HOUSE BILL REPORT

HB 1091

As Reported by House Committee On:

Environment & Energy

Appropriations

Transportation

Title: An act relating to reducing greenhouse gas emissions by reducing the carbon intensity of

transportation fuel.

Brief Description: Reducing greenhouse gas emissions by reducing the carbon intensity of

Environment & Energy: 1/14/21, 1/15/21, 1/21/21 [DPS];

Appropriations: 2/4/21, 2/9/21 [DP2S(w/o sub ENVI)];

Transportation: 2/16/21, 2/19/21 [DP3S(w/o sub APP)].

Brief Summary of Third Substitute Bill

Directs the Department of Ecology (Ecology) to adopt rules establishing

a Clean Fuels Program (CFP) to limit the aggregate, overall greenhouse

gas (GHG) emissions per unit of transportation fuel energy to 10 percent

below 2017 levels by 2028 and 20 percent below 2017 levels by 2035.

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Directs Ecology to update, prior to 2032, CFP rules to further reduce

GHG emissions from each unit of transportation fuel for each year

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constitute a statement of legislative intent.

Requires the CFP to include processes for the registering, reporting, and

tracking of compliance obligations and to establish bankable, tradeable

credits used to satisfy compliance obligations.

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Requires annual reporting by Ecology on the CFP, as well as an analysis

of the program's first five years by the Joint Legislative Audit and

Review Committee.

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production of low-carbon transportation fuels.

Majority Report: The substitute bill be substituted therefor and the substitute bill do pass.

Signed by 7 members: Representatives Fitzgibbon, Chair; Duerr, Vice Chair; Berry, Fey,

Harris-Talley, Ramel and Slatter.

Minority Report: Do not pass. Signed by 5 members: Representatives Dye, Ranking

Minority Member; Klicker, Assistant Ranking Minority Member; Abbarno, Boehnke and

Goehner.

Minority Report: Without recommendation. Signed by 1 member: Representative

Shewmake.

perfluorocarbons, and sulfur hexafluoride as greenhouse gases (GHGs) because of their

capacity to trap heat in the Earth's atmosphere. According to the EPA, the global warming

potential (GWP) of each GHG is a function of how much of the gas is concentrated in the

atmosphere, how long the gas stays in the atmosphere, and how strongly the particular gas

affects global atmospheric temperatures. Under state law, the GWP of a gas is measured in

terms of the equivalence to the emission of an identical volume of carbon dioxide over a

100-year timeframe (carbon dioxide equivalent or CO2e).

Under the federal Clean Air Act, GHGs are regulated as an air pollutant and are subject to

several air regulations administered by the EPA. These federal Clean Air Act regulations

Department of Licensing (DOL) must use the fuel sale information submitted for the DOL

fuel tax purposes to report to the state the GHG emissions associated with the fuel.

Ecology and the Department of Commerce must report to the Governor and Legislature by

December 31 of even-numbered years regarding total GHG emissions and GHG emissions

by source sector in Washington. According to the most recent Ecology data, as of 2017 the

total annual GHG emissions in Washington were estimated at 97.5 million metric tons

(MMT) of CO2e. Of these emissions, a total of 43.26 MMT CO2e were attributable to

transportation sources, of which on-road gasoline accounted for 21.53 MMT CO2e and on-

road diesel accounted for 8.36 MMT CO2e.

By 2030, reduce GHGs to 45 percent below 1990 levels, or 50 MMT.•

By 2040, reduce overall emissions of GHGs in the state to 70 percent below 1990

levels, or 27 MMT.

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By 2050, reduce overall emissions of GHGs in the state to 95 percent below 1990

levels, or 5 MMT, and achieve net-zero GHG emissions.

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State Clean Air Act.

Ecology and seven local air pollution control authorities (local air authorities) have each

received approval from the EPA to administer aspects of the federal Clean Air Act in

that describes how the state implements clean air programs to achieve the federal National

Ambient Air Quality Standards (NAAQS) for certain air pollutants, known as criteria

pollutants. If the state does not achieve NAAQS in a portion of the state for a particular

criteria pollutant, that area is considered to be in nonattainment, and the state must revise its

SIP with the goal of regaining attainment with NAAQS. Areas that have previously been

designated as nonattainment areas but that subsequently regained NAAQS compliance are

Violations of Clean Air Act requirements are punishable by a variety of criminal and civil

penalties. Civil penalties of up to $10,000 per violation are authorized by the state Clean

Air Act.

Fuel Content.

The state Motor Fuel Quality Act (MFQA), enacted in 1990, adopted motor fuel standards,

authorized the Washington State Department of Agriculture (WSDA) to set state fuel

standards, and established a sampling, testing, and enforcement program administrated by

annually sold in Washington is biodiesel or renewable diesel fuel. This requirement

will increase to at least 5 percent if the WSDA determines that both in-state feedstock

and oilseed crushing capacity can satisfy a 3 percent requirement. The WSDA has

not certified that the state has met this threshold.

