What’s That: Emergency Fuel Provisions

Several states have temporarily adjusted diesel fuel regulations or enforcement practices in response to high fuel costs and supply concerns. Some measures allow limited use of dyed diesel for highway use that would normally be restricted to qualifying off-road or tax-exempt applications.

However, temporary relief does not necessarily make dyed and clear diesel interchangeable. Taxes, permitted uses, enforcement, and federal and state requirements can still vary. For businesses considering dyed diesel for vehicles or tanks that normally hold clear diesel, understanding these differences can help avoid operational and compliance complications after provisions expire.

Why Is Dyed Diesel Treated Differently?

In most cases, the primary difference between clear and dyed diesel is not how the fuel performs, but how it is taxed and legally used.

Dyed diesel contains a red marker indicating that the fuel is intended for qualifying tax-exempt uses, such as certain off-road equipment. IRS rules specify the dye requirements for tax-exempt diesel and generally impose penalties when dyed fuel is knowingly used for a taxable purpose. Under normal federal rules, the penalty for improper use can be the greater of $1,000 or $10 per gallon involved, in addition to applicable tax.

That distinction is especially important during temporary state relief because the measures are not uniform. Some states are providing temporary relief for the use of dyed diesel on public roads, while Georgia has suspended its state motor fuel tax without changing dyed diesel requirements. Temporary relief involving dyed diesel also does not necessarily eliminate applicable taxes or other state and federal requirements.

Where Are Provisions in Place?

Nebraska announced a 90-day measure allowing highway-registered vehicles to hold, sell, or use untaxed dyed diesel without state fines or penalties. The state also established a process that allows eligible agricultural operators to seek refunds of certain diesel taxes by filing Form 84AG with the Nebraska Department of Revenue.

Review Nebraska's executive-order announcement

Alabama directed state law enforcement to halt enforcement related to dyed diesel for 120 days, with the action focused on agricultural and timber operations. Alabama has also requested federal penalty relief, but the state's announcement does not, by itself, provide such relief.

Review Alabama's enforcement directive

Texas issued a disaster proclamation allowing expanded use of dyed diesel on public roads by suspending certain state restrictions and penalties. The proclamation does not waive the underlying fuel tax, and separate federal requirements may still apply.

Review the Texas announcement and proclamation

Georgia took a different approach, suspending its motor fuel excise tax for 30 days from September 29 through October 29. The order provides temporary tax relief but does not authorize dyed diesel for highway use.

Review Georgia's motor-fuel tax announcement

What Happens If Dyed Diesel Enters a Clear Diesel Tank?

The issue is less about mechanical risk than the operational and compliance challenges that can follow. The red dye itself should not be confused with lower-quality diesel. The dye serves as a tax marker. The bigger concern for a fleet that normally operates with clear diesel is what happens after dyed fuel enters its fuel system.

Residual dyed fuel can remain in tanks, lines, filters, hoses, and other components well after use. When clear diesel is subsequently added, the remaining dyed product can tint the new fuel or leave detectable traces of dye. This can create compliance questions after a temporary exemption or enforcement policy expires.

Depending on the circumstances and applicable requirements, returning a tank or fueling system to clear-diesel service may involve draining any remaining product and cleaning or flushing the equipment.

For businesses with bulk fuel storage, the issue can extend beyond a single vehicle. Introducing dyed diesel into a tank normally dedicated to clear fuel could affect subsequent loads and equipment fueled from that tank. Keeping clear and dyed diesel storage and dispensing systems separate can help reduce cross-contamination and simplify recordkeeping.

What Businesses Should Check Before Using Dyed Diesel

Before using dyed diesel in a highway vehicle, businesses should review the temporary provisions for each state where the vehicle will operate. If a vehicle crosses state lines, relief provided in one state may not apply in another.

Confirm permitted uses, applicable taxes, documentation requirements, enforcement periods, and when the temporary measure expires. Businesses should also consider whether dyed fuel will be placed in a vehicle or storage tank that normally holds clear diesel, since residual dye may create complications when returning to clear fuel.

Mansfield is monitoring state and federal developments as requirements change and can help you understand available fuel options in your market. Reach out to a Mansfield representative today to make sense of the emergency provisions affecting your area and to build a customized fueling solution for your business.