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Special Report · Fuel Policy Alert
Red Diesel Executive Order
B Mello Ag Services · Central Valley, CA
Published October 8, 2026 • Federal Tax Deferral • State Actions • What It Means in California
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♦ U.S. DIESEL: $6.29/GAL ♦ CALIFORNIA: $8.36/GAL, HIGHEST IN THE NATION ♦ FEDERAL TAX DEFERRED: 24.4¢/GAL ♦ RELIEF WINDOW: OCT 5 TO DEC 31 ♦ 16+ STATES MATCHING ♦ CALIFORNIA: NO CHANGE YET
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⚠ California Growers: Please Read First
Do not run red diesel in a road vehicle in California yet.
The President’s order changes federal rules only. As of today, California has not matched it, and dyed diesel in any vehicle on a public road is still illegal under state law. CDTFA still inspects highway vehicles, and the penalty is $10 per gallon or $1,000, whichever is greater, plus the unpaid tax and interest. Refusing an inspection is another $1,000. Below is what the order does, which states have joined in, and what Sacramento would have to do before you can benefit.
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Section 1
What the Executive Order Does
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On October 5, at a rally in Grand Island, Nebraska, President Trump signed an executive order titled “Emergency Tax Relief on Diesel Fuel.” It temporarily lifts the off-road-only rule on red dyed diesel and defers the federal highway diesel tax on that fuel from October 5 through December 31, 2026. Red diesel is the same fuel sold at the pump; the dye simply marks it as untaxed and reserved for off-road use. The order arrives with diesel near record highs: AAA puts the national average at $6.29 a gallon this week, against $3.68 a year ago.
| Federal Tax |
| 24.4¢/gal |
| excise + LUST fee |
| Deferred on highway use of dyed fuel. |
| Window |
| Oct 5 to Dec 31 |
| 2026 only |
| About 12 weeks of relief, if approved. |
| Tax Status |
| Deferred |
| not forgiven |
| Still owed later unless Congress acts. |
| 250-Gal Fill |
| ~$61 |
| federal tax only |
| $100+ only where states waive theirs too. |
| Agency |
What the Order Directs |
| Treasury |
Within 5 days (about Oct 10), decide whether the federal emergency postponement law allows the relief. If it does, defer the diesel excise tax owed from Oct 5 to Dec 31, with no penalties or interest. |
| IRS |
Within 5 days, announce that it will not charge the federal dyed fuel penalties for highway use during the window, and explain how it will handle tank inspections. |
| Treasury guidance |
Spell out who qualifies and when the deferred tax must be paid. No deadline is set for this guidance, and none has been issued yet. |
| Forgiveness |
Treasury is told to “explore” ways, including legislation, to wipe out the deferred amount. Nothing is forgiven today. |
| USDA |
Work with farm co-ops and rural fuel distributors so dyed diesel stays available in high-demand farm areas, and encourage states to follow suit. |
| DOT / FMCSA |
Coordinate with states and industry. Truck safety inspections and audits continue as normal. |
| The States |
The White House is urging governors to halt their own dyed fuel inspections and waive state tax on highway use. A federal order cannot override state law. |
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The fine print: As of this morning, neither Treasury nor the IRS has published its guidance, so the federal relief is announced but not yet in hand. The tax is postponed, not erased. Farm press expects a payment date around January 1, 2027, but Treasury has not set one. Several economists note it adds no new diesel supply, and some warn that extra demand for dyed fuel could push up the price of the off-road diesel you already buy tax-free for tractors and pumps. If you use dyed diesel on the road anywhere it becomes legal, keep every fuel receipt and a log of on-road gallons by vehicle.
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Section 2
States Allowing Red Diesel on the Road
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Several farm states moved before Washington did, and more followed the day after the signing. USDA Secretary Rollins says 13 governors have followed suit; Roll Call counts at least 14. We confirmed 16 through governors’ offices and state revenue departments. Most limit relief to farm and timber hauling, and several still collect their own state fuel tax, so “legal” does not always mean “tax-free.”
