Washington climate legislation faces trucking associations backlash

Washington’s Climate Commitment Act is facing backlash from the state’s trucking industry.

The CCA introduces a statewide emissions reduction program. Fuel used in agricultural transportation is supposed to be exempt from the program for the first five years—but, after the legislation, fuel costs skyrocketed for fleets moving agricultural goods. Fuel suppliers introduced fuel surcharges in response to the Act that did not exclude agricultural transportation.

“It inflated all of our costs,” Brian Hildebrant, a safety compliance officer for a refrigerated transportation company in Washington, told FleetOwner.

After a court shot down the Washington Trucking Associations’ petition for review of the Act’s execution, the trucking industry is looking to a November ballot to ease the strain of fuel suppliers' climate legislation surcharges.

Agricultural fuel use exemptions

What is Washington’s Climate Commitment Act?

The Climate Commitment Act is a Washington law introduced in 2021 to reduce greenhouse gas emissions through a “cap-and-invest” program. The program, generally, sets an emissions limit that lowers over time to ensure that the state reduces greenhouse gas emissions in accordance with its timeline through 2050.

The Washington Department of Ecology, charged with implementing the program, calls the cap-and-invest approach “a market-based solution” and “only the second such program in the U.S.” Under the program, high-emissions businesses must purchase allowances equal to their covered greenhouse gas emissions.

Ecology sells these allowances through quarterly auctions and also allows secondary markets to sell allowances, similar to stocks or bonds. Select businesses and emissions—like utilities, agriculture, aviation, and manufacturing—obtain some of their emissions allowances for free.

Ecology says that the proceeds of these auctions will go to initiatives that help decarbonize transportation and other sectors.

Ecology uses the auctions to allow for market-based emissions pricing. The price of an allowance, through an auction, is determined by the state’s supply and private businesses’ demand.

Over time, as the state pursues its emissions-lowering timeline, it will reduce the quarterly supply of allowances, indirectly driving up emissions prices. As the cost of emitting CO2 rises, CCA will incentivize businesses to lower their emissions. However, this also still raises the costs of many business processes, including fuel suppliers'.

The Climate Commitment Act features an exemption for fuel used for agricultural purposes. Fuel suppliers can be exempt from emissions if the supplier can provide proof that a buyer is using the fuel for an exempt purpose.

This exemption had another key clause that is supposed to benefit trucking: a five-year exemption expansion for fuel used to transport agricultural products on public highways “to provide the agricultural sector with a feasible transition period.”

“One of the provisions of the cap-and-invest program was a negotiated five-year exemption for farmers and transporters of agricultural products,” Sheri Call, president and CEO of the Washington Trucking Associations, told FleetOwner. “This was a recommendation by legislators who were concerned about consumer prices, concerned about low-margin industries, concerned about folks that don’t have as much leeway for passing costs along, to give them time to adapt.”

However, this exemption hasn’t stopped fuel suppliers from imposing surcharges on exempt fuels. Ecology has acknowledged this problem in some of its written guidance.

Rising fuel costs

With new emissions regulations, fleets quickly found out that fuel suppliers would be raising fuel costs.

“The effects immediately were the increased costs of fuel, being notified by the fuel suppliers right away that, effective January 1, your costs are going up 50 cents,” Call told FleetOwner. “Those that had fuel contracts got that notification, others who buy it at retail didn’t get that notification; they just noticed that their costs had gone up.”

Call said that diesel fuel prices skyrocketed as much as 50 to 70 cents in Washington.

“At one point we were the highest fuel prices in the nation, which is unusual because we compete with California,” Call told FleetOwner.

The rising fuel costs are noticeable for drivers across the state.

“There’s an additional fee added. It’s built into the price,” Hildebrant said. “Some of our pumps have stickers on there that show the impact of these state and local taxes.”

Fuel prices in adjacent states are not nearly as high, however. This brings a significant challenge to fleets looking to fuel in-state.

“Trucks from out of state are exempt from this program. All they have to do is fuel outside the state; they don’t have to account for the CO2 that is burned inside the state,” Call said. “It immediately puts Washington-based carriers at a competitive disadvantage … We were hearing our members going out of their way across borders to buy fuel at places a dollar cheaper than it was here in Washington State.”

Local fleets able to do so are looking to fuel up outside of Washington.

“We try to get our drivers lined up to where they’re fueling out of state,” Hildebrant said. “We’re trying to do as many different things as we can to cut costs. Freight rates are down, so that makes it very challenging to try to keep moving.”

