Sanders Declares Diesel Emergency, Lets Farmers and Loggers Run Tax-Free Dyed Fuel on Highways Through Oct. 30

LITTLE ROCK — Gov. Sarah Huckabee Sanders declared a statewide emergency Tuesday over the price of diesel and suspended the penalties that normally keep farmers and loggers from running tax-free, red-dyed fuel in trucks on public roads.

Executive Order 26-15 takes effect Wednesday and runs through Oct. 30 unless Sanders extends it. It covers the heart of harvest season: the order notes that Arkansas crop harvest and delivery “regularly” run into November.

Diesel averaged $6.07 a gallon in Arkansas on Wednesday, according to AAA, up from $5.27 a month ago and $3.35 a year ago. The U.S. Energy Information Administration put the national average at $6.38 for the week of Sept. 28, down 15 cents from the record $6.53 set the week before but $2.63 higher than a year ago.

“If a country can’t feed itself, fuel itself, or fight for itself, then it can’t survive,” Sanders said. “And when costs for our producers go up, that hurts affordability for everyone else.”

What the order does

Dyed diesel is chemically the same fuel as the clear diesel sold at the pump. The red dye marks it as untaxed for off-road use in tractors, combines, skidders and other equipment. Arkansas taxes it at 6 cents a gallon, against 28.5 cents for clear highway diesel, according to the Department of Finance and Administration’s rate schedule. Dyed fuel is also exempt from the 24.4-cent federal highway diesel tax.

State law bars dyed diesel from the fuel tank of any highway vehicle, with exceptions for government vehicles, transit and intercity buses and school buses. If the state catches a vehicle running it, or running a mix of dyed and clear fuel, the law requires DFA to assess the back tax plus a $10-per-gallon penalty on every gallon the vehicle’s tanks could hold.

Sanders’ order suspends those penalties and bars any state agency from assessing them, but only for vehicles that meet four conditions:

• The vehicle is registered as a Class 2, 3, 4, 5, 6 or 8 truck under Arkansas registration law. Classes 2 through 6 are trucks rated from 6,001 to 68,000 pounds; Class 8 is the special farm and timber registration for vehicles used to haul farm or timber products. Left out are Class 1, the three-quarter-ton and lighter pickups registered for personal use, and Class 7, the heaviest commercial trucks up to 80,000 pounds.
• It is owned and operated by an individual or business engaged in agricultural or forestry operations and used primarily for that business.
• It is registered in Arkansas.
• It is not licensed under the International Fuel Tax Agreement, the multistate system used by interstate trucking.

The order defines an agricultural operation as a business that produces food, fiber, grass sod, nursery products or livestock “in commercially marketable quantities,” and says the business must be able to show that through recent tax filings reporting farm income or, for a new operation, a business plan showing land, financing and other resources. A forestry operation is defined as timber harvesting from the point a tree is cut through loading it in the field for transport.

The order’s practical effect is to let farmers and loggers draw on the dyed fuel they already keep in on-farm and on-site storage tanks, rather than buying highway diesel at the pump. Sanders wrote that doing so “will make fuel immediately available to those operations.”

Federal penalty still applies, for now

The governor’s order reaches only state penalties. Federal law carries its own penalty for dyed diesel in a highway vehicle, and only the Internal Revenue Service can waive it. The order directs the secretary of the Department of Finance and Administration to ask the IRS for that relief within three business days.

The IRS has granted such waivers before, typically after hurricanes and other supply disruptions, most recently for Florida after Hurricane Milton in October 2024.

The White House is separately weighing whether to allow broader sales of dyed diesel nationally as an alternative to a diesel export ban, Reuters reported Monday. Analysts have questioned how much that would help: GasBuddy’s Patrick De Haan noted farmers already use untaxed dyed fuel, and letting truckers use it would save them the federal tax without adding any supply.

Why now

The order lays out its case in a series of findings. The University of Arkansas Cooperative Extension Service built its 2026 crop enterprise budgets, the planning tools farmers use to price a season, on diesel at $2.46 a gallon, “less than half the price presently prevailing in this State.” U.S. distillate inventories were 13 percent below the five-year seasonal average as of Sept. 11, according to EIA figures cited in the order.

The order cites agriculture’s $25.6 billion annual contribution to the state economy and 248,000 jobs, 37,200 farms on 13.6 million acres, and 18.8 million acres of forestland. It lists this year’s planted acreage at 3.4 million acres of soybeans, 885,600 of rice, 750,000 of corn, 551,000 of cotton, 65,400 of wheat and 38,700 of peanuts. Forest industries contribute $7.3 billion, the order says, making Arkansas the most forestry-dependent economy in the South.

Sanders invoked the state Emergency Services Act, which lets a governor suspend regulatory statutes when compliance “would delay action in coping with the declared emergency,” and pointed to President Donald Trump’s national energy emergency declaration, which has been extended through Jan. 20, 2027.

Arkansas joins a run of states taking the same step in the past week. Louisiana Gov. Jeff Landry declared an emergency for farmers and loggers Sept. 23, Alabama Gov. Kay Ivey suspended dyed-diesel enforcement Sept. 24, Nebraska Gov. Jim Pillen signed a 90-day order the same day, Oklahoma Gov. Kevin Stitt ordered a 120-day enforcement pause Monday and North Dakota Gov. Kelly Armstrong declared a diesel emergency Tuesday that runs through Nov. 30.

The order does not change the price of dyed diesel itself or add to supply, and it does not apply to trucking companies, contractors or anyone outside agriculture and forestry. DFA had not published guidance on how it will verify eligibility as of Wednesday morning.

The full text of Executive Order 26-15 is posted on the governor’s website.