| State |
What They Did |
Ends |
Louisiana
Sept 23 |
Emergency order; farm and timber vehicles |
Oct 22 |
Nebraska
Sept 24 |
Executive order; ag hauling on Nebraska miles. State tax paid, then refunded |
About Dec 23 |
Alabama
Sept 24 |
State police told to stop dyed fuel enforcement; ag and timber |
About Jan 22 |
Texas
Sept 28 |
Disaster declaration, all 254 counties. 20¢ state tax still owed |
30 days, renewable |
Oklahoma
Sept 28 |
Paused state taxes, fines and enforcement on farm vehicles |
About late Jan |
Arkansas
Sept 29 |
Executive order; farmers and loggers |
No end date set |
North Dakota
Sept 29 |
Emergency order; ag haulers pay the 4¢ dyed rate instead of 23¢ |
Nov 30 |
Missouri
Sept 30 |
Emergency order; farm use on state highways only, not interstates |
Oct 30 |
Indiana
Sept 30 |
Governor’s order; farm and timber activities |
30 days, renewable |
North Carolina
Oct 1 |
Revenue Dept notice; farm use. 41¢ state tax still owed |
Dec 31 |
Tennessee
Oct 2 |
Governor’s directive; ag and forestry |
Oct 31 |
Mississippi
Oct 6 |
Highway patrol told not to enforce dyed fuel rules |
Not stated |
Georgia
Oct 6 |
State penalties for on-road dyed fuel suspended |
Nov 5 |
Illinois
Oct 6 |
Executive order and disaster proclamation; ag only. State tax reportedly still owed |
Dec 31 |
Iowa
Oct 6 |
Penalties suspended; ag hauling, expanded Oct 7 to livestock and feed |
Feb 2, 2027 |
South Dakota
Oct 6 |
Inspections refocused on safety. A state tax waiver would need the legislature |
While federal relief lasts |
Montana and Ohio appear on some state lists, but we could not find an official order on dyed diesel for either, so they are not counted here. Several orders above expire in late October and may be extended.
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⚠ Holding Out or Undecided
California: no change (see Section 4). Kansas: Gov. Kelly publicly criticized the order as an election-year move. Minnesota: the Revenue Dept says any change would take legislation. Pennsylvania, Michigan and Kentucky: still illegal; farm groups have asked their governors for waivers. Utah: no statement yet. Oregon, Washington and Idaho: unresolved, per Northwest industry groups.
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Section 3
States Suspending Their Own Fuel Taxes
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Separate from red diesel, a handful of states have cut or paused their regular gas and diesel taxes for everyone at the pump. This kind of relief helps every truck, not just farm vehicles, and does not depend on dyed fuel.
| State |
Fuel Tax Relief |
Through |
| Ohio |
Diesel 47¢ and gas 38.5¢ suspended. 90-day holiday passed by the legislature, funded with $725M from the general fund |
Jan 2, 2027 |
| Georgia |
Diesel 37.3¢ and gas 33.3¢ suspended by emergency order. Second suspension this year |
Nov 5 |
| Kentucky |
Diesel cut from 22¢ to 12¢, gas cut 10¢, by executive order |
In effect since May; end date not announced |
| Indiana |
Gas sales tax and excise paused, about 61¢. Diesel not included |
Nov 4, possible final extension to Dec 4 |
| Utah |
15% cut to the gas tax, about 6¢. Gasoline only |
Dec 31 |
| Illinois |
Postponed its scheduled July gas tax increase |
Ongoing |
Proposed but not passed: Massachusetts Gov. Healey has proposed a two-month gas and diesel tax holiday, and Connecticut lawmakers have floated a three-month holiday. South Carolina’s governor has opposed one. California rejected a gas tax holiday in May, and its diesel excise actually went up on July 1, from 46.6¢ to 48.2¢ a gallon.
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Section 4
Where California Stands
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California growers are paying the most for diesel of anyone in the country: $8.36 a gallon on AAA’s October 7 average, and the EIA’s weekly California figure is up more than $3 from a year ago. Yet as of today, the federal order does almost nothing for a California farm truck on the road.
| ✗ State law has not changed. Dyed diesel in the tank of any vehicle driven on a public road is still illegal in California, and CDTFA still runs roadside fuel inspections. |
| ✗ No state action yet. We found no statement from the Governor’s office on the order. California’s late-September emergency action dealt with gasoline supply, not dyed diesel. |
| ✗ State taxes are untouched. The 48.2¢ state diesel excise and the sales tax on diesel still apply to every on-road gallon. |
| ✓ Off-road use is unchanged. Tractors, harvesters, pumps and other off-road equipment already run on untaxed dyed diesel, so the order adds no new break there. |
| ✓ Fuel quality is not the obstacle. California already requires off-road diesel to meet the same CARB fuel standards as highway diesel. The barrier here is state tax law and enforcement. |
📊 Excise Tax on a Gallon of Highway Diesel in California |
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Federal · 24.4¢ (deferred by the order)
California · 48.2¢ (still owed)
Combined · 72.6¢ per gallon, before sales tax
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| On a 250-gallon fill, the federal deferral alone is worth about $61. If California also set aside its excise, the same fill would carry about $181 less tax. A truck burning 300 gallons a week would see roughly $73 a week from the federal piece, or about $218 a week with both. Today, in California, it sees neither. |
Examples are our arithmetic from the published tax rates and are not a forecast of any state program.
