Washington lawmakers want to charge for climate impacts with a fuel export tax

Washington lawmakers are pushing a $16 billion transportation bill through the state’s Legislature that would be paid for in part by a new tax on fuel exported from the state.

The proposed tax of 6 cents per gallon on fuel refined in Washington before being exported from the state would generate more than $2 billion over the 16-year, Move Ahead WA transportation spending plan, according to an estimate from legislative staff, most of which would come from shipments sent to Oregon, Idaho and Alaska.

Democrat leaders of the Washington House and Senate Transportation committees say the tax is a way to pay for part of the impacts the refineries have on the state’s environment and the climate, while also funding work to help mitigate climate change in the state.

Unsurprisingly, it isn’t being received well in many places outside of Olympia.

Republican Gov. Mike Dunleavy and officials in his office have been encouraging Alaskans to write to Washington Gov. Jay Inslee and testify against the fuel export tax in Washington state legislative hearings, providing talking points in social media posts over the past week.

A Feb. 17 post on Dunleavy’s official Facebook page highlights that Washington is currently debating “a tax that targets Alaska’s fuel costs.”

“Their view of Alaska as a colony is reflected (in) a tax on all of us, with nary a care to our lives and economy. If Alaska is to be punished as a business partner with Washington State, then we will respond accordingly,” the post states.

Inslee, a Democrat, was a presidential candidate early in the 2020 race with a campaign focused on combating climate change and the potential for economic growth from those investments.

Oregon Gov. Kate Brown, also a Democrat, has come out against the tax as well, and Republican Idaho Gov. Brad Little wrote a letter to Inslee Feb. 18 urging him to veto the fuel tax proposal.

Oregon and Idaho do not have any refineries, and there are five in the Puget Sound area. Alaska has refineries in Kenai and Valdez that provide in-state sources of fuels, but large volumes are also imported, particularly by Southeast communities and industrial users.

It’s unclear exactly how much fuel is imported to Alaska from Washington refineries. That amount can also be highly variable.

Former Ted Stevens Anchorage International Airport Director Jim Szczesniak said approximately 70% of the more than 2.5 million gallons of jet fuel used at the airport each day are imported. Much of that fuel is used by international cargo carriers, which find it more cost efficient to carry more cargo and stop for fuel in Alaska on their way between manufacturing hubs in Asia and North American markets than to carry more fuel and fly over Anchorage. The cargo transfer business at the airport is also expanding.

However, the imported fuel is purchased in huge quantities on global markets by a consortium of airlines, so Washington’s tax would likely have little impact at the airport, according to Szczesniak.

Mike Satre, spokesman for Hecla Mining Co., wrote in an email that operations at the company’s Green’s Creek underground silver mine near Juneau consume 1.5 million to 2.5 million gallons of diesel fuel per year when hydropower is readily available. The mine used more than 6 million gallons of diesel per year during the drought in Southeast that spanned from late 2018 to early 2020, according to Satre, who also noted the impact would be felt my many rural communities across the state that rely on imported diesel for power, as well.

Curt Chamberlain, associate general counsel for Calista Corp. testified to lawmakers that while the bill seeks to remedy environmental harm, it would actually harm the most environmentally and economically disadvantaged people in the nation. Large portions of Western Alaska are among the poorest areas in the U.S. and also have some of the highest energy costs in the country.

Chamberlain said Calista leaders can associate with the reasoning behind the bill given climate change and other outside factors are impacting salmon runs in their region significantly, but he added that the tax will very likely be passed on to some of those vulnerable consumers.

With the backing of leaders in both chambers, the Move Ahead WA plan has moved quickly through the Legislature so far.

Introduced Feb. 8 as a 121-page omnibus bill, the $16 billion package passed the Washington Senate Feb. 15 on a 29-20 vote after three hearings in the Transportation Committee.

Some Washington lawmakers noted concerns about the legality of the exported fuel tax — whether it runs afoul of the Commerce Clause of the Constitution — in the Senate hearings. Transportation chair Sen. Marko Liias, a Democrat representing suburbs north of Seattle, said Feb. 14 that the tax provision was deemed legal both by Washington Attorney General Bob Ferguson and the Legislature’s attorneys.

A spokeswoman for Liias did not respond to questions in time for this story.

Alaska Senate President Peter Micciche, R-Soldotna, noted in an interview that the Senate vote fell along party lines and Democrats also hold a majority in the Washington House.

“Right now it look like this bill is destined to pass similar to how it is written,” Micciche said, adding that Alaska Senate leaders are working on a formal response.

He emphasized a belief that the tax would be highly hypocritical given the impact it would have on rural Alaskans, many of whom are among the disadvantaged individuals the lawmakers backing the bill say they want to help. Additionally, much of the oil refined in Washington is produced in Alaska, Micciche said.

He urged Washington lawmakers to evaluate their state’s relationship with Alaska, particularly in regards to fishing, before passing the tax provision.

“There is room for retaliation on one of their primary industries,” he said.

“If they’re out for Oregon and Idaho, I’d like to see an exemption for Alaska, which would make a likely illegal act more illegal.”

Longtime Alaska oil and gas attorney and industry analyst Brad Keithley wrote via email that such attempts to extract revenue from residents of other states, which come in various forms across the country, are typically unconstitutional if they tax exported goods differently than they are taxed for in-state use.

A judge may not buy that the export tax charged at the refinery gate is the same as one applied at the gas pump, but, according to Keithley, Washington lawmakers could also rework the structure of the tax code if it passes and is shot down.

Liias noted that Washington charges a fuel tax of 49 cents per gallon on its drivers, while exported fuel is not currently taxed.

“From the perspective of interstate commerce, we are not discriminating against fuel leaving. We are actually charging a lower rate than we are charging our residents,” Liias said.

Alaska’s fuel tax of 8 cents per gallon is the lowest in the country.

The Washington House Transportation Committee is scheduled to take up a companion version of the transportation spending bill Tuesday afternoon.

Elwood Brehmer can be reached at [email protected].