Diesel tax relief has Limited impact for North Dakota farmers

The Limited Reach of Diesel Tax Relief for North Dakota Farmers

For North Dakota farmers currently in the thick of a high-stakes harvest, the recent emergency tax breaks on diesel fuel are proving to be a modest buffer against a much larger financial storm. While state and federal executive orders have opened the door for using lower-taxed, red-dyed diesel on public highways, the practical impact on farm balance sheets remains narrow. As of November 6, 2026, many producers are finding that these policy shifts simply arrive too late or apply to such a small fraction of their total fuel consumption that they barely offset the stinging surge in energy costs.

The North Dakota Monitor reports that the state’s September 29 decision to allow red-dyed diesel for on-road agricultural hauling provides a potential savings of 19 cents per gallon. However, this relief is set to expire on November 30. When combined with the federal order issued by President Donald Trump on October 5—which allows for dyed diesel use on highways and a deferment of the 24-cent federal tax—the intent is clearly to lower the barrier to entry for harvest logistics. Yet, the reality on the ground is far more complex than a simple price cut at the pump.

The Math of Field Versus Road

The primary limitation of these executive orders lies in the nature of modern agricultural fuel consumption. According to Matthew Gammans, an assistant professor in the Department of Agribusiness and Applied Economics at North Dakota State University, highway transit typically accounts for only 5% to 15% of a farm’s total diesel use. The vast majority of fuel is burned in field equipment like combines and tractors, which were already permitted to use the cheaper, red-dyed fuel long before these emergency measures were enacted.

“The issue is that the share of diesel that’s actually used on the road relative to in the field is just so small that these policies are just not able to make a big dent,” Gammans noted in his analysis.

Gammans estimates that corn and soybean farmers across the state could save roughly $850,000 in total this fall due to the North Dakota emergency order. While that figure sounds significant in isolation, it represents a fraction of the total operational costs for the state’s agricultural sector, which is currently grappling with diesel prices hovering around $6.04 per gallon—a staggering $2.52 increase compared to last year, according to AAA data.

The Cross-Border Complication

For farmers like Ben Bakko, who manages land in both Walcott, North Dakota, and across the border in Minnesota, the patchwork of regulations creates a genuine headache. While North Dakota has relaxed its rules, Minnesota has not signed on to the federal exemption. This leaves producers in a precarious position: they risk fines if they haul grain on Minnesota highways using the prohibited dyed fuel.

Bakko, who consumes approximately 30,000 gallons of diesel annually, found himself forced to stick with more expensive clear diesel until he finished his Minnesota harvest. “I didn’t want to risk a fine by using dyed diesel on Minnesota highways,” Bakko explained, noting that even with the tax breaks, the savings do not come close to covering the massive price hike he has seen since last fall. He remains skeptical that the volatility in fuel markets will subside before the year ends, suggesting that the current relief measures may be a temporary stopgap rather than a lasting solution.

Economic Stakes and Future Policy

The urgency for these measures was triggered by a September attack on a key Mideast pipeline, which, coupled with ongoing global conflicts, has severely restricted fuel supply chains since February. North Dakota Tax Commissioner Brian Kroshus acknowledged that the state’s exemption provides “a little bit of relief,” but he emphasized that the broader economic pressure—affecting not just fuel, but also the cost of fertilizers and chemicals—will only moderate if the global price of oil stabilizes. The state stands to lose significant revenue, with the Department of Transportation typically receiving about $5.4 million per month from diesel taxes, though the Tax Department has yet to issue a formal forecast on the total impact of the current exemptions.

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Looking ahead, the U.S. Department of Agriculture is preparing to distribute $8 billion in aid through the Harvest Fuel Relief program. However, the mechanism for that distribution remains a point of contention. As Gammans pointed out, if the USDA adopts a formula strictly tied to fuel consumption, states that grow more fuel-intensive crops like rice and cotton—predominantly in the South—could see a larger share of the funds than states like North Dakota, where wheat production is more common. An announcement on the distribution formula is expected later this month.

For now, the trucking and farming sectors remain in a state of uncertainty. The North Dakota Motor Carriers Association has warned members that not all states will honor the federal enforcement deferment, and the physical availability of red-dyed diesel remains a logistical hurdle for many operators. As the November 30 expiration date for the state tax break looms, the industry is left wondering if these executive maneuvers are a recurring feature of a volatile energy market or merely a brief reprieve in a long season of high costs.