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Searching for fixes to the farm fuel carveout in Washington’s climate law

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Searching for fixes to the farm fuel carveout in Washington’s climate law

Sep 18, 2023 | 8:00 am ET
By Laurel Demkovich
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Searching for fixes to the farm fuel carveout in Washington’s climate law
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(Scott Olson/Getty Images)

Farmers and truckers say the state is ignoring their ideas for how to fix a troubled exemptions system that is supposed to shield them from fuel price hikes under Washington’s new climate law. 

The Washington State Department of Ecology launched a series of stakeholder meetings this summer to iron out the exemptions, which are available for fuel used in agriculture, commercial fishing and aviation. With the final meeting scheduled for this week, the workgroup has made some progress but major sticking points remain.

“It’s hard to say what Ecology might come up with,” said Sheri Call, president and CEO of the Washington Trucking Associations, one of the groups involved in the talks. “From day one when these discussions started, they have been putting it back on industry and impacted entities to figure it out.” 

As the talks wrap up, the Trucking Associations and the Washington Farm Bureau are also pushing for changes to the exemption program on a different track. They’re asking a state judge to scrap Ecology’s regulations guiding the exemptions and to open a new rulemaking process, which the groups hope will yield the fixes they want.

Special carveout, messy rollout

Central to the state’s landmark Climate Commitment Act are auctions for pollution allowances that refineries and other companies need to buy to offset their carbon emissions. 

Under the law, the agricultural, maritime and aviation sectors are supposed to be exempt from the law’s cap on emissions and any fees fuel companies might pass along to customers to cover the cost of buying the allowances. And fuel used for trucking crops and other agricultural goods over the road is supposed to be exempt through 2027. 

But once the program launched in January, farmers, fishermen and fuel distributors were quick to say the exemptions program was a mess. 

They complained about difficulties with how to track whether diesel fuel was being used for exempt purposes and said a process where exempt fuel buyers had to present certificates to fuel sellers was cumbersome and faulty. 

The result, they said, was fuel distributors were in many cases passing on the cost of allowances to buyers who were supposed to be exempt. The farmers and truckers say in their court filing that fuel costs for agriculture are up $0.45 to $0.70 per gallon due to the climate law.

In June, Ecology set up a workgroup of more than 30 farmers, fuel distributors, climate advocates and others to find solutions. The agency itself has pinned much of the blame for the exemption difficulties on fuel sellers.

Claire Boyte-White, Ecology spokesperson, said she couldn’t say for sure what might come out of the workgroup, but that the department has been focused on finding solutions to the issue since fuel suppliers began placing “unfair surcharges on fuels.”

“Although there are still technical challenges with some specific types of fuel sales that we continue to work on, we’ve made tremendous progress,” she wrote in an email. 

Searching for solutions

Workgroup members got their first look at the specifics of potential new approaches with the exemptions at their last meeting.

What emerged reflects an attempt to get financial relief to farmers and produce haulers faster than wading through a legislative or rule-making process, said Isaac Kastama a lobbyist for Clean & Prosperous Washington, a coalition of environmental groups, utilities and oil refiners.

In a summary document from the last meeting, Ecology said many workgroup members felt that the proposed solutions seemed feasible. 

But Bre Elsey, director of governmental affairs at the Washington Farm Bureau, said some members have expressed worries during meetings that there is not “a clear path to resolve the most difficult, unresolved issues.”

One of the biggest obstacles has been figuring out how to track and exempt fuel used exclusively for agricultural purposes that is purchased at retail gas stations. Farmers and truckers who fill up vehicles at roadside gas stations say they don’t have a way to get exempted.

Solutions offered at the workgroup’s last meeting included allowing purchasers to show a gas station operator a form proving they’re exempt from any surcharge, or creating a way for exempt purchasers to submit fuel receipts and a form to receive refunds from fuel suppliers.

Elsey criticized the discussion over how to deal with exemptions at gas stations. She said the meeting did not include anyone who represented the retail gas industry who could have spoken on whether it would be feasible.

“As long as Ecology continues to cherry-pick who they want in the room, the longer it’s going to take to find real solutions,” she wrote in an email. “This scenario wouldn’t have happened if rulemaking was open to the public and all industry experts.”

A snag for the trucking industry is how to track which of their fuel is used specifically for hauling agricultural goods when the same truck transports other types of cargo. 

Call said it would be a burden for truck drivers to track those fuels but they would do it if it meant they didn’t have to pay a surcharge. 

Another option discussed at last week’s meeting was allowing fuel distributors to offer exemptions to farmers and truckers who buy fuel from them in bulk, as opposed to purchasing it at gas stations. A number of distributors in Washington have already started offering exemptions to those who buy directly from them. 

Industry-backed ideas

Elsey, with the Farm Bureau, said it’s unlikely there is one path forward on the exemptions that would work for everyone, and it’s important to get other perspectives into the discussion. 

The Trucking Associations’ Call said she is pushing for a rebate program where those exempt could fill out a form, similar to what they already do with the Department of Licensing for fuel not used on public highways and get money back from the state for any surcharges. 

She said her organization has submitted a request to Ecology to take up the refund system idea at the workgroup’s next meeting but has not heard whether it will be discussed. 

Elsey pointed to other solutions that could work for farmers, including some outlined in legislation state Sen. Mark Mullet, D-Issaquah, plans to introduce next session.

Other possibilities include a remittance program for farmers to get rebates from the state for any fees they may have paid, or a rule allowing farmers or truck operators the option to turn their exemption into carbon credits that could be sold.

But Elsey said Ecology has rejected both of these options.