In the 2008, there were 106 biofuel tax incentive and rebate programs in 40 States. This has grown to 190 biofuel tax incentive and rebate programs in 45 different states. In addition, a total of 10 states had mandates or standards for the use of ethanol or biodiesel after the 2008 legislative season including Hawaii, Washington, Oregon, New Mexico, Louisiana, Florida, Montana, Minnesota, Iowa and Missouri. Currently, there are 16 states with mandates or standards thanks to the addition of California, Maine, Massachusetts, New Jersey, Pennsylvania and Wisconsin. While this is not a large increase, the biobased economy is expanding largely at the state level.
Several biofuel policies exist at the state level. While many states have similar policies, several states are distinguished by their differences in terminology and standards, such as a further breakdown of how a state defines the term ‘biodiesel’. States have alternative fuel incentives, tax credits, or exemptions that are either similar or varying in nature.
As depicted, California has the most biofuel policies of any state; followed by Virginia, Illinois, and Indiana. Such policies include alternative fuel school bus regulations and incentives, alternative fuel labeling and ethanol labeling requirements, and biofuels blend use requirements. States with the fewest biofuel policies include Alaska, Michigan, Delaware, and the District of Columbia.
State biofuel policies set alternative fuel school bus regulations and incentives. Virginia and West Virginia have alternative fuel school bus regulations and incentives based on their Boards of Education. The Virginia Board of Education may not limit any local school division to purchase and use school buses powered by compressed natural gas or other alternative fuels or convert its school buses to use compressed natural gas or other alternative fuels. In West Virginia, any county that uses compressed natural gas or propane for its school bus fleet is eligible for a 10 percent reimbursement from the West Virginia Department of Education. That helps offset the cost of maintenance, operation, and other costs incurred from using those compressed natural gas or propane.
Texas has a Clean School Bus Program. The Texas Commission on Environmental Quality gives grants to any school district or charter school to pay for the incremental costs to replace school buses or install diesel oxidation catalysts, diesel particulate filters, emission-reducing add-on equipment, and other emissions reduction technologies in qualified school buses. Like Texas, California also has a Lower-Emission School Bus Program that grants funds for the replacement of older school buses and for the purchase of air pollution control equipment for in-use buses.
Connecticut seeks to reduce emissions by requiring school buses with engines 1994 model and newer to be equipped with specific emissions control systems. Ohio has a School Bus Replacement Grant Program. Other states with bioenergy policies pertaining to school buses include: Kentucky, North Carolina, New Jersey, Illinois, South Carolina, and Oregon.
North Carolina and Alabama offer alternative fuel and idle reduction grants. Alabama divides low interest energy efficiency loan programs for private and public entities. On the other hand, North Carolina has grants for the incremental cost of original equipment manufacturer alternative fuel vehicles, vehicle conversions, and implementing idle reduction programs. Similarly, Maryland and Virginia have alternative fuel infrastructure grants for planning, installation, and operating public access alternative fueling and charging infrastructure.
The following states have alternative fuel use and vehicle acquisition requirements: Nevada, Texas, Vermont Utah, Missouri, North Carolina, Oklahoma, Maryland, Ohio, West Virginia, Kansas, and Washington.
In Utah, by August 30, 2018, at least 50 percent of new or replacement light-duty state agency vehicles must meet Bin 2 emissions standards, which apply to all vehicle weight categories, including cars, minivans, light-duty trucks, and SUVs.
In Kansas, state agencies must purchase flexible fuel vehicles capable of operating on E85 fuel if available.
North Carolina’s alternative fuel vehicle acquisition goal is that at least 75 percent of new or replacement state government light-duty cars and trucks with a gross vehicle weight rating of 8,500 pounds or less must be alternative fuel vehicles or low emission vehicles.
New Mexico and Minnesota have biodiesel blend mandates. In New Mexico, all diesel fuel sold for use in on-road motor vehicles to state agencies, political subdivisions of the state, and public schools must contain at least 5 percent of biodiesel. In Minnesota, diesel fuel sold in the state must be at least 10 percent biodiesel, increasing to 20 percent biodiesel on May 1, 2018. Iowa and South Dakota also offer biodiesel blend tax credits.
