S-1690

AN ACT Relating to providing incentives to reduce air pollution through the use of clean alternative fuel vehicles; amending RCW 70.94.030, 82.38.020, 82.38.030, and 82.38.075; adding new sections to chapter 70.94 RCW; adding new sections to chapter 82.04 RCW; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; repealing RCW 43.19.637; providing effective dates; and providing an expiration date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. A new section is added to chapter 70.94 RCW to read as follows:

The legislature finds that Washington state faces threats to its economic vitality, public health, and environment from the ongoing and increasing use of gasoline and diesel fuels in motor vehicles. Motor vehicle emissions from petroleum fuels account for more than half of all air pollutants and almost sixty percent of total carbon dioxide emissions in Washington. The legislature finds it is important to begin addressing the negative impacts of continued gasoline and diesel fuel use. Addressing motor vehicle emissions is further needed because of the expected increases in population and vehicle miles traveled, which threaten to erode air quality gains made over the last decade. To make net progress in improving air quality, reducing the threat of climate change, and protecting public health and the environment, the legislature finds it is necessary to encourage the use of clean alternative fuel vehicles.

Sec. 2. RCW 70.94.030 and 1993 c 252 s 2 are each amended to read as follows:

Unless a different meaning is plainly required by the context, the following words and phrases as hereinafter used in this chapter shall have the following meanings:

(1) "Air contaminant" means dust, fumes, mist, smoke, other particulate matter, vapor, gas, odorous substance, or any combination thereof.

(2) "Air pollution" is presence in the outdoor atmosphere of one or more air contaminants in sufficient quantities and of such characteristics and duration as is, or is likely to be, injurious to human health, plant or animal life, or property, or which unreasonably interfere with enjoyment of life and property. For the purpose of this chapter, air pollution shall not include air contaminants emitted in compliance with chapter 17.21 RCW.

(3) "Air quality standard" means an established concentration, exposure time, and frequency of occurrence of an air contaminant or multiple contaminants in the ambient air which shall not be exceeded.

(4) "Ambient air" means the surrounding outside air.

(5) "Authority" means any air pollution control agency whose jurisdictional boundaries are coextensive with the boundaries of one or more counties.

(6) "Best available control technology" (BACT) means an emission limitation based on the maximum degree of reduction for each air pollutant subject to regulation under this chapter emitted from or that results from any new or modified stationary source, that the permitting authority, on a case-by-case basis, taking into account energy, environmental, and economic impacts and other costs, determines is achievable for such a source or modification through application of production processes and available methods, systems, and techniques, including fuel cleaning, clean fuels, or treatment or innovative fuel combustion techniques for control of each such a pollutant. In no event shall application of "best available control technology" result in emissions of any pollutants that will exceed the emissions allowed by any applicable standard under 40 C.F.R. Part 60 and Part 61, as they exist on July 25, 1993, or their later enactments as adopted by reference by the director by rule. Emissions from any source utilizing clean fuels, or any other means, to comply with this subsection shall not be allowed to increase above levels that would have been required under the definition of BACT as it existed prior to enactment of the ((~~[federal]~~)) federal clean air act amendments of 1990.

(7) "Best available retrofit technology" (BART) means an emission limitation based on the degree of reduction achievable through the application of the best system of continuous emission reduction for each pollutant that is emitted by an existing stationary facility. The emission limitation must be established, on a case-by-case basis, taking into consideration the technology available, the costs of compliance, the energy and nonair quality environmental impacts of compliance, any pollution control equipment in use or in existence at the source, the remaining useful life of the source, and the degree of improvement in visibility that might reasonably be anticipated to result from the use of the technology.

(8) "Board" means the board of directors of an authority.

(9) "Clean alternative fuel vehicle" means a motor vehicle, as defined in RCW 46.04.320, originally designed and equipped by the manufacturer to operate: (a) Exclusively on alternative fuels; (b) as a hybrid vehicle powered by a combination of an electric motor and an engine powered by gasoline, diesel, or an alternative fuel, that has an average estimated fuel economy rating, as determined by the environmental protection agency's national vehicle and fuel emissions laboratory, of at least forty miles per gallon; or (c) as a fuel cell vehicle powered by gasoline or an alternative fuel. Vehicles less than twelve thousand pounds gross vehicle weight must also meet or exceed the federal emission standards for ultralow emission vehicles. For purposes of this subsection, "alternative fuels" are defined as natural gas, propane, hydrogen, and electricity.

(10) "Control officer" means the air pollution control officer of any authority.

((~~(10)~~)) (11) "Department" or "ecology" means the department of ecology.

