Why It Matters
Illinois farmers and fuel retailers face immediate relief from criminal penalties associated with using tax-exempt diesel on public roads, a move designed to mitigate the impact of soaring fuel costs on agricultural operations.
What Happened
Governor JB Pritzker declared all of Illinois a disaster area on Tuesday, citing rising diesel fuel costs. The declaration follows an executive order signed by President Donald Trump that permits the use of tax-exempt, red-dyed diesel fuels on highways. In response to the federal action, Pritzker directed state agencies to refrain from penalizing the sale or use of this dyed fuel on roads through December 31.
The Illinois Department of Revenue and the Illinois State Police have been instructed not to impose penalties for the on-road use of dyed diesel during this period. The red dye is chemically identical to regular diesel but is typically reserved for off-road farming equipment exempt from highway taxes. While the federal order suspends the tax, retailers remain responsible for remitting it in January.
Nate Harris, CEO of the Illinois Fuel and Retailer Association, advised retailers against using dyed diesel until further clarification is received. Harris stated that retailers face criminal risk if they sell dyed diesel for on-road purposes without clarity on penalties. “I don’t really think that the federal government really thought this through when they were wanting to issue this in an election year,” Harris said.
“My advice to all retailers is that they should not be doing this until there’s further clarification,” Harris added. Dye residuals can stay in tanks for several refills and months, creating issues for retailers after non-dyed diesel is used.
By the Numbers
$3.73 — Diesel price in Illinois last year
$6.64 — Diesel price in Illinois this year
78% — Average increase in diesel prices in Illinois
Dec. 31 — End date for penalty suspension on dyed diesel use in Illinois
Sept. 30 — Date Indiana governor signed executive order on red-dyed diesel
Nov. 4 — End date for penalty relief on red-dyed diesel in Indiana
$4 billion — Value of Illinois soybean exports in 2024
$2.1 billion — Value of Illinois corn exports
Zoom Out
Diesel prices in Illinois have surged from $3.73 last year to $6.64 this year, representing a 78% average increase. Price increases are attributed to the Iran War, the Ukraine War, and a weeklong shutdown of the ExxonMobil refinery in Joliet. Indiana’s governor signed a similar executive order on September 30 relieving penalties on red-dyed diesel through November 4.
Rodney Knittel stated that farmers cannot pass diesel cost increases to customers because commodity prices are market-determined. Farmers can buy red-dye diesel in bulk by semi-load or truckload at a cheaper rate, offering a potential savings mechanism despite the regulatory complexities. Illinois farmers and retailers could be subject to penalties after January 1 if the waiver period is not extended.
What’s Next
Pritzker directed the Illinois Department of Transportation to consider extending the Illinois Harvest Permit program into 2027. The program allows heavier truck weights on specified routes, providing additional logistical flexibility for agricultural transport.