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:
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.
PRO: I was honored to serve on the Governor's transition team and while this bill does not do everything, it helps fulfill the promise made to agriculture under the CCA. The provisions of this bill can help every agricultural producer who chooses to use them. We think the two-year exemption extension is good. We have learned most farmers are able to access exempt fuels throughout the state, but some smaller farmers are not. This bill has been well-stakeholdered. We need to do a better job of educating farmers so they know where to purchase exempt fuel. While it did take awhile for fuel distributors, the exemption is working. We are working on an amendment to clarify the definition of special fuel. We agree with Ecology's interpretation of public highways to include waterways. The bill provides a workable solution to a complex problem within the existing system. There is a fuel location in every area for individuals to access exempt fuel. The bill reduces financial barriers for retail fuel stations to be able to provide exempt fuel access directly at the point of sale. This version of the bill lowers administrative costs while creating easily-accessible information to improve outcomes for agricultural fuel users.
CON: If this bill is considered a fix, it needs to do more. We are concerned the bill would just codify what is happening today, and we have been circulating an amendment. The bill does not resolve our issues. We oppose this bill as written since the natural gas part of this bill is not solved. We hope the bill will be amended to allow natural gas to pass on the exemption.
OTHER: Most of the agricultural fuels are taken care of, but there are some small farmers that are unable to receive the exemption. Commerce is in the process of determining how it can set up a method to provide an incentive to retail fuel sellers.