Trump diesel order ‘leaves a lot of questions unanswered’ for contractors

Move to ease restrictions on off-road diesel could benefit road-going fleets while creating new competition for construction equipment fuel. Image: Adobe Stock

The executive order, signed on 5 October, could potentially reduce fuel costs for construction companies operating on-road vehicles, while also creating additional demand for the same dyed diesel used to power excavators, loaders and other off-highway equipment.

Red-dyed diesel is normally reserved for applications including construction and agricultural equipment and is not subject to the federal highway fuel tax.

Trump’s order directs the US Treasury to determine whether it can defer federal excise tax liabilities associated with highway use of dyed diesel between 5 October and 31 December 2026. It also calls for penalty relief where the fuel is sold for or used on highways during that period.

The federal tax on highway diesel is currently US$0.244 per gallon. The White House said allowing on-road vehicle users to defer that cost would save around US$60 on a 250-gallon fill.

However, exactly how the measure will operate remains unclear.

The Energy Marketers of America (EMA) has advised fuel suppliers to “proceed with caution”, stressing that the executive order does not itself authorise highway sales or use of dyed diesel.

It said eligibility for relief and the conditions attached to it would depend on guidance from the Treasury, while separate state action could also be required.

Potential pressure on off-road fuel supplies

The change could also have implications for contractors already reliant on dyed diesel for construction machinery.

EMA warned that opening the fuel to additional highway users could increase demand at a time when agricultural and heating-fuel requirements are also high, potentially putting pressure on supplies.

The executive order also does not eliminate the underlying federal tax. Instead, any qualifying tax liability would initially be deferred without interest or penalties. Trump has instructed Treasury to explore ways, including legislation, of ultimately eliminating the obligation to pay those deferred taxes.

The measure also does not automatically override Environmental Protection Agency requirements or individual state restrictions governing dyed diesel.

Industry comment

In a communication to members, the Associated General Contractors of America (AGC) said, “The Executive Order leaves a lot of questions unanswered until we see further guidance from Treasury. The most obvious question, a delayed tax bill is still a tax bill, and the executive order does not make clear that those taxes ultimately will be forgiven.

“Treasury and the IRS will have to provide guidance and spell out who qualifies and when payment is due. For contractors operating trucks and other highway vehicles, that could mean lower upfront fuel costs, but the order does not guarantee that the tax bill will be eliminated. Instead, the order asks the Treasury to explore potential avenues for tax forgiveness down the line, meaning contractors should not expect that any deferred taxes will be automatically forgiven.

“The biggest elephant in the room, the cost to the Highway Trust Fund, which helps pay for highway and transit projects. Diesel taxes brought in about $10 billion in 2025. Using that annual average, if all normally taxed highway diesel were replaced with fuel qualifying for delayed payments during the 90-day period, roughly $2.4 billion in revenue could be delayed. However, the actual amount depends on how widely the relief is used. “