North Dakota Lowers Agricultural Diesel Tax Through 2026

Farmers gain temporary relief from public road fuel taxes as diesel prices rise $2.60 over the past year.

Updated on Oct. 21, 2026 in Agriculture

Bold flat-color editorial illustration featuring a geometric fuel nozzle and storage tank against a flat field, representing state agricultural fuel policy. — Governor Kelly Armstrong signed an order permitting North Dakota farmers to use lower-taxed red-dyed diesel for agricultural transport through 2026. AI Illustration. Upload story photo >

Live Poll

Is the current economic environment in your area becoming too expensive for local farmers to survive?

Governor Kelly Armstrong signed an order in September 2026 allowing the use of red-dyed diesel in agricultural vehicles on public roads in North Dakota to mitigate high operating costs. This relief coincides with a federal suspension of penalties for using dyed fuel on highways, which remains in effect through the end of 2026.

Why it matters

Rising diesel costs and unsustainable input prices for producers prompted these measures to protect the viability of agricultural operations. The relief offers significant tax savings for farmers, as dyed diesel is taxed at $0.04 per gallon compared to $0.23 for regular highway diesel.

North Dakota's average diesel price is now $6.07 per gallon, a $2.60 increase compared to the same period last year. The state policy allows farmers to use dyed diesel taxed at $0.04 per gallon on public roads, offering a $0.19 savings per gallon over the $0.23 highway diesel tax.

The players

Kelly Armstrong

Governor of North Dakota who authorized the temporary expansion of dyed diesel use to support state agricultural producers.

Donald Trump

President of the United States who issued an executive order suspending federal penalties for highway use of dyed fuel.

The details

Agricultural producers in North Dakota may now utilize red-dyed fuel, typically reserved for off-road machinery, in licensed vehicles used for transporting grain, livestock, and supplies. The state order, combined with the federal executive order signed on October 5, 2026, removes the risk of fines for using this lower-taxed fuel on public thoroughfares. This regulatory change addresses the immediate pressure of high fuel input costs on farm profitability.

September 2026: Governor Armstrong signed the order expanding dyed diesel use.
October 5, 2026: President Trump signed the federal executive order.
November 30, 2026: State authorization for red-dyed diesel on roads expires.
December 31, 2026: Federal suspension of penalties for dyed diesel ends.
2027: Projected financial survival deadline for highly leveraged farmers.

Market Landscape

This move follows the precedents set by the IRS federal fuel tax exemption, which typically restricts dyed diesel to off-road use. It marks a temporary departure from standard fuel-tax compliance protocols to address specific inflationary pressures on agricultural inputs.

Agricultural operators should account for the expiration of state relief on November 30 and federal penalty suspensions on December 31. Consult with your tax advisor regarding the IRS guidance on potential federal tax payment deferrals for fuel used during this window.

The takeaway

Operators must recalibrate their logistics budgets to account for the return of standard fuel taxation after the 2026 relief period concludes. Keep a detailed log of dyed diesel usage and fuel purchases to ensure accurate reporting should federal or state requirements change.