Texas Opens the Red Tank
Texas has moved to temporarily loosen restrictions on dyed diesel as soaring fuel prices and tightening supplies put pressure on the state’s agricultural and transportation industries. Gov. Greg Abbott declared a statewide disaster on September 28, covering all 254 Texas counties, and suspended state restrictions that normally prohibit the use of red-dyed, tax-exempt diesel on public roads. The order is scheduled to remain in effect for 30 days and can be extended.
The move comes as diesel prices in Texas have climbed to roughly $5.86 per gallon, according to AAA, with the state citing fuel shortages and international disruptions as contributing factors. The emergency proclamation also increases allowable weights for certain fuel, agricultural and timber loads and suspends some Texas diesel-emissions requirements to the extent permitted by federal law. Abbott has separately asked the federal government for additional regulatory relief.
The dyed-diesel provision is particularly significant because red diesel is normally intended for off-road applications such as farming and construction and is exempt from most federal fuel taxes. Under ordinary federal rules, highway diesel carries a 24.4-cent-per-gallon federal tax, while dyed diesel is subject only to a small federal charge supporting the Leaking Underground Storage Tank Trust Fund.
Now Washington is considering whether to broaden access to that same tax-exempt fuel. Reuters reports that the White House is weighing regulatory changes that could allow red-dyed diesel to be sold for wider uses as one possible way of reducing the cost of diesel. No final decision has been made, and the proposal is being considered alongside other options, including a possible diesel-export restriction.
The important distinction is that allowing more people to purchase dyed diesel would reduce the tax burden on eligible fuel purchases, but it would not create additional diesel. Petroleum analyst Patrick De Haan of GasBuddy told Reuters that the proposal would not address the underlying supply imbalance because the fuel already exists; the change would primarily determine who can purchase it without the normal highway diesel tax. How much of any tax savings ultimately reaches the customer would also depend on how the policy is structured and how fuel sellers price the product.
Texas is not alone. Reuters reports that Alabama, Louisiana and Nebraska have also taken recent steps to loosen restrictions or penalties involving dyed diesel as fuel prices have climbed. That makes Texas’ action look less like an isolated state experiment and more like part of a rapidly developing response to the current diesel market.
This does not mean that you can suddenly start filling up the trucks with red diesel. Texas’ emergency order is specific to the state, and federal fuel-tax and fuel-use rules still matter. But the larger development is significant. If additional states begin adopting similar emergency measures, or if Washington expands the circumstances under which dyed diesel can be legally used, the fuel-cost equation for companies operating fleets could change substantially.
For now, however, there is no nationwide red-diesel holiday. Texas has opened a temporary door, and Washington is considering whether to open a much larger one. With diesel already above $6 a gallon nationally, what happens next could have a direct effect on the operating costs of anyone whose business depends on putting a truck on the road.
