Natural Gas Laws and Incentives in Minnesota

The list below contains summaries of all Minnesota laws and incentives related to natural gas.

State Incentives

Alternative Fuel Retail Delivery Fee Exemption

Retail deliveries of liquefied natural gas and liquefied petroleum gas to political subdivisions, trades, or businesses are exempt from retail delivery fees.

(Reference Minnesota Statute 168E.05)

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)

Laws and Regulations

Alternative Fuel Tax

The Minnesota Department of Revenue (DOR) 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. The tax rate for propane is $0.239 per gallon, liquified natural gas is $0.192, E85 is $0.2259 per gallon, biodiesel (B100) is $0.318 per gallon, and compressed natural gas is $0.00251 per thousand cubic feet. Exemptions for certain categories of fuel purchasers apply. For more information, including current tax rates and fees, see the DOR Petroleum Tax Fuel Excise Tax Rates and Fees website.

(Reference Minnesota Statutes 296A.07 and 296A.08)

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 (NEVs), 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. A NEV is defined as an electrically powered motor vehicle with three or four wheels that can attain a speed of at least 20 miles per hour but not exceed 25 miles per hour. 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 Vehicle Acquisition and Management Requirement

When purchasing motor vehicles, state agencies must prioritize vehicles that operate on alternative fuels. Priority is based on fuel type in the following order:

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 agencies 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. The Minnesota Department of Administration, in collaboration with the Departments Agriculture, Commerce, Natural Resources, and Transportation, as well as the Pollution Control Agency, must report progress on fleet vehicle acquisitions in the public dashboard for state fleet reporting and information management. The dashboard must also include recommendations for new or adjusted goals, directives, or legislative initiatives to meet fleet vehicle acquisition requirements. For more information, see the Minnesota Office of Enterprise Sustainability website.

(Reference Minnesota Statutes 16C.135, 16C.137, and 16C.138)

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