Trucks fill up with diesel fuel in Casselton, North Dakota on Oct. 1, 2026. (Photo by Jeff Beach/North Dakota Monitor)
UNDATED (North Dakota Monitor) – Moves to provide help for farmers, truckers and others hit by high diesel fuel prices are having a limited effect in North Dakota.
For some farmers, loosening up restrictions on the use of lower-taxed diesel came too late and was complicated by farming in two states following different sets of rules.
North Dakota on Sept. 29 announced it would allow expanded use of a lower-taxed diesel. The cheaper diesel, which is dyed red, is normally only allowed in tractors, combines and other off-road field equipment. Gov. Kelly Armstrong’s order allows red diesel for hauling grain on highways and for other on-road agricultural jobs.
But highway use only accounts for about 5% to 15% of a typical farm’s diesel use, said Matthew Gammans, assistant professor in NDSU’s Department of Agribusiness and Applied Economics. Far more diesel is used in field equipment that could already use the cheaper fuel.
“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 said.
Farms in two states
North Dakota charges a tax of 23 cents per gallon on regular diesel fuel but only 4 cents per gallon on red-dyed diesel, potentially saving farmers19 cents per gallon with the cheaper diesel until the order expires Nov. 30.
Similar to the North Dakota exemption, President Donald Trump on Oct. 5 issued an order allowing dyed diesel on the highways and a deferment on federal taxes on diesel for the rest of the year. The federal tax is 24 cents per gallon.
But Minnesota has not signed on to the federal exemption, keeping the dyed diesel ban on roadways in place.
Ben Bakko farms at Walcott in southeast North Dakota but also farms land on the Minnesota side of the Red River.
Bakko was already done harvesting soybeans by the start of October and only had a small number of acres of corn left to harvest, he said. He didn’t want to risk a fine by using dyed diesel on Minnesota highways, so he kept clear diesel in his trucks until he finished harvesting sugar beets in Minnesota.
He moved on to his beets in North Dakota and finally was able to haul with the cheaper diesel.
It takes more truckloads to haul a field of sugar beets than corn, he said, so he was grateful for the tax break.
But Bakko said it doesn’t come close to making up for the more than $2 per gallon price increase from last fall’s harvest.
The average price for a gallon of diesel in North Dakota on Thursday was at $6.04 per gallon, about 22 cents below the national average but about $2.52 cents above a year ago, according to AAA.
Bakko, who burns through about 30,000 gallons of diesel each year, mostly in the fall, is skeptical about seeing any break in prices soon.
“This diesel problem, these prices, are not going to go away by the end of the year,” he said. “I’m kind of wondering if they’re just going to reissue all this again next year.”
Savings and losses
The fuel tax breaks were spurred by a spike in diesel prices just as harvest was ramping up, in part because of an attack on a key Mideast pipeline in September. The U.S. war with Iran and other global conflicts have restricted fuel shipments since February.
North Dakota Tax Commissioner Brian Kroshus said the exemption would provide “a little bit of relief” but said the price of oil needs to come down to help farms with diesel and other energy-intensive expenses, such as fertilizer and farm chemicals.
“The real solution to this isn’t through executive orders but seeing the price of oil moderate,” Kroshus said.
The state Department of Transportation receives about $5.4 million per month from diesel tax revenue, according to the Governor’s Office.
Kroshus said the Tax Department did not have a forecast for how tax revenue might be affected.
Gammans, in a report published last month, estimated that corn and soybean farmers in the state could save up to $850,000 this fall because of North Dakota’s emergency order.
The red-dyed diesel is usually delivered in bulk to farmers, who fill up large fuel tanks on their farms. Some farms would not have the ability to fuel tractors and trucks with their on-farm storage, further limiting the benefit.
Calvin Benson, director of public policy for the North Dakota Farm Bureau, said the tax breaks are “not a world-changing thing,” but show that the governor and president are aware of the challenges that farmers are facing.
He said the longer-term solution that might come out of the fuel situation is policies that might help bring more diesel refining to the United States, making it less dependent on foreign sources.
The federal exemption applies to all trucks, not just those involved in farming.
How many truckers are switching to dyed diesel also is unclear.
Normally, if a truck is inspected and the fuel is red, the operator faces a penalty.
The North Dakota Motor Carriers Association advised its members that not all states may honor the federal enforcement exemption. It also notes that dyed diesel is not readily available and the dye may linger in a truck’s fuel system, potentially exposing the truck to enforcement of the red-dye ban when the order expires.
The trucking association also said that while it is unlikely, any deferred diesel taxes could still be collected.
Federal payments
The price surge prompted another round of aid payments to farmers under the Harvest Fuel Relief program. The U.S. Department of Agriculture has made $8 billion available to compensate farmers for high diesel prices, but it has not announced how it will be distributed.
Gammans has looked at scenarios for calculating the payments and said USDA could follow a formula similar to the farm bridge payments announced last year by the Trump administration. Or, Gammans said, USDA could come up with a new formula that factors in average fuel consumption for different crops.
Gammans said a formula more tied to fuel use could mean more money for southern states that grow rice and cotton, with less money for states that grow wheat, such as North Dakota.
“Cotton and rice are extremely fuel intensive, and they’re not grown in North Dakota, right? So if you reward proportional to fuel, you’re going to send a lot more money to the South,” he said.
Gammans said he expects an announcement this month.
Reach North Dakota Monitor deputy editor Jeff Beach at [email protected]
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