Dent's ag exemption bill for CCA costs moving forward
TR Reapers combines form a line in a field. The harvesting contractor based out of Warden and other agriculturally-based businesses like farms and ranches are supposed to be exempted via rebates and similar processes for fuel used in agriculture. However, the process for that has not been smooth.
FILE PHOTO
OLYMPIA — Rep. Tom Dent, R-Moses Lake, is working to fulfill lawmakers' promise to exempt Washington farmers and ranchers from cap-and-trade fuel taxes in a newly proposed bipartisan bill.
“Finding a solution is a challenge,” Dent said in a public hearing. “We know that, but a promise was made, and we need to find a way to keep that promise.”
The Climate Commitment Act, passed in 2021, established a cap-and-trade program that exempted fuel used for agricultural purposes by farm fuel users and fuel used for transporting agricultural goods on public highways until 2027. Despite the exemption, many farmers have been unable to claim their benefits on all eligible fuels, particularly those purchased from traditional retail stations.
HB 1912, in its substituted form, would strengthen the tracking and registration of exempt fuel sales by requiring fuel sellers to report to their suppliers, aiming to ensure farmers do not pay the cap-and trade surcharge. The bill has been amended since its introduction with more amendments to be expected according to Dent.
“We're trying to get it where it works, as close as we can for everybody,” he said.
The CCA requires oil refineries to pay the surcharge as they are bidders in the quarterly carbon allowance auctions. Refiners are not allowed to pass down compliance costs to farmers and those transporting agricultural goods. However, Dent has said in the past that a methodology for ensuring that part of the law is implemented hasn’t materialized properly.
According to Washington Tree Fruit Association President Jon DeVaney, the complex supply chain that includes middlemen distributors and retailers, complicates the tracking process of exempt sales. That is especially true for ag professionals who do not purchase fuel via bulk or cardlock but from retailers who serve both agriculture and non-agriculture consumers
“The penalties for fuel suppliers are so high under the CCA for not purchasing credits for all non-exempt fuels that many (retailers) feel very risk-averse unless they have a very clear process explained to them about how they can track and manage that exemption,” DeVaney said.
Travis Coulter from the Washington Oil Marketers Association argued that the bill would create an administrative burden on fuel businesses, as suppliers already report the sales when they enter the fuel market via distributors. He added that distributors currently verify that end consumers meet the Department of Ecology eligibility requirements, providing auditable assurances to suppliers.
Coulter said that, if implemented, the bill could put companies at risk by requiring them to report to suppliers who, in some cases, are their direct competitors.
“Given these risks, point-of-sale operators may choose not to offer exempt fuel rather than face increased administrative costs, steep penalties, and the prospect of handing over customer lists to potential competitors,” said Coulter.
He emphasized that most farmers do receive exempt rates and suggested that those who do not should instead utilize a rebate program offered by the state.
The bill was first introduced to the Environment and Energy Committee on Feb. 13, initially requiring farmers to apply for refunds through a remittance program established by the Department of Ecology.
However, the bill’s original version received significant pushback over the program's implementation as refunds would be calculated based on the most recent CCA carbon allowance prices under the assumption that the compliance costs are paid the same by each supplier and are passed down in full to exempt users.
Joel Craswell, a program manager with the Department of Ecology’s Climate Pollution Reduction group, said calculating a uniform compliance cost would limit the price signal on fuel producers, disincentivizing them to reduce carbon emissions.
Breanne Elsey from the Washington Farm Bureau also noted that remittance programs are underutilized by the agriculture community.
As a partial solution in 2023, the Legislature directed the Department of Licensing to set aside $30 million to refund the cap-and-trade taxes to farmers, however only about $3.2 million has been claimed.
Readers may visit https://bit.ly/CCAREBATES1 to find out more about how to apply for the rebate program if they work in agriculture.
According to the Department of Licensing, farmers who apply for refunds are only reimbursed based on the number of gallons of fuel used, with a rebate cap ranging from $600 for less than 1,000 gallons and $4,500 for 10,000 gallons or more.
Devaney said producers want a clear system to receive exemptions at retail without applying for reimbursement; however, he recognizes concerns over the substitute tracking process.
“The more burdensome any process is on various stakeholders, the more likely there is to be ongoing costs that could erode support,” he said.
He emphasized that the goal is to ensure farmers receive their exemptions, requiring collaboration from constituents and lawmakers on both sides of the aisle to find a solution to a complicated problem.
“It's a good example of how legislation should occur,” DeVaney noted.
The substitute bill was heard in the House Appropriations Committee Wednesday night with an executive session scheduled for Feb. 28.