Proposed tax on WA fuel exports scorned by neighboring states

A proposed 6-cent per gallon tax on fuel exported from Washington state is running into bipartisan pushback from neighboring states that stand to absorb the additional cost.

But Democrats in Olympia, including Gov. Jay Inslee, have so far continued to back the new source of funding as a necessary piece of an ambitious $16.8 billion transportation package and a counterbalance to the environmental impact of oil refineries in the state.

The tax barely survived a House Transportation Committee meeting Tuesday, which voted to advance the revenue side of the proposed package.

In the weeks since the tax proposal was introduced by state Democrats, lawmakers from Alaska, Oregon and Idaho have issued a flurry of pleas and threats of retaliation if it’s signed into existence by Inslee.

“Washington taking unilateral action to increase gas prices for Oregon families and businesses is unacceptable,” Gov. Kate Brown, D-Oregon, said in a tweet last week. She said she conveyed her displeasure to Inslee in a phone call last week. In an op-ed Tuesday, Brown urged Inslee to “put this bad idea back on the shelf, where it belongs.”

Gov. Mike Dunleavy, R-Alaska, encouraged his constituents to call Inslee’s office to oppose the tax. “Their view of Alaska as a colony is reflected on a tax on all of us,” he said in a tweet.

The Idaho House of Representatives on Tuesday unanimously approved a joint memorial calling on Inslee to veto the tax if it comes to his desk, warning that the Legislature “will take any and all actions necessary to block this new tax,”

Idaho’s governor and attorney general, Brad Little and Lawrence Wasden, also asked Inslee in a letter to veto the tax.

Spokesperson for Inslee, Jaime Smith, confirmed Inslee had spoken with Gov. Brown, but said he remained supportive of “the most climate-friendly investments in state history.”

“Funding sources are always a point of debate, and this plan is no different,” Smith said. “[Gov. Inslee] hopes legislators deliver this to his desk, and plans to sign it.”

The tax would apply to any fuel products exported from Washington’s five refineries, which have historically been exempt from the state’s gas tax. Lawmakers project it would raise around $2 billion over the course of 16 years, which Democrats in the Legislature say is a necessary new revenue stream to fund their transportation goals without raising the gas tax locally.

“We’re really trying to turn the corner from a very fossil-fuel, carbon intensive transportation system of today to an electrified carbon-neutral transportation system of tomorrow,” said Sen. Marko Liias, D-Lynnwood, chair of the Senate Transportation Committee.

All three of Washington’s neighboring states could stand to be affected. Ninety percent of the refined petroleum used in Oregon is imported from Washington, according to the U.S. Energy Information Administration. Idaho has a more diverse array of sources, but has no refineries. Alaska, meanwhile, is the second-most petroleum-dependent state in the country, behind only Hawaii, and exports much of its crude oil.

Washington has the fifth-largest crude oil refining capacity in the country. Liias and other Democrats argue the tax would help share the environmental burden caused by Washington’s refineries, while also building out a transportation system that would benefit the whole Northwest region.

“This is a modest cost that has a huge return on investment, both for our state but also for our partner states,” Liias said. As for the threats from neighboring states, Liias said, “I think a lot of it is rhetoric.”

But Washington Republicans have been united in their opposition.

“We produce a lot of things, so what’s next?” said Sen. Curtis King, R-Yakima and ranking member of the Senate Transportation Committee. “Are we going to put a million dollar increase on every airplane that comes out of this state? Are we going to put a nickel tax on every box of apples that comes out of here? Where do you start and where do you stop?”

In Alaska, one lawmaker, Rep. Kevin McCabe, R-Big Lake, is proposing a set of retaliatory taxes if Washington’s goes into effect — 6-cents per pound of exported fish; a 6-cent per-foot mooring fee; and a $15 per-barrel surcharge on crude oil sent to Washington for refining. He said if Washington is going to make an argument about the environmental impact of its refineries, he would make one about the number of halibut caught and killed incidentally.

“I want people in Washington to understand that Alaska is not going to take this taxation without representation lying down,” McCabe said.

In addition to opposing the tax in principle, Republican lawmakers also contend it violates the commerce clause of the Constitution. Liias said he was well-counseled and would not have proposed the tax if he believed it to be unconstitutional.

The Washington state Senate last week passed the revenue portion of the proposed transportation package, including the tax, along party lines. The measure is now in the House. Both chambers will also separately consider the spending portion of the overall package in the coming weeks.