((~~(11)~~)) (12) "Emission" means a release of air contaminants into the ambient air.

((~~(12)~~)) (13) "Emission standard" and "emission limitation" mean a requirement established under the federal clean air act or this chapter that limits the quantity, rate, or concentration of emissions of air contaminants on a continuous basis, including any requirement relating to the operation or maintenance of a source to assure continuous emission reduction, and any design, equipment, work practice, or operational standard adopted under the federal clean air act or this chapter.

((~~(13)~~)) (14) "Lowest achievable emission rate" (LAER) means for any source that rate of emissions that reflects:

(a) The most stringent emission limitation that is contained in the implementation plan of any state for such class or category of source, unless the owner or operator of the proposed source demonstrates that such limitations are not achievable; or

(b) The most stringent emission limitation that is achieved in practice by such class or category of source, whichever is more stringent.

In no event shall the application of this term permit a proposed new or modified source to emit any pollutant in excess of the amount allowable under applicable new source performance standards.

((~~(14)~~)) (15) "Modification" means any physical change in, or change in the method of operation of, a stationary source that increases the amount of any air contaminant emitted by such source or that results in the emission of any air contaminant not previously emitted. The term modification shall be construed consistent with the definition of modification in Section 7411, Title 42, United States Code, and with rules implementing that section.

((~~(15)~~)) (16) "Multicounty authority" means an authority which consists of two or more counties.

((~~(16)~~)) (17) "New source" means (a) the construction or modification of a stationary source that increases the amount of any air contaminant emitted by such source or that results in the emission of any air contaminant not previously emitted, and (b) any other project that constitutes a new source under the federal clean air act.

((~~(17)~~)) (18) "Permit program source" means a source required to apply for or to maintain an operating permit under RCW 70.94.161.

((~~(18)~~)) (19) "Person" means an individual, firm, public or private corporation, association, partnership, political subdivision of the state, municipality, or governmental agency.

((~~(19)~~)) (20) "Reasonably available control technology" (RACT) means the lowest emission limit that a particular source or source category is capable of meeting by the application of control technology that is reasonably available considering technological and economic feasibility. RACT is determined on a case-by-case basis for an individual source or source category taking into account the impact of the source upon air quality, the availability of additional controls, the emission reduction to be achieved by additional controls, the impact of additional controls on air quality, and the capital and operating costs of the additional controls. RACT requirements for a source or source category shall be adopted only after notice and opportunity for comment are afforded.

((~~(20)~~)) (21) "Silvicultural burning" means burning of wood fiber on forest land consistent with the provisions of RCW 70.94.660.

((~~(21)~~)) (22) "Source" means all of the emissions units including quantifiable fugitive emissions, that are located on one or more contiguous or adjacent properties, and are under the control of the same person, or persons under common control, whose activities are ancillary to the production of a single product or functionally related group of products.

((~~(22)~~)) (23) "Stationary source" means any building, structure, facility, or installation that emits or may emit any air contaminant.

NEW SECTION. Sec. 3. A new section is added to chapter 82.04 RCW to read as follows:

(1) Persons who are taxable under this chapter may take a credit for the purchase, or the lease for a period of at least three years, of new clean alternative fuel vehicles as defined in RCW 70.94.030(9)(a), (b), or (c), if the vehicles are exclusively used in business operations. The credit shall be based upon the following schedule:

VEHICLE TONNAGE CREDIT

Less than 12,000 pounds gross 25 percent of the base cost

vehicle weight or $5,000, whichever is less

Over 12,000 pounds gross 25 percent of the base cost

vehicle weight or $20,000, whichever is less

(2) The credit may not exceed the amount of tax that would otherwise be due under this chapter. The credit may be accrued and carried over until it is used. Refunds shall not be granted in place of credits. The maximum amount of credit under this section that may be claimed, by each person, for any calendar year shall not exceed two hundred thousand dollars.

(3) Tax credit may not be claimed for expenditures that occurred before the effective date of this section or expenditures that occur after the date specified in section 6 of this act.

(4) The tax credit for vehicles defined under RCW 70.94.030(9)(b) expires June 30, 2003.

NEW SECTION. Sec. 4. A new section is added to chapter 82.04 RCW to read as follows:

(1) Persons who are taxable under this chapter and provide financial assistance for the purchase, or the lease for a period of at least three years, of new clean alternative fuel vehicles as defined in RCW 70.94.030 to school districts, transit agencies, and local governments may take a credit for amounts paid, if the vehicles are used for public transit. School buses are considered public transit for purposes of this section.

(3) Tax credit may not be claimed for financial assistance that occurred before the effective date of this section or financial assistance that occur after the date specified in section 6 of this act.

