AGC opposes PSCAA fuel proposal

The Puget Sound Clean Air Agency is considering a regional low-carbon fuel standard (LCFS), and AGC is opposed. AGC is joining a coalition of business, agriculture and labor groups in requesting that PSCAA drop its proposal.

During the 2018 legislative session, these groups opposed HB 2338, which would have directed the Department of Ecology to implement a statewide LCFS. HB 2338 did not pass, and neither state law nor Washington Department of Ecology regulations appear to provide PSCAA the authority to unilaterally implement a regional LCFS.

“We recognize the need to reduce greenhouse gas emissions to protect our natural environment and keep Washington a great place to live, work and play, but a regional program would present all of the same problems as a statewide scheme, as well as create additional challenges,” the coalition’s letter to PSCAA states.

AGC is concerned because the PSCAA proposal is based on a California LCFS law passed in 2007. Since adoption, however, the program has been riddled with litigation and delays. Since implementation, the carbon-intensity reduction requirement had been frozen several times at one percent. The gasoline-reduction requirement now has reached its halfway point at 5 percent, while the requirement for diesel is currently frozen at 3.5 percent.

In August, the California Energy Commission (CEC) estimated that the program is adding 12.7 cents to the price of a gallon of gasoline – despite being only partially implemented. The CEC also estimated the impact on diesel, where the requirement is only 35 percent underway, will add another 9.1 cents per gallon more than in states without a LCFS. The LCFS could continue to increase fuel prices even further as reduction goals become more aggressive, fuel producers fully spend down credits banked earlier in the program, and credit prices continue to escalate.

The impact of PSCAA’s proposal, coupled with the potential impact of the carbon tax initiative (I-1691), could mean a huge increase in gas prices – in effect, a large gas-tax increase -- without new transportation revenue that the gas tax is supposed to provide.