Megabucks Pouring into Washington State Carbon Fee Initiative

By Paul Shukovsky

A political slugfest is brewing in Washington over a ballot measure that would impose fees on the largest carbon emitters, with big oil companies in one corner and environmental groups, organized labor, tribes, and social-justice activists in the other.

Initiative 1631 would be the first direct fee or tax on carbon emitters in the nation. It would be imposed on the carbon content of fossil fuels sold or used in the state and electricity generated in or imported into Washington. It would levy a fee of $15 per metric ton of carbon content beginning in 2020 that increases $2 per year plus inflation. Several sectors that are energy intensive and exposed to international competition are exempted.

A defining difference between this measure and I-732—a carbon tax defeated in 2016—is that the broad coalition supporting the current measure wrote it to ensure that its various constituencies benefit from the revenue. That means the unions get help with job creation, the tribes with conservation of forests and fish, and social justice groups get funding to help offset regressive impacts of the fees on low-income communities.

The upshot is that instead of facing off against a splintered environmental community that failed to unite behind I-732, big oil companies like Andeavor are confronting a unified coalition that has already collected $3.7 million in contributions to fund the Yes on 1631 campaign.

Oil Opening Its Wallet

But oil companies are opening up their wallets, too. Andeavor, the oil company formerly known as Tesoro Corp., is the largest donor to the No campaign with a $1.7 million cash contribution. The Phillips 66 Co. chipped in $201,000, and U.S. Oil & Refining Co. gave $59,000. All three have refinery operations in Washington that would be paying carbon fees if the measure passes.

“I-1631 does not reflect our Principles of Public Policy, specifically by creating an unlevel-playing field within our industry, raising energy prices and failing to provide adequate transparency and accountability,” Andeavor spokesperson Destin Singleton told Bloomberg Tax in a Aug. 8 email. “We believe major policy decisions should be addressed in the legislature and not by passing ballot initiatives. We recognize and applaud the desire by legislators and voters to find meaningful ways to address environmental issues including climate change, but I-1631—as designed—is an unfair energy tax that will increase energy costs for consumers and small businesses.”

The Nature Conservancy was the largest donor to the Yes campaign, giving $775,000 cash and $140,000 of in-kind support, according to an Aug. 7 check of the state Public Disclosure Commission campaign finance website. The website showed Aug. 8 that Yes campaign donations had jumped up from $3.3 million from the previous day. But it wasn’t possible to access the source of the new money because the site was bogged down Aug. 8—perhaps because of traffic generated by results from the state’s primary election Aug. 7.

The Yes campaign is pointing to sweeping gains by Democrats in the primary as one of many reasons they believe the measure will prevail in November. “Democrats are coming out in droves,” Yes on 1631 Communications Director Nick Abraham told Bloomberg Tax Aug. 8.

Powerful ‘Ground Game’

Abraham said he anticipates that Western States Petroleum Association, which sponsors the No campaign, will come up with “20 or 25 million dollars,” while the Yes campaign has “a ground game that they will never match.” His assertion is predicated on volunteers generated by dozens of coalition members, including the Service Employees International Union and the Teamsters, allied with tribes like the Quinault Indian Nation and the Tulalip Tribes as well as a wide range of environmental groups.

Among those groups are the Washington Environmental Council, which as of Aug. 7 had donated $202,000, and Washington Conservation Voters, which put up $113,000. Smaller donations came in from Audubon Washington, Climate Solutions, the Sierra Club, and Earthjustice. The Washington State Labor Council, AFL-CIO contributed $125,000.

Western States Petroleum Association didn’t respond to a question about whether it would match or exceed the contributions gathered by its opponents in the yes campaign.

But association spokeswoman Kara Siepmann told Bloomberg Tax in an Aug. 8 email: “The petroleum industry in Washington supports well designed, market-based programs to reduce greenhouse gas emissions. Unfortunately, the program I-1631 would impose in Washington will not meet the intended carbon reduction goals.”

She said “the better path to decreasing greenhouse gas emissions in the state is to reject this ill-conceived initiative and for interested parties to work together on a market-based program that provides real GHG reductions with cost certainty.”