How Big a Deal Is Red-Dye Diesel Order?

By Cindy Gonzalez, Nebraska Examiner

LINCOLN, Neb. -- Sixth-generation Nebraska farmer John Hansen leaned into baseball lingo to describe his take on dual diesel directives by President Donald Trump and Gov. Jim Pillen. He compared the impact to a bunt single.

The swing was less than full and the outcome far from a home run, he said.

"It's somewhat helpful but small in scale by far," said Hansen, whose leadership of the Nebraska Farmers Union spans nearly 40 years. "We've got a much bigger hole to fill."

Hansen said Trump's executive order struck out in addressing "underlying systemic" issues, including rising base fuel costs, tariffs, trade and other policies he said are driving up expenses and threatening the economic health of farmers and ranchers.

He and others interviewed about the diesel directives said they have lingering questions and were still trying to get a grip on apparent relief set to expire in a few months. Many saw the president's move to temporarily (through December) allow use of untaxed red-dyed diesel for "any reason" -- beyond the typical restricted use in farmland and construction equipment -- as more of a break, in the short run, for long-haul commercial truckers.

But the Nebraska Trucking Association, which represents roughly 900 companies, was skeptical and is cautioning members and partners not to fill up with the untaxed, tinted diesel fuel.

"We're being very clear," said Kent Grisham, president and CEO of the state network. "Do not put dyed diesel in your tanks -- at least not yet."

AMBIGUITY, CONCERN

Grisham said he and industry colleagues see "a lot of ambiguity" in who can benefit from the federal directive and how it would work.

However, he said they applaud the president's attempt to find temporary relief, as "the world moves on diesel."

"Every supply chain is diesel-powered, from the ships that cross the ocean to the trains that haul commodities to the trucks that move 88% of the tonnage in the state of Nebraska," Grisham said. "So, when the price of diesel is setting record levels, all of that is going to get into the pockets of you and me and everybody else."

When announcing the diesel directive earlier this week in Grand Island, amid Midwestern farm and ag workers reeling from spiking diesel prices, Trump remarked that the action should cinch the elections of fellow Republicans Pillen and U.S. Sen. Pete Ricketts.

But as described in White House documents, details are yet to be hammered out by the secretary of the Treasury. The presidential action seeks to "defer" until later the payment of the federal diesel fuel tax without penalties, interest or addition to the tax. It tells the secretary to "explore" avenues that might eliminate, or forgive, the obligation to pay the postponed amount. The standard federal diesel tax is 24.4 cents per gallon.

A couple of weeks earlier, Pillen announced his own order to refund Nebraska's state diesel tax -- that's 31.8 cents per gallon -- on clear/undyed diesel fuel used during a similar 90-day period if the load being transported from field to market or storage involved Nebraska sourced commercial ag products.

Intended as relief during harvest time, the Pillen directive also allowed the tax-free red-dyed diesel to be used for ag purposes on state public roads without penalty through December. Regular diesel mixed with a tint of red dye is meant to alert law enforcement if "off-road" fuel is being used unlawfully.

NOTHING BURGER V. WELCOME RELIEF

Kent Green, who farms about 3,000 acres in the Alliance area, said he hires five truckers who use clear diesel fuel to transport his sugar beet harvest to town.

Green figures the combined executive orders could potentially result in a tax savings of as much as 56 cents a gallon on roughly $6-per-gallon diesel during the few-month period. So far, he said, the contracted truckers haven't bumped up the fees they charge Green.

"Maybe it's been helpful to me in that way," he said. But he called the relief short-lived, if at all.

"Taxes are like a balloon: You push on one side, it pushes on the other," Green said, noting that clear diesel state tax revenues go to the Highway Fund to help take care of public roads and bridges.

Becky Potmesil and husband Scott raise calves and own or lease several thousand acres of ranchland around Alliance. She said tractors and machinery used on their property already were exempt from taxes and Potmesil viewed the president's directive as a big "nothing burger."

"It's just a lot of noise," Potmesil said, noting that she paid rising base diesel prices throughout the summer.

The Trump diesel plan said that where states match his federal action, savings could "top $100 per fill, a real difference for the hardworking Americans who haul the freight and grow the food."

Some groups reacted with glee. The president of the American Farm Bureau Federation earlier this week applauded the executive order to ease limits on the use of tax-exempt dyed diesel fuel.

"Allowing dyed diesel fuel to be used over-the-road will bring welcome relief for farmers because every cent per gallon matters when you're running a fleet of grain trucks or hauling cattle hundreds of miles," Zippy Duvall said in a statement.

The White House touted support from groups including the Alabama Farmers Federation, the Tennessee Farm Bureau Federation and the Louisiana Farm Bureau president.

"With about a dozen states easing enforcement of off-road diesel rules, President Trump's executive order provides consistency across the country and ensures farmers and timber producers will not be penalized when they cross state lines to market their products," said Alabama Farmers Federation president Jimmy Parnell in a statement.

Duvall noted a letter the national group sent to Trump last week, calling for efforts that would bring price relief for farmers as they complete harvest. The group underscored challenges, including that the national average on-highway diesel price had reached $6.38 per gallon.

WAITING ON ASSURANCES

Sam Bradley, president of the Nebraska Petroleum Producers Association, said he was not at Trump's Grand Island political rally nor had his board taken a position on the president's order.

He said the group generally supports anything the administration can do to ease the cost of fuel and energy.

"Affordability is important to us," Bradley said. "Our operations burn a lot of diesel. We have guys driving around in pickup trucks, we have maintenance crews utilizing equipment that burns diesel. We are very, very much affected by inflation."

For Grisham, undecided details muddy the value of the president's order. He said it could take numerous months for red dye to purge from an engine system, and penalty problems could arise for truckers who travel through states with conflicting enforcement policies. Experts said a minimum fine for unlawful use of red diesel is $1,000.

Grisham said his group had yet to receive assurance that truck warranties won't be affected by dye use. "It's another reason why we're saying to our trucking partners, 'Don't do it.'"

Hansen, who is also vice chair of the legislative committee for the National Farmers Union, said that while short-term relief might be in store for some Nebraskans, he described Trump's action as "more perception than substance."

"We've done a couple of things that are somewhat helpful, useful, but they're not getting at the underlying structural problems around our energy policy, our trade policy -- and the fact that the price of diesel is a few dollars a gallon higher than a year ago."

Diesel fuel in Nebraska averaged about $5.94 per gallon on Friday compared to $3.36 per gallon a year ago, according to AAA. Nationally, the average diesel price averaged $6.28 a gallon.

Also see, "Trump Orders Temporary Relief on Dyed Diesel Taxes, Penalties," https://www.dtnpf.com/…

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