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Section 5
What Has to Happen for California Farmers
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For a California grower to legally put red diesel in a farm truck and save money on the road, four things have to line up, and the clock runs out December 31.
| Step |
What It Takes |
| 1. Federal relief finalized |
Treasury must confirm it has the legal authority and the IRS must announce its penalty relief, both due about October 10. Without that, the order does not take effect in any state. |
| 2. The Governor acts on enforcement |
The fastest route is the one Louisiana, Georgia, Iowa and Illinois used: an emergency proclamation that suspends the state’s dyed fuel penalties for farm vehicles and directs CDTFA and the CHP to stand down on dyed fuel inspections. California’s Emergency Services Act lets a governor suspend state statutes during a declared emergency, and that power has been used often in recent years. |
| 3. A decision on the 48.2¢ state tax |
Lifting penalties is not the same as waiving the tax. Other states have split three ways: tax still owed and paid on a return (North Carolina, Texas), paid then refunded (Nebraska), or paused outright (Oklahoma). A true California tax waiver would most likely need the Legislature, which is adjourned until the new session convenes December 7. A special session called by the Governor is the only faster path. |
| 4. Guidance and fuel at the pump |
CDTFA would need to publish who qualifies and how to report on-road gallons. Fuel dealers would have to be willing to sell dyed fuel for road use; their national trade group has raised liability concerns. Many dyed fuel pumps are also not set up to fill a semi. |
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✓ What We Recommend Now
| 1. Keep red diesel out of road vehicles until California formally changes its rules. One inspection can cost more than the whole season’s savings. |
| 2. Keep clean fuel records now, by vehicle and use, so you are ready to document gallons if a program opens. |
| 3. Plan for the exit. Dye residue can take 7 to 8 full tanks of clear fuel to flush, and the deferred federal tax may still come due early next year. |
| 4. Hauling out of state? Check each state’s rules. Coverage, routes and tax treatment vary, and IFTA gives no credit for fuel bought without state tax. |
| 5. Make your voice heard. If you want California to match the order, the Governor’s office and your state legislators are the people who can make it happen. |
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💡 Our Read
For growers in farm states that have signed on, this is real money during harvest. For California, the order is a door that Sacramento has not opened. Even the federal piece is a postponement, so treat any savings as a short-term cash-flow help rather than money in the bank until Treasury says otherwise. We are watching for the Treasury and IRS guidance this week and for any move from the Governor, and we will get word to you the moment California’s rules change. Questions about fuel, hauling or your program? Call Bryan at (559) 816-3889 or email bryan@bmelloag.com.
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Fuel Bills Piling Up?
High diesel touches every pass, every load and every delivery. We can help you tighten your input program and timing so fewer trips do more work. Reach out directly and we will dig in with you.
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We watch Washington and Sacramento so you can stay focused on the ground under your boots. When the rules change, we will get word to you fast. That is the promise behind every B Mello Special Report.
Proudly American · Rooted in the American Dream
Bryan Mello
B Mello Ag Services · Central Valley, California
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B Mello Ag Services · Central Valley, CA
Special Report: Red Diesel Executive Order · Published October 8, 2026
Every issue we have ever published is free at bmelloag.com/reports: field conditions, ag crime, markets, fuel and fishing.
(559) 816-3889 · bryan@bmelloag.com · bmelloag.com
This Special Report is provided for informational and educational purposes only and reflects federal and state actions as of the morning of October 8, 2026. These rules are changing daily, many state orders are short-term and may be extended or allowed to lapse, and the federal relief depends on Treasury and IRS guidance not yet issued. Fuel prices are AAA and EIA averages and are approximate. Savings figures are illustrative arithmetic, not a guarantee. This publication does not constitute legal or tax advice. Confirm your situation with CDTFA, the IRS and a qualified tax professional before using dyed fuel in any on-road vehicle. B Mello Ag Services assumes no liability for decisions made based on information in this publication.
Sources: White House executive order “Emergency Tax Relief on Diesel Fuel” and fact sheet (Oct 5, 2026); IRS; CDTFA; AAA and U.S. Energy Information Administration fuel price data; governors’ offices and revenue departments of the states listed; Tennessee Farm Bureau; USDA; Farm Progress; Morning Ag Clips; Fortune; CBS News; Roll Call; Time; Newsweek; PBS NewsHour; Capital Press; Michigan Farm News; and DTN/Progressive Farmer (2026).
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