Cap-and-Invest Program.  In 2021, as part of the Climate Commitment Act, the Legislature directed the Department of Ecology (Ecology) to implement a Cap-and-Invest Program (Program), which is a market-based system designed to achieve the greenhouse gas (GHG) limits set in state law.  Under the Program, covered entities must either reduce their GHG emissions or obtain compliance instruments—allowances or offset credits—equal to their covered emissions.

The Program covers approximately 75 percent of statewide GHG emissions.  Emissions exempt from coverage under the Program include, in part, emissions from: (1) the combustion of aviation fuels and certain watercraft fuels, (2) certain coal-fired electric generation facilities, and (3) the combustion of biomass or biofuels. 

There are two emissions exemptions applying to the agricultural sector.  First, there is an exemption for motor vehicle fuel or special fuel used exclusively for agricultural purposes by a farm fuel user.  This exemption is available only if a fuel purchaser provides the fuel seller with an exemption certificate, as prescribed by Ecology.  Agricultural purposes means the performance of activities directly related to the growing, raising, or producing of agricultural products.  Farm fuel user means a farmer, or a person who provides horticultural services for farmers, such as services associated with soil preparation, and crop cultivation and harvesting.  Second, there is a temporary, five-year exemption for fuels used to transport agricultural products on public highways.  This expanded exemption expires December 31, 2027.

2023-25 Operating Budget.  The 2023-25 Biennial Operating Budget appropriated $30 million to the Department of Licensing (DOL) to administer a tiered payment system providing funding to farm fuel users and transporters who purchased fuel for agricultural purposes.

Locating and Purchasing Exempt Fuels, and Obtaining a Department of Licensing Remittance.  A retail fuel seller, including an exempt fuel purchase aggregator, as defined, may voluntarily notify Ecology of locations where exempt agricultural fuel is available for purchase, including contact and location information, and types of exempt fuel for sale.

By October 1, 2025, Ecology must:

• post and periodically update an easily-searchable directory tool on its website, which must include the voluntary information reported by retail fuel sellers; and
• publish on its website, a guide for potentially eligible users of exempt agricultural fuels that describes the mechanisms by which:
  1. potentially eligible users may obtain a remittance from DOL, with specified information; or
  2. the exempt fuel user may purchase exempt fuels.

Subject to appropriation, the Department of Commerce must provide financial incentives to, or remove financial barriers for, retail fuel sellers making exempt agricultural fuel available for purchase at a price different from non-exempt fuel, which may include providing financial incentives to the retail fuel seller to create a card- or membership-based payment option.

Extension of the Expanded Agricultural Fuels Exemption.  The exemption for fuels used to transport agricultural products on public highways expires December 31, 2029.

Other.  The legislation provides intent language relating to continuing the DOL Remittance Program and pairing the DOL Remittance Program with the provisions of this legislation.