Washington farmers want their promised carbon-pricing exemptions

The messiness involves the multiple paths gasoline can travel from refineries to farmers. Sometimes a wholesale gasoline distributor ships fuel directly to a farm, making the tracking easy. Other times, fuel goes through one or more middlemen before it reaches a farm, which makes tracking any exemptions more difficult. 

Oil refineries are among those paying surcharges in the new system because they are among the bidders at the state’s quarterly carbon auctions. When their fuel is sold to farmers and those transporting their crops, it is supposed to be exempted from those extra costs, which are otherwise passed on for non-agriculture uses. As supporters of the new program have acknowledged: Putting a price on carbon and making it more expensive to expend fossil fuel is supposed to make it less attractive and make other, cleaner energy sources look better in comparison. 

But somewhere in the hodgepodge of uncoordinated supply chains, because farmers don’t buy directly from refineries and mostly not from wholesale distributors, the accounting gets messy. And farmers aren’t always getting the exemptions they were promised.

Big farms have accounting staffs to track complex supply chains. Smaller family farms don’t have that regulatory expertise. “I’m not big enough to have a full-time bookkeeper,” Driver said. Sixty-seven percent of Washington’s roughly 32,000 farms are small, Elsey said.

Major fuel distributors don’t serve a lot of small farms, which often buy their gasoline from retail filling stations. A rural gas station usually does not have the paperwork or trained employees needed to track their sales of farming and non-farming gasoline, Elsey and others said. 

Another complication is that fuel is dyed red to signal that it’s to be used exclusively on farmland. It’s now also a signal to suppliers that this fuel should not be subject to any surcharges related to pay for extra costs from bidding on carbon pollution allowances. But it is illegal to use red-dye fuel on Washington’s roads, so it can’t be used to transport crops. Farmers “know [that if] they mess up, the fines are astronomical,” Elsey said.

So farms use regular gasoline to haul their crops to warehouses, grain elevators and food processors. But then they have an accounting nightmare to deal with. It is extremely difficult to parse regular gasoline use on roads into farming and non-farming uses, Driver said.

Opponents of Washington’s new Climate Commitment Act — the formal name of the cap-and-invest program — are using its agriculture impact as one reason to reject it at the ballot box. They have an initiative on the November ballot to do just that. The oil and gas industry has passed much of the costs they have accrued at the quarterly carbon auctions on to consumers at the gas pump, resulting by some estimates in 21 cent- to 50 cent-per-gallon increases. But numerous factors impact the rise and fall of Washington’s gasoline prices, which means it is difficult to pin down the exact cap-and-invest effect.

The program has raised roughly $2.15 billion since Jan. 1, 2023, which has been spent by the Legislature on numerous health, transportation, environmental, salmon and other projects.

Led by conservative interests, cap-and-invest opponents argue that the Democrat-controlled state government is forcing people to pay more for gasoline to fund its pet programs.

Cap-and-invest supporters — led by Democratic leaders and liberal organizations — argue that the revenue is paying for numerous programs across Washington. At least 30 percent of the money raised in carbon auctions is supposed to go to disadvantaged communities, especially those disproportionately affected by pollution. 

Notably, most of the state’s oil industry is neutral about the cap-and-invest program, wanting to keep it while also modifying the system. British Petroleum has announced its opposition to the initiative to repeal the program. 

Jeff Perrault is the fourth-generation president of Toppenish-based Perrault Farms, harvesting 1,000 acres of hops and 52 acres of blackberries. A believer in environmentally responsible farming, he understands both the arguments and the counter-arguments.

“Cap-and-invest’s intentions are good, but the economics in the long run don’t bode well for consumers. You can’t argue with where the money is being spent,” Perrault said. He argues the cap-and-invest surcharges have hard-to-define ripple effects on transportation and storage of his hops as they travel from the field to warehouses and then breweries.

His operation has a full-time accounting staff. But so far, it has not figured out the entire financial picture of all the moving economic parts of cap-and-invest.