Kansas Lowers Motor Fuel Taxes on Ethanol, Creates Energy Education Program

April 12, 2006

Kansas Governor Kathleen Sebelius signed Senate Bill (SB) 544 on April 5 that reduces the motor vehicle fuel tax on E85 by $0.07 per gallon to $0.17 per gallon beginning January 2007. And starting July 2020, the tax on E85 fuels will be $0.11 per gallon, which is less than the tax on most other fuels.

The 2007 tax reduction effectively makes the rate of taxation on ethanol E85 equivalent to that of gasoline on an energy-content or miles-per-gallon basis. Currently, both fuels are taxed at the same rate per gallon on a volumetric basis. However, E85 is comprised of 85% ethanol, which has an energy content that is about 15% less than that of unleaded gasoline, and as a result, drivers using E85 get lower fuel economy than those driving with gasoline. Without this adjustment, drivers using E85 would pay higher taxes than those using gasoline.

Sebelius said, "Ethanol is better for our environment, it supports Kansas farmers, and it decreases our dependence on foreign oil. Kansans have already increased their use of ethanol by over 600% since 2005, and this action will help continue that growth." Sebelius is chair of the Governors' Ethanol Coalition. For more information about the bill, see the governor's April 5 press release.

Kansas has additional incentives to support increased E85 availability and consumption. This includes a flexible fuel vehicle (FFV) tax incentive, which allows taxpayers a $750 tax credit for purchasing an FFV and utilizing 500 gallons of E85, along with a state tax credit for installing. General Motors publishes a list of Kansas incentives for alternative fuel vehicles.

In related news, the governor signed a bill (SB-93) creating an energy education program about oil, gas, and energy efficiency. Under the bill, Kansas will use revenues from a severance tax on oil and gas production to create the Kansas Oil and Gas Resources Board. The board will coordinate public education regarding the oil and natural gas industry, encourage energy efficiency, promote environmentally sound production, and support job training and research activities. For more information, see the governor's April 12 press release.