected if the vehicle type is incapable of carrying out its purpose or the total cost of ownership is more than 10% higher than the next vehicle in the preference list. Emergency and law enforcement vehicles are exempt from this requirement. State agency plans must also, among other things, encourage state employees to fuel vehicles with alternative fuels when available and increase the use of renewable fuels derived from agricultural products or waste products.
(Reference Minnesota Statutes 16C.135 and 16C.137 and House Bill 2310, 2023)
State Agency Vehicle Procurement and Management Requirement
When purchasing motor vehicles, state agencies must prioritize vehicles that operate on priority alternative fuels.
A committee of representatives from the Minnesota Departments of Administration, Agriculture, Commerce, Natural Resources, and Transportation, as well as the Pollution Control Agency, will implement a state fleet reporting and information management system. The committee will submit findings to the governor and appropriate legislative committees on a bi-yearly basis with recommendations for goals, directives, or legislative initiatives to meet these objectives.
(Reference Minnesota Statutes 16C.137 and 16C.138 and House Bill 2310, 2023)
State Incentives
Idle Reduction and Natural Gas Vehicle (NGV) Weight Exemption
A motor vehicle equipped with idle reduction or emissions reduction technology may exceed the maximum gross vehicle weight and axle weight limits by up to 550 pounds (lbs.) to compensate for the additional weight of the technology.
NGVs may exceed the state’s gross vehicle and axle weight limits by the amount of weight calculated as provided under Code of Federal Regulations Title 23, section 127(s), not to exceed 2,000 lbs.
The vehicle operator must be able to provide documentation or demonstrate that the vehicle meets these requirements.
(Reference Minnesota Statutes 169.824)
Off-Road Diesel Replacement Grants
The Minnesota Pollution Control Agency (MPCA) provides funding to public, private, and nonprofit fleet owners for the replacement of eligible off-road diesel equipment. Eligible equipment includes trailer refrigeration units, terminal tractors/drayage trucks, and more. This program is partially funded by Minnesota’s portion of the Volkswagen Environmental Mitigation Trust. For more information, including funding availability, see the MPCA Diesel Emission Reduction Act website.
More Laws and Incentives
To find laws and incentives for other alternative fuels and advanced vehicles, search all laws and incentives.