Stakeholders who oppose a low carbon fuel standard (LCFS) proposal turned out in full force to share their perspectives in Olympia during a critical March 2 public hearing of the Senate Transportation Committee, highlighting the myriad ways such a measure would harm Washington’s workers and business climate.
After failing to clear the committee last year following passage in the House, ESHB 1110’s fate now hinges on whether Chair Steve Hobbs (D-44) will schedule it for a committee vote which is necessary for it to reach the Senate floor for final passage.
The only comment from Hobbs during the hearing to sponsor Rep. Joe Fitzgibbon (D-34) during his testimony was: “maybe you and I don’t agree on things, but I know your heart’s in the right place.”
Yet even if the bill fails a third time to reach the governor’s desk, the fight over a LCFS is clearly far from over. An ongoing regional proposal by the Puget Sound Clean Air Agency (PSCAA) could force the issue, along with the possibility for a fourth bill attempt next year when Hobbs seeks support for his Forward Washington transportation package that includes either a carbon tax or cap-and-trade to pay for road projects.
PSCAA Executive Director Craig Kenworthy told the committee the agency would “put our pencils down” if a statewide LCFS is approved.
However, the presence of hundreds of truck drivers and company owners in Olympia to protest the bill reflects growing opposition that was reflected by the individuals testifying, including Poulsbo-based Rick Collins, who said: “If it doesn’t get stopped, we’re going to put a stop to it. I don’t think you people understand what is entailed in owning a big rig or equipment.”
ESHB 1110 would direct the state Department of Ecology to establish a maximum carbon intensity threshold for fuel providers, which would gradually lower over time. Entities that generate fuel below the standard generate credits, while those who don’t generate deficits and must purchase credits.
California and Oregon have already implemented their own LCFS programs, both of which are areas of disagreement for ESHB 1100 stakeholders. Supporters say it will improve the state’s air quality by reducing transportation-related emissions and incentive growth in the biofuel industry, though Washington Policy Center Environmental Director Todd Myers says an LCFS is the least efficient way to reduce emissions. “No matter how much the price of gas goes up or down, you’re still wasting $29 out of every $30 in terms of CO2 reductions.”
Jerry VanderWood with the Associated General Contractors of Washington said “there are other environmental bills under consideration that provide revenues for infrastructure funding,” a sentiment widely shared among opponents who desire tangible benefits to the state.
“We think that (legislation) should be the focus of the legislature –not this bill,” he added.
One of the greatest areas of dispute over the bill is its impact to gas prices and its wide-ranging impacts, which was reflected by the 103 people who signed in to testify at the hearing. Critics argue that the costs would hit a variety of industries, including:
The gas price hike, in turn, could also take the air out of the transportation package that includes a gas tax increase along with either a carbon tax or cap-and-trade. Washingtonians already pay a combined $.67 per gallon in taxes, with $.49 of that being the state gas tax. Advocates have sought to downplay the potential increase, while detractors insist it will lead to a significant price hike while providing no additional money for transportation when infrastructure maintenance and preservation is already underfunded.
“Funding for transportation is complicated enough,” said Billy Wallace, the political and legislative director for the Washington-North Idaho District Council of Laborers. “Trying to negotiate the LCFS outside of a larger funding package doesn’t make sense.”
To assuage concerns among some lawmakers, supporters dropped an amendment into ESHB 1110 while it was in the Senate Environment, Energy & Technology Committee that stipulates the LCFS can’t be implemented until a transportation package is passed that provides at least $2 billion per biennium in revenue and funds several major state highway projects. However, Sen. Dean Takko (D-19) remarked: “I really have a problem with tying this thing to a revenue package – it’s almost like a quid pro quo.”
During his testimony, Fitzgibbon acknowledged the funding challenges posed by Initiative 976 passed in November that places a $30 cap on car tab fees used to help finance transportation projects.
He said the amended bill “resolves the perceived conflict” between his bill and Forward Washington by “ensuring that the enforcement of a clean fuel standards shall not occur prior to the passage of a significant transportation package that addresses these unmet needs.” He noted that since implementing their LCFS programs, both California and Oregon have passed new transportation packages. The current gas tax in Oregon is $.36 per gallon, while California’s is $.578 per gallon.
Fitzgibbon also downplayed concerns over gas prices, noting that “if impacts are higher than expected, they (fuel standards) will be phased very gradually over time and give the legislature time to course correct if necessary.”
The committee offered several sources from California and Oregon’s programs, with the California Air Resource Board estimating that a 10-percent reduction in carbon intensity levels causes a $.9-$.23 increase and $.18-$.45 increase per gallon at a 20-percent reduction. The gas increase ultimately depends on the amount of credits available for deficit-generating entities to purchase.
Incidentally, not included in the presentation was the PSCAA’s analysis of its regional proposal that concluded gas prices could climb by $.57 per gallon over 10 years. Although some point to the low gas price increase due to Oregon’s policy, the program is only 15 percent implemented.
Jessica Spiegel with Western States Petroleum Association said LCFS programs are designed to have minimal impacts initially, with price increases later. Because of that, she said it’s “misleading and irresponsible” to cite costs for Oregon or California’s programs from previous years, “understanding the costs today matter.”
The presence of hundreds of truckers underscored the immediate and direct effect of gas price increases. Although there is an exemption in the bill for certain dyed fuels exempt from the state gas tax and used off-road, Sen. Tim Sheldon (D-35) who co-manages a family tree farm called the provision “disingenuous.”
“Usually the amount of distance a log truck might be on my property is a mile,” he told Fitzgibbon. “I’m worried about a lot of the people sitting behind you (and) what it (an LCFS) would do to their incomes.”
Forks-based Brandon Miller put it bluntly. “It’s going to take our ability to live (and work) away.”
“It’s hard enough to put food on the table for my kids,” trucker Josh Wagner said.
Washington Trucking Association President Sheri Call warned that while some truckers can pass the costs onto consumers, “many do not have that flexibility built into their business model.”
Adams County-based farmer Michele Kiesz said they face a similar dilemma with wheat production, since most of it is exported. Keisz is a member of the Washington Association of Wheat Growers.
“We have very little power to negotiate the prices of our products to recoup the additional added costs that this (LCFS) would add to our fuel bills,” she said. “Prices are set by global markets, not local producers.”
Washougal-based truck owner and operator Todd Stoffel said the exemption for dyed fuel doesn’t help because they operate on public roads where it is prohibited by federal law. Stoffel is one of the founders and organizers for #TimberUnity, which held a rally in Olympia the day of the public hearing.
“The brunt of this tax falls on the backs of everybody in this room,” he said.
Trucker John Hogan warned that added costs to their industry “is going to cost everybody in the state money. There’s no way around it.”
“Everything will go up in price, because everything is transported by truck,” Wagner said.
A similar observation was made by Bob Edwards, who formerly served on the Renton City Council, the Puget Sound Regional Council as chair and is a past president of the Association of Washington Cities. “These costs are going to hurt the local economy.”
Wallace told the committee that a higher gas price would mean more costs for tradesmen who “move from job to job as needed, with no idea where that next job will be.”
Tree fruit farmer Ben Buckholz, speaking on behalf of the Northwest Agricultural Cooperative Council, told the committee that “when we pay our employees, they have to make conscious decisions about whether they fill their tank in their car to get to work, or if they buy groceries for their families. It is a real problem for some of the lower income folks to be able to absorb the cost.”
No further action is scheduled for ESHB 1110.