NEW SECTION. Sec. 5. A new section is added to chapter 82.04 RCW to read as follows:

(1) Persons who are taxable under this chapter may take a credit for the costs expended for acquiring and installing alternative fuel and electric vehicle recharging equipment, including alternative fuel storage tanks. Alternative fuel means natural gas, propane, hydrogen, fuel containing a minimum of eighty-five percent ethanol, and fuel containing a minimum of twenty percent biodiesel. The credit shall be based upon the following schedule:

(a) Fifty percent of the costs incurred at facilities open to the public not to exceed two hundred thousand dollars; and

(b) Twenty-five percent of the costs incurred at facilities not open to the public not to exceed one hundred thousand dollars.

(3) Tax credit may not be claimed for expenditures that occurred before the effective date of this section or expenditures that occur after the date specified in section 6 of this act.

NEW SECTION. Sec. 6. A new section is added to chapter 82.04 RCW to read as follows:

Tax credits under sections 3, 4, and 5 of this act shall not be allowed for expenditures that occur after December 31, 2009.

NEW SECTION. Sec. 7. A new section is added to chapter 82.08 RCW to read as follows:

(1) The tax imposed by this chapter shall not apply to the sale or lease of a new motor vehicle that meets the definition of a "clean alternative fuel vehicle" as provided in RCW 70.94.030(9) (a) or (c) or a hybrid vehicle as defined under RCW 70.94.030(9)(b) that operates solely on an alternative fuel.

(2) Until June 30, 2003, the tax imposed by this chapter shall not apply to the sale, or the lease of a period of at least three years, of a new motor vehicle that meets the definition of a "clean alternative fuel vehicle" as provided in RCW 70.94.030(9)(b), except for hybrid vehicles operating solely on alternative fuels.

NEW SECTION. Sec. 8. A new section is added to chapter 82.12 RCW to read as follows:

Sec. 9. RCW 82.38.020 and 1998 c 176 s 50 are each amended to read as follows:

The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "B2O" means a fuel blend containing not less than nineteen percent or more than twenty-one percent biodiesel.

(2) "Biodiesel" means a mono alkyl ester of long chain fatty acids derived from vegetable oils or animal fats, that is produced domestically, for use in compression-ignition engines.

(3) "Blended special fuel" means a mixture of undyed diesel fuel and another liquid, other than a de minimus amount of the liquid, that can be used as a fuel to propel a motor vehicle.

((~~(2)~~)) (4) "Blender" means a person who produces blended special fuel outside the bulk transfer-terminal system.

((~~(3)~~)) (5) "Bond" means a bond duly executed with a corporate surety qualified under chapter 48.28 RCW, which bond is payable to the state of Washington conditioned upon faithful performance of all requirements of this chapter, including the payment of all taxes, penalties, and other obligations arising out of this chapter.

((~~(4)~~)) (6) "Bulk transfer-terminal system" means the special fuel distribution system consisting of refineries, pipelines, vessels, and terminals. Special fuel in a refinery, pipeline, vessel, or terminal is in the bulk transfer-terminal system. Special fuel in the fuel tank of an engine, motor vehicle, or in a railcar, trailer, truck, or other equipment suitable for ground transportation is not in the bulk transfer-terminal system.

((~~(5)~~)) (7) "Bulk transfer" means a transfer of special fuel by pipeline or vessel.

((~~(6)~~)) (8) "Bulk storage" means the placing of special fuel into a receptacle other than the fuel supply tank of a motor vehicle.

((~~(7)~~)) (9) "Department" means the department of licensing.

((~~(8)~~)) (10) "Dyed special fuel user" means a person authorized by the internal revenue code to operate a motor vehicle on the highway using dyed special fuel, in which the use is not exempt from the special fuel tax.

((~~(9)~~)) (11) "Evasion" or "evade" means to diminish or avoid the computation, assessment, or payment of authorized taxes or fees through:

(a) A knowing: False statement; misrepresentation of fact; or other act of deception; or

(b) An intentional: Omission; failure to file a return or report; or other act of deception.

((~~(10)~~)) (12) "Export" means to obtain special fuel in this state for sales or distribution outside the state.

((~~(11)~~)) (13) "Highway" means every way or place open to the use of the public, as a matter of right, for the purpose of vehicular travel.

((~~(12)~~)) (14) "Import" means to bring special fuel into this state by a means of conveyance other than the fuel supply tank of a motor vehicle.

((~~(13)~~)) (15) "International fuel tax agreement licensee" means a special fuel user operating qualified motor vehicles in interstate commerce and licensed by the department under the international fuel tax agreement.

