Puget Sound LCFS could add $.57 to gas prices

Puget Sound LCFS could add $.57 to gas prices
After failed efforts to impose a statewide low carbon fuel standard (LCFS), the Puget Sound Air Agency is now trying to create a regional LCFS that could raise gas prices by more than $.50. Photo: freepik.com

After its failed efforts to impose a low carbon fuel standard (LCFS) across the state  during the last two legislative sessions,  the Puget Sound Clean Air Agency (PSCAA) is now considering a LCFS that would only apply to King, Pierce, Snohomish and Kitsap counties. Some industry observers say the regional draft rule is intended to pressure state lawmakers into adopting a statewide LCFS program, however the agency’s own technical analysis estimating a $.22-$0.57 per gallon price increase by 2030 gives critics powerful ammunition against any potential legislative proposal.

As Association of Washington Business Government Affairs Director Mike Ennis sees it, the technical analysis vindicates warnings made about a LCFS bill introduced during this year’s legislative session  based on a 2018 report about California’s LCFS by its nonpartisan Legislative Analyst’s Office (LAO). The LAO report concluded that the program had raised gas prices by $.13 and would likely raise them by $.46 by 2030.

The new analysis by PSCAA “validated everything we were saying,” Ennis said. “Wait until they have a hearing on the statewide version next session. We don’t have to use California’s numbers. We can use Puget Sound’s.”

PSCAA’s draft rule is intended to reduce regional carbon emissions by 25 percent below 2016 levels and 50 percent below 1990 levels by 2030. The LCFS program sets up a system in which entities that provide fuel above the limit generate deficits and must purchase credits from clean fuel providers. The agency’s draft rule goal is more ambitious than California or Oregon’s LCFS programs, as well as the legislative proposal made this year.

Although the technical analysis concluded that the “precise impact on fuel prices is difficult to predict,” Ennis says the estimated gas price increase is “ridiculous” when compared to gas tax increases to pay for highway projects. Even if the LCFS program added just $.22 to the price of gas per gallon, that would be the equivalent of four “nickel funding” packages approved by the legislature in 2003 – though the package did include an increase in gross weight fees and sales tax on cars. The $.22 increase is almost twice as much as the $.12 gas tax increase used to fund the $16 billion Connecting Washington package approved in 2015.

That added fuel costs would “provide no additional transportation infrastructure,” Ennis said. “With the gas tax you’re actually getting a return on your investment.”

The higher fuel prices may make it harder for state lawmakers to approve another gas tax package for the state transportation system, which is already underfunded by $700 million annually for maintenance and repair. Earlier this year, Senate Transportation Committee Chair Steve Hobbs (D-44) proposed a 10-year transportation package that included a $.06 gas tax increase to help pay for fish barrier removal mandated by a U.S. Court.

Although the LCFS is intended to encourage clean fuel use, Washington Trucking Association President Sheri Call told Lens that it instead discourages new technology investments.

According to new research from the Diesel Technology Forum, near-zero-emissions diesel truck technologies now make up half the U.S. trucking fleet. Since 2007, the emission reductions as the result of this shift toward clean diesel trucks is equal to carbon emitted from all U.S. cars for 33 years. Yet, Casey Selecman with global information provider IHS Markit noted in an Oct. 22 webinar that West Coast states lag the rest of the country in adopting newer, clean fuel trucks.

“Maybe it’s regional economic policies and other things that are sort of limiting the new growth of trucks in those markets,” he said.

Call said that a LCFS would only undermine further use of this technology by creating “a whole layer of regulation. We’re on the cusp of availability for these technologies. We’re just not there yet for the heavy truck industry. Not only is there a lot of new technology in diesel fuel engines, but there is a lot of upcoming technologies for alternative fuels like electric or hydrogen.”

Washington Farm Bureau Associate Director of Government Relations Bre Elsey told Lens PSCAA’s proposal “amounts to willful negligence at this point. PSCAA’s policy is based on this premise that everyone will be switching over to an electric. But when was the last time you saw an electric tractor going down the field?”

As with the trucking industry, Elsey said the regulatory costs placed on farmers “prevent us from being a part of these new technologies. Farms are operating with little to no profit right now.”

She added the LCFS assumes industry members will adopt vehicle technology that doesn’t even exist yet. “They’ve given us a no-win situation. They presented us with a solution to go electric, which is impossible currently in our industry. That shows the profound disconnect between PSCAA and the industry around them.”

The public comment period for the draft rule is scheduled until Jan. 6. A public hearing is scheduled for Dec. 19 at the Washington State Convention Center. The agency will take action no sooner than Feb. 27.

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