Proposal to boost oil tax draws foes to Olympia

OLYMPIA — A proposed boost to the state's tax on oil and other chemicals to pay for clean-water projects is prompting a lather of lobbying and deal-making in the Legislature's special session.

In one of the most intense political fights of the year, oil-industry lobbyists have camped out almost daily in the Capitol rotunda, trying to halt the $100 million a year tax increase, which would mainly hit the state's five refineries.

Oil executives from Texas have flown in to meet with legislators. A former state Supreme Court justice is threatening a lawsuit on behalf of gas stations.

Environmental lobbyists are here, too, urging a vote on the plan before lawmakers go home. They've been cutting deals to unstick the measure — such as giving Alaska Air a break from the tax on jet fuel.

The proposal, dubbed the Clean Water Act of 2010, would more than double the state's hazardous-substances tax, created by a voter initiative in 1988 to clean up toxic-waste sites. The extra money would pay to clean up polluted stormwater, cited as the No. 1 threat to the health of Puget Sound.

Environmentalists have said for weeks they're close to winning. But the bill has remained stalled while they try to round up the votes they need.

Meanwhile, opponents have redoubled their efforts to kill the tax.

"It's fricking intense. There are more oil lobbyists out there than legislators," said Rep. Hans Dunshee, D-Snohomish.

Last week, refinery workers positioned themselves outside the doors of the House and Senate chambers. They told passing lawmakers they're afraid the tax would cost jobs as refineries shift operations to lower-tax states.

"Why would they invest here if the cost of doing business is three times higher than in California?" said Jaunty Rutter, human-resources manager for the Shell refinery in Anacortes.

A refinery union leader sent an e-mail to lawmakers last week painting a dark future if the Legislature helps kill off domestic-oil production — leaving the U.S. reliant on foreign producers, such as China, that might cut off the supply.

"The riots could be nationwide. Would we go to war with our suppliers?" the e-mail asked.

Environmentalists deride such talk as oil-company scare tactics. The companies, they argue, would simply pass on the costs to customers.

The latest version of the tax bill could raise gasoline prices about two cents a gallon.

"It's just inconceivable to me it's going to hurt refineries in any way," said Brendon Cechovic, program director with the Washington Environmental Council.

Environmentalists said they've already agreed to changes to the proposal to deal with the jobs objections — primarily by exempting exported fuel from the new tax. The added cost would have put exported fuel at a competitive disadvantage.

But some lawmakers remain worried that the bill could hurt the state's refineries.

Sen. Kevin Ranker, D-San Juan Island, is one of those in the middle of what he called a "monumental" lobbying fight over the measure.

An environmentalist who used to sit on the board of the Washington Environmental Council, Ranker now represents a legislative district that includes, or is adjacent to, four of the state's five refineries.

Ranker said he's had senior executives from three oil companies fly up from Texas and meet with him.

"I don't know whether I should feel flattered or scared," he said.

Although a "polluter pays" approach makes sense, Ranker said he's worried about his district's refinery workers. He said steps such as the exemption for exported fuel have improved the bill, but he still isn't sure he could vote for it.

"These are my guys. I'm not going to support something that I believe is going to threaten their jobs," Ranker said.

Other changes to the bill are being made to appease fuel-hungry — and politically connected — businesses worried about the tax increase.

Airline exemption

The biggest carve-out is for Alaska Air Group. The Washington-based airline, which also runs Horizon Air, employs about 6,500 people in the state.

Lawmakers from the district that includes Seattle-Tacoma International Airport, where the company is headquartered, have agreed to sponsor an amendment that would exempt the airline from the new tax.

"I think there is something special about the aviation industry," said Rep. Dave Upthegrove, D-Des Moines, a supporter of the clean-water bill, who is pushing the Alaska amendment.

Alaska pays about $500,000 a year under the existing hazardous-substances tax, and spends millions of dollars on stormwater-cleanup requirements at the airport, Upthegrove noted.

"We support efforts to keep Puget Sound clean and believe Alaska Airlines and Horizon Air are already doing our part," said Megan Lawrence, Alaska Air Group's managing director of government relations, in a written statement.

But critics argue the request for that special treatment only shows the burden the tax would place on other businesses.

"It just seems to me that the necessity of this amendment points out what is wrong with the underlying plan," said Sen. Cheryl Pflug, R-Maple Valley, when the Alaska amendment was raised at a Senate Ways and Means Committee meeting this month.

"You've identified one employer, and obviously they're large enough and they've managed to get somebody down here to let you know what is going to happen."

Other industries may not be so lucky.

On Friday, 47 agricultural groups, from the Asparagus Council to the Turfgrass Seed Commission, chimed in with a letter to state lawmakers arguing that the new tax would unfairly raise the price of diesel fuel and fertilizers.

Alaska isn't alone in seeking a break. Under the latest version of the bill, trucking firms would be eligible for a refund for higher gas prices due to the new tax.

Despite the legislative sausage-making, environmentalists argue the plan is worth it to secure a new funding stream to deal with polluted stormwater.

"When you get right down to it, even with all these exemptions, this bill will create a sustainable revenue source to deal with the state's number one water-pollution problem and create jobs," said Cliff Traisman, state lobbyist for the Washington Environmental Council and Washington Conservation Voters.

But environmentalists so far have been unable to bring the bill to the floor for a vote in either the House or Senate.

Critics are not likely to let up, even after the legislative session.

A gas-station association has hired former Supreme Court Justice Phil Talmadge to draft a lawsuit that argues the hazardous-substances tax is unconstitutional.

Jim Brunner: 360-236-8267 or jbrunner@seattletimes.com