Trucking association takes legal action

In 2023, the Washington Trucking Associations and the Washington Farm Bureau argued that Ecology hadn’t adequately introduced the agricultural exemption.

“Washington’s Department of Ecology failed to implement the agricultural fuel exemption, among others,” Call said. “We’ve gone down this path for all of ‘23 and most of ‘24 and Ecology just failed to come up with a solution.”

WTA and WFB argued that Ecology should require fuel suppliers to segregate exempt fuel sales, like agricultural-related fuel, to isolate exempt businesses from their fuel surcharges.

"Under Ecology’s rules, suppliers are not required to segregate (i) farm fuel used for agricultural purposes or (ii) fuels used for transporting agricultural products on public highways, including waterways, from CCA coverage as is required by the statute," WTA and WFB wrote in a letter, according to coverage from The Center Square. "Instead, segregation of agricultural-related fuel is optional and which—if exercised—still requires proof to Ecology’s satisfaction. Moreover, the exemption certificate is meaningless as fuel suppliers and distributors continue to add CCA-related costs onto the price of exempt fuel, and the State of Washington continues to reap the revenue from such charges."

In June 2023, WTA and WFB requested that Ecology introduce a process for agriculture and transportation businesses to be exempt from these fuel surcharges. Ecology denied the formal petition in August 2023.

In September 2023, WTA and WFB filed legal action against Ecology. The organizations petitioned the Superior Court of Washington for Thurston County to review the department’s execution of the CCA and its petition denial. WTA launched a campaign to raise $50,000 to cover legal costs of the suit, according to King 5.

On July 29, 2024, however, the Superior Court dismissed the petition with prejudice, meaning that the organizations cannot file that same action again.

“No findings nor analysis were given,” Call said. “He basically just ruled in favor of Ecology and their arguments … It feels like Ecology’s plan has been rubber-stamped and we’re just being told to go away and shut up.”

Superior Court Judge Chris Lanese's ruling read, “The Petitioners [WTA and WFB] have standing to bring this matter, but their claims fail on the merits of the reasons articulated by the Respondent [Ecology] in their briefing.”

The limits of Ecology's authority

Ecology’s briefing in question, which the Court agreed with in its dismissal, defends (among other arguments) the department’s execution of the CCA.

“The CCA is clear: Large fuel suppliers are the entities that incur compliance obligations for emissions resulting from the combustion of fuels supplied to Washington customers,” Ecology’s brief said. “The emissions exemptions at issue in this case must therefore be claimed by those suppliers.”

The supplier’s eligibility, however, wrote Ecology, depends on end users who are not subject to CCA. While fuel suppliers may be incentivized by Ecology to document fuel sales to these exempt end users, they are not required to do so. WTA's and WFB's petitions that Ecology enforce surcharge exemptions would be beyond the department's authority and language of the CCA.

"In short, yes, the CCA provides an exemption for agricultural fuels, but it is up to fuel suppliers to claim those exemptions and sell fuel without surcharges," Caroline Halter, communications manager for Ecology's Climate Pollution Reduction Program, told FleetOwner. "Fuel suppliers have an economic incentive to claim the exemption because it allows them to offer lower prices."

Ecology has distributed several guidance documents, some of which outline how fuel suppliers can document exempt fuel sales. Suppliers can accept exempt businesses’ customer accounts, product codes, delivery documentation, and tax records.

"Ecology has provided fuel suppliers with tools for claiming the exemption but does not have the authority to force suppliers to change their pricing," Halter said.

What’s next

Climate legislation regularly faces continued resistance across the U.S. In Washington, citizens will soon vote on whether to repeal the CCA in their next ballot.

Ballot initiative no. 2117 would repeal sections of the CCA and prohibit similar future programs. WTA supports the initiative.

“Our industry is going to be aggressively supporting that,” Call said.

Washington House Republicans characteristically supported the measure, and House Democrats, holding the majority, characteristically rejected motions to vote on the initiative during legislative sessions. However, the initiative received enough signatures to be included in November’s ballot.

Ecology plans to continue helping fuel suppliers respond to CCA and working to help agriculture.

"We appreciate the agricultural community’s engagement on this new climate policy, and we’ll continue to be responsive to concerns," Halter said. "We have invested significant resources to help suppliers respond to this policy and continue working collaboratively to meet the Legislature’s intent of exempting agricultural fuel emissions."