Hobbs orders fuel-tax relief for farm trucks

"Arizonans are feeling the squeeze at the grocery store, and we are stepping up to deliver relief,'' said the Democratic governor in a news release late Tuesday. "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, in her executive order, is also going to allow heavier vehicles hauling agricultural products to use state highways.

Exactly how all that will work — and whether there will be permanent financial relief — remains unclear.

Hobbs took the action because diesel fuel is running far north of $6 a gallon. That compares to about $3.64 a gallon a year ago, according to AAA.

The high price is driving up costs for producers of food and fiber, which in turn is reflected in the costs to consumers, said John Boelts, president of the Arizona Farm Bureau.

Farmers and others already can buy and use red-dye fuel for off-road use, ranging from farm equipment and construction bulldozers to backup generators and data center power systems.

The product is chemically virtually the same as diesel sold at fuel pumps — but without the 24.4-cent-a-gallon federal levy and 26-cent state tax.

What happens is that when fuel is picked up at a distribution hub, red dye is added to show that the buyers did not pay those taxes, based on their promise to use it only off-road. The dye allows state and federal transportation officials to determine whether trucks using the roads are cheating by buying fuel without paying the taxes. 

Hobbs' order will allow agricultural operations to buy and use that less expensive dyed fuel for all of their operations, including deliveries, without fear of penalty — at least through the end of the year. 

The governor's move comes more than a week after President Donald 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 the actions by Trump or Hobbs will save farmers and truckers any money in the long run.

Trump acknowledged that all his order does is defer payment of the 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 it wants to "explore pathways to eliminate the obligation to pay the deferred taxes.''

Hobbs is using a different tactic — and not just because her edict about the use of red-dye fuel affects only vehicles engaged in direct agricultural operations and those that distribute agricultural products.

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 those who are entitled to buy the tax-free diesel between now and the end of the year won't later be handed a bill for the taxes they didn't pay.

Boelts said any help is welcome.

"It's a temporary reprieve,'' said Boelts, who raises green vegetables including 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 tax is concerned — may rest with the Legislature.

Even with the governor's order, he said there's another factor that may stand in the way of farmers being able to get some relief.

Boelts said many manufacturers of new diesel fuel have told buyers that the use of red-dye fuel will void the warranty. That may convince some farmers that the dollar savings of tax-free fuel are not worth that financial risk, he said.

The other key element of Hobbs' 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 the owners or operators obtain a special permit — at a fee. Hobbs is directing ADOT to charge no fees for trucks weighing up to 90,800 pounds.

But there is a catch of sorts. Her permission applies only to "non-interstate state highways,'' roads that generally carry a state-designated number. That still leaves the interstate highways, controlled by the federal government, off-limits to those overweight trucks.

Hobbs said Tuesday she is calling on the federal government to allow the larger trucks on those roads.

Slater had no immediate answer to the question of whether the extra loads could mean more damage to roads and lead to more frequent need for repairs.

There's also a political element to this issue. Hobbs, in her written statement, said the high cost of fuel is "due to the war in Iran.''

Trump, for his part, said the reason for the restricted supply of diesel is "driven by the Russia-Ukraine war and a lack of refining capacity around the world.'' 

Boelts said the lack of capacity takes its toll. He said there hasn't been a new refinery built in this country in the 49 years he has been alive.

Several other states already took action to cut the cost of fuel.

Reuters reports states including North Carolina, South Dakota and Oklahoma are allowing owners of diesel vehicles to use the red-dye diesel and escape their own state taxes. Other states, including Georgia and Ohio, have gone farther, reducing the tax on both diesel and gasoline

Hobbs said in March this year, as fuel prices were soaring, that 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 during the time she was negotiating a new state budget with the Republican-controlled Legislature. Nothing ever came of the gas tax talk.