Biodiesel production and blending tax credits are provided to aid qualified producers or blenders. Kentucky and North Dakota are examples of states that have biodiesel production and blending tax credits. In Kentucky, qualified biodiesel producers or blenders are eligible for an income tax credit of 1.00 dollar per gallon of pure biodiesel or renewable diesel produced or used in the blending process. In North Dakota, a corporate income tax credit of 10 percent of the direct costs incurred to add equipment to retrofit an existing facility or construct a new facility in the state for the purpose of producing or blending diesel fuel containing at least two percent of biodiesel or green diesel is given to qualified producers or blenders.
Texas and Oklahoma have natural gas vehicle and fueling infrastructure rebates. The Texas Gas Service Conservation Program offers a 2,000 dollars rebate for the purchase of a qualified natural gas vehicle or 3,000 dollars for the conversion of a gasoline powered vehicle to operate on natural gas. Oklahoma Natural Gas offers rebates for natural gas vehicles purchased or converted after June 20, 2016, in the amount of 2,000 dollars for a dedicated of bi-fuel natural gas vehicle. Also, 3,000 dollars can go toward the cost of a compressed natural gas home fueling station.
Virginia and Wisconsin have alternative fuel license policies. In Virginia, people with alternative fuel vehicles from a private source that do not pay the alternative fuels tax must obtain an alternative fuel license from the Virginia Department of Motor Vehicles. In Wisconsin, anyone acting as an alternative fuels dealer must hold a valid alternative fuel license and certificate from the Wisconsin Department of Administration. To conduct business in Wyoming, an annual 25 dollar license from the Wyoming Department of Transportation must be obtained by an alternative fuel supplier, refiner, distributor, terminal operator, importer or exporter of alternative fuel used in motor vehicles.
Virginia has clean transportation technology investment funding. In Virginia, the Commonwealth Energy Fund provides early-stage investment funds for Virginia-based technology, life science, and clean technology companies.
Alternative fuel labeling and ethanol labeling requirements vary by state. Illinois requires that 15 percent of all vehicles purchased with state funds must be fueled by electricity, natural gas, or liquefied petroleum gas (i.e., propane). In North Dakota, alternative fuel retailers must label retail dispensing units with the price, name, and main components of the alternative fuel or alternative fuel blend being sold. Every alternative fuel automobile, truck, motorcycle, motor home, or off-road vehicle in Washington must bear a reflective placard from the National Fire Protection Association indicating that the vehicle is powered by an alternative fuel. In North Carolina, pumps dispensing and selling ethanol-blended gasoline must be labeled with the registered brand name and the volume percentage, or blend level, of the ethanol (10 percent or less, 10 to 15 percent, 15 to 85 percent or 85 percent). Connecticut requires any motor vehicle fuel sold at retail containing more than one percent ethanol or methanol to be labeled according to Connecticut Department of Consumer Protection. All gasoline in Mississippi and Oklahoma containing one percent or more ethanol by volume offered for sale must be conspicuously identified as “with ethanol” or “containing ethanol”.
Many states have biofuel production facility tax credits or exemptions. For example, in South Carolina, a taxpayer constructing a commercial facility for the production of biofuel is eligible for a tax credit of up to 25 percent of the cost of constructing or renovating a building and equipping the facility. In Montana, a tax credit of up to 15 percent of the cost of constructing and equipping a facility to be used for biodiesel or bio-lubricant production is available to businesses. Any newly constructed or expanded biomass-to-energy facility in Kansas is exempt from state property taxes for up to 10 taxable years after construction.
Alternative fuel tax rates can vary by state. In Maine, blended fuels that contain at least 10 percent of gasoline or diesel are taxed at the full tax rate of gasoline (0.30 dollars per gallon) or diesel (0.312 dollars per gallon). Wyoming has a license tax of 0.24 dollars per gasoline gallon equivalent or a diesel gallon equivalent is collected on all alternative fuel used, sold, or distributed for sale or use. In Hawaii, any alternative fuel used to operate an internal combustion engine distributor must pay a license tax of 0.0025 dollars for each gallon of alternative fuel the distributor sells or uses and pay a license tax for each gallon of fuel sold or used by the distributor for operating a motor vehicle on state public highways.
North Dakota has a special excise tax rate of two percent that is imposed on the sale of propane and an excise tax of 0.23 dollars per gallon is imposed on all special fuels sales and deliveries.
