Key Points:
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Gov. Katie Hobbs is temporarily allowing agricultural vehicles to use “red dye” vehicles off the farm
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The tax-free gas includes red dye that’s typically only used on farmland
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The governor’s office said farmers should not have to pay back taxes when the law reverts in 2027
Saying she’s trying to cut costs for Arizonans, Gov. Katie Hobbs late Tuesday ordered state officials to temporarily stop enforcing laws that now bar farmers and ranchers from using cheaper “red dye diesel” in the trucks they use to deliver agricultural products.
“Arizonans are feeling the squeeze at the grocery store, and we are stepping up to deliver relief,” said the Democratic governor in a press release. “By cutting taxes and regulations for our farmers and ranchers, we’re lowering the cost of doing business and helping Arizona families put food on the table in the face of skyrocketing costs due to the war in Iran.”
Hobbs’s executive order also allows heavier vehicles hauling agricultural products to use state highways.
But exactly how all that would work — and whether there actually would be any permanent financial relief — remains unclear.
At the heart of the problem, diesel fuel is running far north of $6 a gallon. That compares, according to AAA, to about $3.64 a gallon a year ago.
John Boelts, president of the Arizona Farm Bureau, said that is driving up costs for food and fiber producers. And that, in turn, is reflected in the costs to consumers.
Farmers and others can already buy and use red-dye fuel for off-road use, from farm equipment and construction bulldozers to backup generators and data center power systems.
The product is virtually chemically the same as diesel sold at fuel pumps — but without that 24.4-cent-a-gallon federal levy and 26-cent state tax.
When fuel is picked up at a distribution hub, they add red dye to show buyers didn’t pay those taxes, based on the promise to use it only off-road. That dye lets state and federal transportation officials determine whether over-the-road trucks are cheating by buying fuel without paying the levy.
The governor’s order will let agricultural operations buy and use that less expensive dyed fuel for all operations, including deliveries, without fear of penalty—at least through the end of the year.
This comes more than a week after President Trump issued his own order allowing all truckers — not just those hauling agricultural products — to buy the specially marked diesel through 2026.
Less clear, however, is whether Trump’s or Hobbs’s actions will actually save farmers and truckers any money in the long run.
Trump acknowledged that all his order does is defer payment of those federal excise taxes — the ones that truckers normally would have to pay for their on-road use — for the remainder of the year, without penalties or interest.
He makes no mention of what happens in January to all those deferred taxes. Instead, the White House says that it wants to “explore pathways to eliminate the obligation to pay the deferred taxes.”
Hobbs is using a different tactic.
Her order tells the Arizona Department of Transportation, which monitors trucks, to “de-prioritize” the enforcement of state laws that prohibit the use of red dye diesel, at least as far as those hauling agricultural products. It specifically directs them to “refrain from initiating inspections, citations, or other enforcement actions based solely upon the presence or use of dyed fuel in such vehicles” through the end of the year.
Gubernatorial press aide Christian Slater said, however, that those entitled to buy tax-free diesel between now and the end of the year won’t later be billed for what they didn’t pay.
Boelts said any help is welcome.
“It’s a temporary reprieve,” said Boelts, who raises green vegetables like iceberg and romaine lettuce, cauliflower and broccoli in the Yuma area. “The hope would be that that deferral is permanent.”
Ultimately, he said, the solution — at least as far as the state diesel levy is concerned — may rest with the Legislature.
However, Boelts said many new diesel fuel manufacturers have told buyers that using red-dye fuel will void the warranty. He said that may convince some farmers that the dollar savings of tax-free fuel aren’t worth the financial risk.
The other key element of the governor’s program is designed to allow more agricultural products to be delivered in a single load.
Under current law, trucks are limited to 80,000 pounds unless owners or operators obtain a special permit for a fee. Hobbs is directing ADOT to charge no fees for trucks weighing up to 90,800 pounds.
In March, as fuel prices soared, Hobbs said she would consider suspending the state gasoline tax. It is 18 cents a gallon, with an additional penny set aside to clean up old fuel tanks.
But that was while she was negotiating a new state budget with the Republican-controlled Legislature. And nothing ever came of that.
