South Dakota Red Diesel Dispute Escalates: Farmers Union Calls Special Session to Put Tax Relief Into Law

The confusion set off by a wave of federal and state executive orders on dyed ("red") diesel keeps growing in South Dakota. The South Dakota Farmers Union (SDFU), representing more than 18,000 members, sent a letter on October 8 to Gov. Larry Rhoden and legislative leaders calling for a special session: to write the tax holiday into state law, shield users from penalties, and temporarily cut the state's diesel and gasoline tax to one cent a gallon — down from the current 28 cents.

Dyed diesel is chemically identical to regular diesel; it is simply marked with red dye so it can be told apart for tax purposes. It is exempt from the 24.4-cent federal tax and from South Dakota's state tax, and was previously restricted to off-road farm machinery such as tractors and combines. Earlier this month, President Trump signed an executive order allowing farmers to use dyed diesel on highways through 2026 and deferring the federal tax (a full suspension still requires Congressional approval). Until then, running red diesel on the highway in South Dakota was a Class 1 felony carrying a $250 penalty under state codified law 10-47B-185.

Following the Trump order, Gov. Rhoden issued a directive on October 7 telling the Department of Public Safety not to enforce the ban on dyed diesel on highways. The Department of Revenue followed up on October 8 with guidance saying only agricultural producers holding a valid agricultural exemption certificate should fuel with red dyed diesel for on-road use. The guidance warned that, depending on federal guidance, consumers using red dyed diesel and paying sales tax "may actually pay more than the regular diesel tax in certain circumstances," and urged users to keep accurate fuel-use records.

Farmers are split. Scott Knochenmus, who farms near Sioux Falls and is in the middle of harvest, worries about unintended consequences: "If everybody starts buying red dye diesel so they don't have to pay the tax, then there will not be any red dye diesel. So it would create a shortage." Audie Larson, who farms near Hamill, called the two-tier system "silly" and argued all diesel should simply be dyed. A producer interviewed by South Dakota Public Broadcasting said fuel prices are 60 to 70 percent higher than last spring when the crop being harvested was planted, calling the executive orders "a little bit of a Band-Aid" — the real cure, he said, is calming world tensions and restoring refining capacity.

SDFU President Doug Sombke, a fourth-generation Brown County crop and cattle producer, addressed the letter to Rhoden, House Speaker Jon Hansen and Senate President Tony Venhuizen. "Simply telling law enforcement not to enforce a law that is not on the books is illegal," Sombke said. He asked the governor and lawmakers to change the law during the tax holiday "so that those of us who need the tax break do not need to worry about breaking the law," and to extend tax cuts to all South Dakotans by cutting the state tax on clear diesel and gasoline. The letter also proposes a one-penny-per-gallon tax on red diesel so the exact waived revenue can be measured, after which the Legislature could authorize a targeted transfer from state reserve funds directly to the State Highway Fund — "protecting our roads and bridges while providing direct, immediate relief at the pump." Sombke said suspending federal and state diesel taxes together would save a little over 52 cents per gallon.

Rhoden responded that his emergency powers let him suspend administrative rules but not statutes in the state code, and suspending the fuel tax requires legislative action. A governor can, however, call a special session — Rhoden did so last year to approve a new men's prison project. His press secretary said in a statement that "all options are on the table, and we will continue to do what we can to support farmers and taxpayers during this turbulent time." The governor's office also noted legislators can call a special session themselves with a two-thirds petition — last used in 2021 for redistricting and the impeachment trial of then-Attorney General Jason Ravsborg.

Beyond the red diesel directive, Rhoden has signed other relief orders, including suspending overweight trip permits so producers can haul the harvest at 10 percent above weight restrictions. Whether a special session is called will decide if this dispute — born of a federal executive order — ends as a temporary enforcement pause or becomes real legislated tax relief.

Published by GSM · USA (original Chinese edition)

Photo: 现代约翰迪尔大型拖拉机，Paul Bryan 摄，CC BY-SA 2.0（Wikimedia Commons）

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