((~~(14)~~)) (16) "Lessor" means a person: (a) Whose principal business is the bona fide leasing or renting of motor vehicles without drivers for compensation to the general public; and (b) who maintains established places of business and whose lease or rental contracts require the motor vehicles to be returned to the established places of business.

((~~(15)~~)) (17) "Licensee" means a person holding a license issued under this chapter.

((~~(16)~~)) (18) "Motor vehicle" means a self-propelled vehicle designed for operation upon land utilizing special fuel as the means of propulsion.

((~~(17)~~)) (19) "Natural gas" means naturally occurring mixtures of hydrocarbon gases and vapors consisting principally of methane, whether in gaseous or liquid form.

((~~(18)~~)) (20) "Person" means a natural person, fiduciary, association, or corporation. The term "person" as applied to an association means and includes the partners or members thereof, and as applied to corporations, the officers thereof.

((~~(19)~~)) (21) "Position holder" means a person who holds the inventory position in special fuel, as reflected by the records of the terminal operator. A person holds the inventory position in special fuel if the person has a contractual agreement with the terminal for the use of storage facilities and terminating services at a terminal with respect to special fuel. "Position holder" includes a terminal operator that owns special fuel in their terminal.

((~~(20)~~)) (22) "Rack" means a mechanism for delivering special fuel from a refinery or terminal into a truck, trailer, railcar, or other means of nonbulk transfer.

((~~(21)~~)) (23) "Refiner" means a person who owns, operates, or otherwise controls a refinery.

((~~(22)~~)) (24) "Removal" means a physical transfer of special fuel other than by evaporation, loss, or destruction.

((~~(23)~~)) (25) "Special fuel" means and includes all combustible gases and liquids suitable for the generation of power for propulsion of motor vehicles, except that it does not include motor vehicle fuel as defined in chapter 82.36 RCW, nor does it include dyed special fuel as defined by federal regulations. However, if the federal regulations authorize dyed special fuel to be used in highway vehicles, that usage is considered taxable under this chapter, unless otherwise exempted.

((~~(24)~~)) (26) "Special fuel distributor" means a person who acquires special fuel from a supplier, distributor, or licensee for subsequent sale and distribution.

((~~(25)~~)) (27) "Special fuel exporter" means a person who purchases special fuel in this state and directly exports the fuel by a means other than the bulk transfer-terminal system to a destination outside of the state.

((~~(26)~~)) (28) "Special fuel importer" means a person who imports special fuel into the state by a means other than the bulk transfer-terminal system. If the importer of record is acting as an agent, the person for whom the agent is acting is the importer. If there is no importer of record, the owner of the special fuel at the time of importation is the importer.

((~~(27)~~)) (29) "Special fuel supplier" means a person who owns and stores special fuel in a terminal facility or who refines and stores special fuel at a refinery.

((~~(28)~~)) (30) "Special fuel user" means a person engaged in uses of special fuel that are not specifically exempted from the special fuel tax imposed under this chapter.

((~~(29)~~)) (31) "Terminal" means a special fuel storage and distribution facility that has been assigned a terminal control number by the internal revenue service, is supplied by pipeline or vessel, and from which reportable special fuel is removed at a rack.

((~~(30)~~)) (32) "Terminal operator" means a person who owns, operates, or otherwise controls a terminal.

((~~(31)~~)) (33) "Two-party exchange" or "buy-sell agreement" means a transaction in which taxable special fuel is transferred from one licensed supplier to another licensed supplier under an exchange or buy-sell agreement whereby the supplier that is the position holder agrees to deliver taxable special fuel to the other supplier or the other supplier's customer at the rack of the terminal at which the delivering supplier is the position holder.

Sec. 10. RCW 82.38.030 and 1998 c 176 s 51 are each amended to read as follows:

(1) There is hereby levied and imposed upon special fuel users a tax at the rate computed in the manner provided in RCW 82.36.025 on each gallon of special fuel, or each one hundred cubic feet of compressed natural gas, measured at standard pressure and temperature, except a tax rate of eleven and one-half cents per gallon shall apply to users of B2O or fuel containing a minimum of eighty-five percent ethanol.