Iowa and Kentucky have alternative fuel production tax credits. Iowa’s High Quality Jobs Program offers state tax incentives to business projects for the production of biomass or alternative fuels. Kentucky companies engaged in energy-efficient alternative fuel production, alternative fuel production, and gasification may be eligible for an incentive through the Kentucky Enterprise Initiative Act (effective July 14, 2018). Kentucky also has the Kentucky Economic Development Finance Authority, which provides tax incentives to construct, retrofit, or upgrade an alternative fuel production or gasification facility that uses coal or biomass as a feedstock.
Each state has a different biodiesel tax exemption, deduction, and refund. Oregon’s exemption is on biodiesel blends containing at least 20 percent biodiesel derived from used cooking oil. The blends are exempt from the 0.34 dollars per gallon state fuel excise tax. In Rhode Island, biodiesel is exempt from the 0.30 dollars per gallon state motor fuel tax. In North Carolina, biodiesel for use in a private passenger vehicle is exempt from the state motor fuel excise tax. Similarly in Montana, biodiesel producers that produce biodiesel from waste vegetable oil feedstock are exempt from the state special fuel tax. Montana’s biodiesel tax refund allows a licensed distributor paying the special fuel tax on biodiesel to claim a refund equal to 0.02 dollars per gallon of biodiesel sold during the previous quarter if the biodiesel is made entirely from components produced in Montana.
As part of the Hawaii Clean Energy Initiative, Hawaii will produce 70 percent of the state’s energy needs from energy-efficient and renewable sources by 2030 and 100 percent of the state’s energy needs from energy-efficient and renewable sources by 2045.
Biobased Products Policies
Since 2008, States have been adding more initiatives, programs, plans, and strategies that increase the use of renewable chemicals and other biobased products. State goals include increases in biobased products and environmentally preferable products, increases in organic farms, reduction of solid waste, and giving tax credits for biorenewable chemicals.
Massachusetts created the Environmentally Preferable Products Procurement Program of 2009, which has the following functions: gives specifications for sustainable products on statewide contracts; fosters cost effective responsible purchasing choices that help reduce impacts on public health and the environment; works with agencies, departments and others to encourage their use in public operations.
In 2010, Ohio became the first state to establish a Bio-based Products Preference Program. In this program, state agencies and institutions of higher learning (state-supported colleges) are obligated to purchase products with the highest percentage of biobased content as determined via ASTM D6866.
California’s 75 Percent Initiative went into effect in 2013. The initiative increases demand for bioproducts. It has a goal of 75 percent recycling, composting or source reduction of solid waste by 2020. This will tremendously decrease California’s future reliance on landfills. The highest and best use of all materials in California can be achieved when the current landfill diversion programs are equal partners with the materials management program.
The Iowa Nutrient Reduction Strategy of 2013 is a science and technology-based approach to assess and reduce nutrients delivered to Iowa waterways and the Gulf of Mexico. It promotes voluntary efforts to reduce nutrients in surface water from both point sources (wastewater treatment plants and industrial facilities) and nonpoint sources (farm fields and urban areas), in a cost-effective manner.
Iowa’s 2016 Biorenewable Chemical Tax Credit created an income tax credit equal to five cents per pound of qualified chemicals produced. New businesses can get up to one million dollars, while existing businesses can receive 500,000 dollars. The credit is limited to 10 million dollars per fiscal year in total awards. The Biorenewable Chemical Tax Credit Program is a revenue-neutral tax incentive and economic development package designed to attract national biochemical companies and pioneering new businesses to the state. The Biorenewable Chemical Tax Credit Program is the strongest incentive package in the world for biochemicals, and Iowa contains by far the nation’s strongest biorenewables infrastructure.
North Dakota’s Foundation for Agricultural and Rural Resources Management and Sustainability works to ensure the sustainability, health, and diversity of small farms and communities across the state. The foundation includes educational programs and opportunities and aims to cultivate the next generation of organic farmers. It gives farmers the tools necessary to build and sustain thriving organic farms, promotes the purchase of locally grown produce, and expands agricultural education in schools. Low interest loans and grants for sustainable farm improvements or enterprise startups are available with the Grants to Grow program.
Reinvigorating Louisiana’s sugar and chemical industries is being promoted by the State’s Sustainable Bioproducts Initiative. The initiative entails a regional program for production of multiple agricultural feedstocks and processing to biofuels and biobased chemicals. It is led by Louisiana State University’s AgCenter.