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California reduces tax on dimethyl ether (DME) fuel to be consistent with other alternative fuels; enabling retail sales

The California state legislature passed and the Governor signed into law a bill (AB-2663) that lowers the Use Fuel Tax rate of dimethyl ether (DME) from $0.18 to $0.06 per gallon of DME used and $0.06 per gallon of DME-propane fuel blend used on or after 1 July 2021 (the same tax rate as propane, $0.06 per gallon).

Commencing 1 July 2021, dimethyl ether and a dimethyl ether-liquefied petroleum gas fuel blend may be added to the categories of fuels for which an owner or operator may pay an annual flat rate fuel tax in lieu of the per gallon fuel tax.

The new law exempts from excise taxes under the Use Fuel Tax Law the use of dimethyl ether and a dimethyl ether-liquefied petroleum gas fuel blend in a vehicle during any period of time for which the owner or operator of the vehicle has instead paid the applicable annual flat rate fuel tax.

The upshot is that the new law makes the statutory changes necessary to enable retail sale of dimethyl ether (DME)-propane fuel blend.

California-based Oberon Fuels, a producer of low-carbon dimethyl ether (DME) transportation fuel, celebrated the signing of California Assembly Bill 2663 into law.

AB 2663 levels the playing field for DME and removes a barrier to adoption for fleets seeking ways to reduce their carbon footprint. I want to thank Assemblymember Eduardo Garcia for championing this bill. A bi-partisan and unanimous bill is a testament to his leadership.

—Rebecca Boudreaux, Ph.D., President and CEO of Oberon Fuels

Oberon Fuels is in the middle of upgrading its plant in Brawley, Calif. from pilot to demonstration scale, due in part to a $2.9-million grant from the California Energy Commission last summer. The company recently added nine full-time, family-wage jobs to the facility, which is located in Imperial Valley, a county with the highest unemployment rate in the state. The plant is expected to produce 1.6 million gallons of DME from more than 5,500 metric tons of waste material when operating at full capacity.

The funding from the State of California was instrumental in helping Oberon Fuels obtain additional private funding. In 2020, Oberon announced a strategic partnership with SHV Energy, the world’s largest distributor of propane, as well as Suburban Propane’s acquisition of a 39% stake in the company. With a significant footprint in California, Suburban Propane is a publicly traded, nationwide distributor of propane, fuel oil and related products and services.


Oberon’s process.

Oberon’s renewable Dimethyl Ether (rDME) fuel is a cost-effective, low-carbon, zero-soot alternative to petroleum diesel. Renewable DME (rDME) reduces greenhouse gas emissions between 68 and 101 percent compared to diesel, with zero soot.

In addition, rDME is also a cost-effective carrier for hydrogen, making it easy to deliver this renewable fuel for the growing hydrogen fuel-cell vehicle industry. Additionally, when blended with propane, rDME can significantly reduce this clean-burning fuel’s carbon intensity.



DME is a clean fuel that can be made renewable.
You gasify RNG to methanol to DME to MTG, jet fuel or diesel.

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