President Donald Trump on Monday signed an executive order allowing red-dyed diesel to be used on highways through the end of the year, a move intended to ease fuel costs for farmers, ranchers and truckers as prices surge during harvest. Trump announced the action at a rally in Grand Island, Nebraska, after agricultural groups and governors urged federal relief.
At the event, Trump said he would waive the off-road requirement so anyone could purchase the tax-free fuel for any purpose. The order follows emergency steps taken by several states and a formal Oct. 1 request from the American Farm Bureau Federation seeking temporary suspension of the federal highway diesel tax for agricultural transportation and relief from federal penalties tied to emergency highway use of dyed fuel.
What the executive order does
Red-dyed diesel is the same product as clear highway diesel, but the dye marks fuel intended for qualifying tax-exempt uses. Farmers routinely rely on the dyed fuel for tractors, combines, irrigation systems and other off-road equipment.
Federal rules generally prohibit using dyed fuel in vehicles on public roads, even for farm-related trucking. The federal highway diesel tax is 24.4 cents per gallon, and knowingly using dyed fuel for a taxable purpose can trigger significant penalties.
The executive order instructs the U.S. Department of the Treasury to determine within five days whether it can defer certain federal diesel excise tax obligations incurred from Monday through Dec. 31. Any qualifying taxes deferred under that authority would accrue no penalties or interest.
The order also tells the Internal Revenue Service to state that it will not assess federal dyed-diesel penalties when the fuel is sold for or used on highways during that period.
The directive does not permanently erase federal tax liability. Treasury is asked to explore options, including legislation, to eliminate the obligation to eventually pay any deferred taxes.
The U.S. Department of Agriculture is directed to coordinate with cooperatives, rural distributors, farm supply firms and other stakeholders to help ensure adequate supplies of dyed fuel in high-demand areas. USDA and the White House are also encouraging states to adopt corresponding relief. The administration estimates federal tax savings of about $60 on a 250-gallon fill, and says combined federal and state relief could top $100 where states align their policies.
Relief comes as harvest fuel costs surge
The order arrives amid a sharp rise in diesel prices that has strained farm budgets at one of the most fuel-intensive times of the year. According to an American Farm Bureau Federation analysis, average U.S. farm diesel rose from $3.01 per gallon in September 2025 to $5.61 in September 2026, a $2.60 increase.
Farm Bureau estimated that the jump could add about $2,227 in fall diesel costs for an average 279-acre corn farm, while a representative 596-acre rice operation could face more than $8,300 in additional harvest fuel expenses. In an Oct. 1 letter, Farm Bureau President Zippy Duvall said higher diesel costs are hitting during harvest and that producers cannot delay fieldwork or transportation when prices rise.
Before the federal order, states including Alabama, Arkansas, Indiana, Louisiana, Missouri, Oklahoma, Nebraska and Texas had relaxed dyed-diesel restrictions for some agricultural or forestry uses, while others suspended fuel taxes, raised truck weight limits or adopted other temporary steps to curb transport costs. Those actions could not change federal tax rules or penalties on their own.
Limited impact for some crop producers
Economists say the order broadens access to lower-cost fuel for highway use, but direct savings for many row-crop farms may be limited because most of their field fuel is already tax exempt. Kansas State University agricultural economist Gregg Ibendahl told Brownfield Ag News that many crop operations may see little change in overall fuel expenses, while livestock producers and agricultural haulers could benefit more since a greater share of their fuel is used on public roads.
Southwest Nebraska farmer Jan TenBensel called the step helpful, though not a cure for elevated prices, and said savings will vary by timing and location. Other analysts cautioned that broader access to dyed fuel does not address underlying supply constraints and could add pressure to off-road fuel prices already paid by farmers.
State rules still matter
Despite the federal action, producers and haulers must still follow individual state requirements. The order encourages states to align their policies, but it does not automatically suspend state fuel taxes or other restrictions, which could create differences as trucks cross state lines. Producers were advised to review rules in each jurisdiction.
The order directs federal transportation officials to coordinate with states, industry groups and labor organizations during implementation. Treasury must also issue guidance clarifying who qualifies for any tax deferral, the applicable conditions, and when postponed taxes would ultimately come due.
How the red-dyed diesel policy will be implemented
According to the administration, the IRS will outline penalty relief for dyed fuel used or sold for highway purposes during the covered period, while Treasury evaluates authority to defer excise taxes. USDA will work with fuel suppliers to bolster availability where demand is highest, and the White House will continue urging states to adopt complementary measures.
Farmers routinely rely on the dyed fuel for tractors, combines, irrigation systems and other off-road equipment, alongside evolving harvest machinery highlighted in Origin of combine: How harvest tech reshaped farming. The administration’s approach may influence how future technology investments intersect with fuel policy on farms.
The U.S. Department of Agriculture is directed to coordinate with cooperatives, rural distributors, farm supply firms and other stakeholders to help ensure adequate supplies of dyed fuel in high-demand areas, reflecting the agency’s broader role as outlined by the U.S. Department of Agriculture. Implementation details will shape how quickly producers feel relief during peak demand.