(2) The tax imposed by subsection (1) of this section is imposed when:

(a) Special fuel is removed in this state from a terminal if the special fuel is removed at the rack unless the removal is to a licensed exporter for direct delivery to a destination outside of the state, or the removal is to a special fuel distributor for direct delivery to an international fuel tax agreement licensee under RCW 82.38.320;

(b) Special fuel is removed in this state from a refinery if either of the following applies:

(i) The removal is by bulk transfer and the refiner or the owner of the special fuel immediately before the removal is not a licensee; or

(ii) The removal is at the refinery rack unless the removal is to a licensed exporter for direct delivery to a destination outside of the state, or the removal is to a special fuel distributor for direct delivery to an international fuel tax agreement licensee under RCW 82.38.320;

(i) The entry is by bulk transfer and the importer is not a licensee; or

(ii) The entry is not by bulk transfer;

(d) Special fuel is removed in this state to an unlicensed entity unless there was a prior taxable removal, entry, or sale of the special fuel;

(e) Blended special fuel is removed or sold in this state by the blender of the fuel. The number of gallons of blended special fuel subject to tax is the difference between the total number of gallons of blended special fuel removed or sold and the number of gallons of previously taxed special fuel used to ((~~produced [produce]~~)) produce the blended special fuel;

(f) Dyed special fuel is used on a highway, as authorized by the internal revenue code, unless the use is exempt from the special fuel tax; and

(g) Special fuel purchased by an international fuel tax agreement licensee under RCW 82.38.320 is used on a highway.

(3) The tax imposed by this chapter, if required to be collected by the licensee, is held in trust by the licensee until paid to the department, and a licensee who appropriates or converts the tax collected to his or her own use or to any use other than the payment of the tax to the extent that the money required to be collected is not available for payment on the due date as prescribed in this chapter is guilty of a felony, or gross misdemeanor in accordance with the theft and anticipatory provisions of Title 9A RCW. A person, partnership, corporation, or corporate officer who fails to collect the tax imposed by this section, or who has collected the tax and fails to pay it to the department in the manner prescribed by this chapter, is personally liable to the state for the amount of the tax.

Sec. 11. RCW 82.38.075 and 1983 c 212 s 1 are each amended to read as follows:

In order to encourage the use of nonpolluting fuels, an annual license fee in lieu of the tax imposed by RCW 82.38.030 shall be imposed upon the use of natural gas as defined in this chapter ((or)), on liquified petroleum gas, commonly called propane, or hydrogen, which is used in any motor vehicle, as defined in RCW 46.04.320, which shall be based upon the following schedule as adjusted by the formula set out below:

VEHICLE TONNAGE (GVW) FEE

0 - 6,000 $ 45

6,001 - 10,000 $ 45

10,001 - 18,000 $ 80

18,001 - 28,000 $110

28,001 - 36,000 $150

36,001 and above $250

To determine the actual annual license fee imposed by this section for a registration year, the appropriate dollar amount set out in the above schedule shall be multiplied by ((~~the motor vehicle fuel tax rate in cents per gallon as established by RCW 82.36.025 effective on July 1st of the preceding calendar year~~)) eleven and one-half cents per gallon and the product thereof shall be divided by 12 cents.

The department of licensing, in addition to the foregoing fee, shall charge a further fee of five dollars as a handling charge for each license issued.

The director of licensing shall be authorized to prorate the vehicle tonnage fee so that the annual license required by this section will correspond with the staggered vehicle licensing system.

A decal or other identifying device issued upon payment of these annual fees shall be displayed as prescribed by the department as authority to purchase this fuel.

Persons selling or dispensing natural gas or propane may not sell or dispense this fuel for their own use or the use of others into tanks of vehicles powered by this fuel which do not display a valid decal or other identifying device as provided in this section.

Vehicles registered in jurisdictions outside the state of Washington are exempt from this section.

Any person selling or dispensing natural gas or propane into the tank of a motor vehicle powered by this fuel, except as prescribed in this chapter, is subject to the penalty provisions of this chapter.

NEW SECTION. Sec. 12. A new section is added to chapter 70.94 RCW to read as follows:

The Washington State University energy program, in consultation with the departments of ecology, revenue, and licensing; local governments; vehicle manufacturers and suppliers; and other interested parties shall collect and review the relevant data associated with the provisions of chapter . . ., Laws of 2001 (this act) and evaluate the effectiveness of these incentives in improving air quality and increasing the use of clean alternative fuel vehicles. The Washington State University energy program shall present its findings and make recommendations as appropriate to the legislature biennially on or before November 30th, beginning in 2004.

NEW SECTION. Sec. 13. RCW 43.19.637 (Clean-fuel vehicles--Purchasing requirements) and 1991 c 199 s 213 are each repealed.

NEW SECTION. Sec. 14. Sections 1 through 8 of this act take effect August 1, 2001.

NEW SECTION. Sec. 15. Sections 9 through 12 of this act take effect January 1, 2002.

NEW SECTION. Sec. 16. Sections 7 through 12 of this act expire December 31, 2009.