South Dakota Laws and Incentives

Listed below are the summaries of all current South Dakota laws, incentives, regulations, funding opportunities, and other initiatives related to alternative fuels and vehicles, advanced technologies, or air quality. You can go directly to summaries of:

State Incentives

Biodiesel Blend Tax Credit

Licensed biodiesel blenders are eligible for a tax credit for special fuel, including diesel, 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 South Dakota Statutes 10-47B-121.1)

Ethanol and Biobutanol Production Incentive

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)

Ethanol Infrastructure Grants

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)

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 South Dakota Statutes 10-47B-120.1)

Propane Tax Exemption

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

Laws and Regulations

Ethanol Production Facility Fee

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)

Fuel Quality Standards

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)

Biodiesel Tax

Biodiesel and biodiesel blends are taxed at the state motor fuel excise tax rate of $0.28 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 $0.26 per gallon. Biodiesel is defined as a fuel comprised of mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats. Biodiesel must meet the requirements of ASTM specification D6751 and the U.S. Environmental Protection Agency registration and health effects testing program, as written January 1, 2008. Biodiesel blends are defined as blended special fuel containing a minimum of 5% biodiesel (B5). (Reference South Dakota Statutes 10-47B-3 through 10-47B-10)

Biofuel Franchising Contract Regulations

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)

Ethanol Blend Definition

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)

Liquefied Natural Gas (LNG) Tax

LNG is taxed at a rate of $0.14 per gallon when used as a motor fuel. For taxation purposes, LNG is converted to its gasoline gallon equivalent (GGE) at the rate of 1.5536 gallons of LNG to equal one volumetric gross gallon of gasoline. LNG is defined as natural gas for use as a motor fuel, which has been cooled to approximately -260 degrees Fahrenheit and is in a liquid state. (Reference South Dakota Statutes 10-47B-3 and 10-47B-4)

Ethanol and Methanol Tax

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)

Compressed Natural Gas (CNG) Tax

CNG is taxed at a rate of $0.10 per gallon when used as a motor fuel. CNG is defined as natural gas that has been compressed for use as a motor vehicle fuel and that, for the purposes of taxation as a motor vehicle fuel, is converted to liquid gasoline gallon equivalent at the rate of 126.67 cubic feet of its natural service delivery line pressure to equal one volumetric gross gallon of gasoline. (Reference South Dakota Statutes 10-47B-3 and 10-47B-4)

Propane Tax

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