Top WA Democrat pulls support for tax on exported fuel

Facing mounting pressure from neighboring states, a top Democrat in the Washington Legislature is now pulling support of a proposed tax on fuel exported from the state’s five refineries.

Rep. Jake Fey, D-Tacoma, one of the architects of a proposed $16.8 billion transportation funding measure, said Saturday he would walk on an amendment striking the controversial tax.

“We’ve been hearing people and been hearing their concerns,” Fey said in an interview. “Everything from the price of oil as it’s been, to the concern about what might transpire with what’s going on in Ukraine, to the response from the elected officials in Oregon, Idaho and Alaska.”

In place of the tax, which was estimated to raise $2 billion over the next 16 years, Fey wants to instead transfer $100 million a year for the next 15 years from the state’s public works account.

“Transportation projects are public works, by definition,” Fey said.  

If the amendment is adopted, that would leave the state with $500 million less in funding for transportation projects than what was proposed in Democrats’ original package. Fey said that will inevitably mean some pieces of the measure will be cut, but he’s uncertain which. His priorities remain the same around funding for maintenance and preservation, fish culverts, the ferry system and completing the state’s long-promised highway projects like 520 in Seattle.

Fey said he’d notified Democratic House members of the change and spoke to his counterpart, Sen. Marko Liias, D-Lynnwood, Saturday morning.

Liias said in a text message he was “pleased” with the progress of the package in the House and is “open to alternative ways to fund it.”

“I look forward to sorting out the details in conference once they’ve passed the bill,” he said.

In recent days, some Democratic members have become concerned about the repercussions of the tax’s approval, Fey said. “Our take was this was just too risky,” he said. “It jeopardized the whole package, and there was just too much weight on it.”

Coming into this year’s short, 60-day session, lawmakers on both sides of the aisle sought increases in funding for the state’s aging and outmatched transportation system, but have so far not come together on the best path forward. The Democrats, who control both chambers of the Legislature, negotiated the funding measure without Republican involvement.

Ranking Republican on the House Transportation Committee, Rep. Andrew Barkis said Saturday he was happy the tax would be shelved.

“If we’d have talked about this from the beginning, they would have avoided this type of backlash,” he said.

Barkis also expressed concern about the proposed use of the public works account, which he described as “a very guarded account” by local governments.

“That’s going to be a heavy lift,” he said. Barkis said he still preferred a dedicated sales-tax stream for long-term transportation funding.

Ushered through by Fey and Liias, a transit-friendly lawmaker in his first year as chair of the Senate Transportation Committee, the proposed package spends heavily on major unfinished highway projects as well as on transit service and corridors geared toward nonvehicle modes of transportation. It also would steer billions toward building out the state’s ferry fleet, removing barriers to fish passage and dedicating $1 billion toward a new I-5 bridge between Oregon and Washington.

To fund the measure, Democrats promised not to raise the gas tax any further — the primary mechanism used in the state’s previous three transportation funding packages. Instead, they’ve counted on billions in new revenue from a new carbon pricing system, approved in 2021, as well as the expected inflow of money from the federal government. They also authorized a one-time transfer of operating funds.

At the same time, Democrats proposed a 6-cent-per-gallon tax on fuel exported from the state. Washington is home to five refineries. Nearly 40% of the fuel processed goes to other states, primarily Oregon. In proposing the new tax, Democrats said it was a way for nearby states to share in the environmental burden caused by those refineries.

But the backlash was swift, accompanied by a flurry of legal threats. Republican lawmakers in Washington have united in opposition, both to the new tax as well as the entire transportation package. Republicans in Idaho and Alaska predictably threatened retaliation.

The real sting, however, came from opposition in Oregon, most notably from Gov. Kate Brown, a Democrat. In an op-ed and subsequent letter, Brown called on Washington Gov. Jay Inslee to veto the tax and for lawmakers in the Legislature to change course. She said the tax would inevitably become bogged down in legal fights, jeopardizing cooperation between the two states on a new I-5 crossing over the Columbia River.

Fey said Democrats are taking into account those concerns.

The revenue portion of the proposed transportation package, including the tax, has already cleared the Senate and the House Transportation Committee. It will come to the House floor sometime next week and Fey will propose his amendment then. The package will then return to the Senate.