Motor vehicle fuel licensees must provide evidence that at least 2 percent of the total

gasoline sold in the state is denatured ethanol. This ethanol requirement may be

increased if the WSDA determines an increase would not jeopardize the state's

continued attainment of federal Clean Air Act standards, and that the state can

economically support the production of higher ethanol blends.

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and diesel fuel, in conjunction with the use of fuels that serve as substitutes for those fuels.

Oregon's program, which began in 2015, currently requires a 10 percent reduction by 2025

in the carbon intensity of transportation fuels, although additional targets for Oregon's

program have been set for 2030 and 2035 by executive order but have not yet been adopted

into program rules.

other activities with a nexus to the transportation fuel supply chain, such as for the

installation of electric vehicle charging infrastructure. The programs of both states measure

the carbon intensity of transportation fuels based on a lifecycle analysis of direct and

indirect GHG emissions associated with the production, distribution, and consumption of

the fuels. Both programs provide exemptions for certain categories of transportation fuels.

2015 Transportation Revenue Package.

In 2015 the Legislature enacted a bill that raised revenue for transportation purposes from a

variety of transportation-related sources ("Transportation Revenue Package"). Among other

Highway Safety Fund (used for driver's license implementation, driver improvement, and

financial responsibility, among other programs), while the vehicle weight fees are deposited

into a combination of the Multimodal Transportation Account (used for transportation

purposes) and the Freight Mobility Multimodal Account (used for certain freight mobility

projects approved by the Freight Mobility Strategic Investment Board). However, if a clean

fuel standard policy is adopted by rule or otherwise initiated by a state agency prior to July

1, 2023, the additional revenue raised from the driver's license and vehicle weight fee

increases in the 2015 Transportation Revenue Package would be redirected from the

Highway Safety Fund, Multimodal Transportation Account, and Freight Mobility

Multimodal Account, and would instead be deposited into the Connecting Washington

Summary of Substitute Bill:

Program Goal.

The Department of Ecology (Ecology) is directed to adopt a rule establishing a Clean Fuels

Program (CFP) limiting the greenhouse gas (GHG) emissions attributable to each unit of

transportation fuel (carbon intensity) to 10 percent below 2017 levels by 2028 and 20

percent below 2017 levels by 2035. The rule must reduce the overall, aggregate carbon

a 2050 reduction in overall emissions of GHGs in the state to 95 percent below 1990 levels,

or 5 million metric tons, and achieving net-zero GHG emissions.

Covered and Exempt Fuels.

Electricity and liquid and gaseous fuels are within the scope of the CFP, so long as the fuels

or electricity are used to propel motor vehicles or are intended for transportation purposes

(transportation fuels). Excluded from the CFP carbon intensity reduction requirements are

the following:

transportation fuel that is exported or otherwise not used in Washington;•

similar GHG or low carbon fuel programs, to avoid mismatched incentives, fuel

shifting between markets, or other outcomes counter to the intent of the CFP.

Until January 1, 2028, the following fuels are also exempt from the CFP's carbon intensity

reduction requirements:

special fuel used off-road in vehicles used primarily to transport logs;•

dyed special fuel used in vehicles that are not designed to transport persons or

property, not designed to be operated on highways, and that are used primarily for

construction work, including timber harvest and mining; and

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dyed special fuel used for agricultural purposes that are exempt from state fuel

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based on a lifecycle analysis that considers emissions from the production, storage,

transportation, and combustion of the fuels, and associated changes in land use.

Ecology must establish separate carbon intensity standards for gasoline and its

substitutes and diesel and its substitutes;

processes for assigning and verifying bankable, tradeable credits for the production,

import, or dispensation for use of transportation fuels with associated lifecycle GHG

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with transportation fuels with a carbon intensity below the carbon intensity standard;

and (2) persons associated with exempt transportation fuels, including electricity and

fuel used to propel vessels, railroad locomotives, or aircraft;

a determination of the carbon intensity of electricity supplied by electric utilities

participating in the CFP based on the mix of generating resources used by each

electric utility, and mechanisms that allow for the certification of electricity that has a

carbon intensity of zero;

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mechanisms that allow for the assignment of credits to an electric utility for, at

minimum, residential electric vehicle charging or fueling; and

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cost containment mechanisms.•

emissions data and information that is different from the types of data currently submitted to

the state by those entities. Ecology may also require periodic reporting on CFP activities

from producers and importers of transportation fuels. Transactions that transfer ownership

of fuels required to be covered by the CFP must be accompanied by documentation

assigning compliance responsibility for the fuels. To the extent practicable, CFP reporting

rules for persons associated with the supply chains of transportation fuels must be consistent

with the reporting procedures of similar clean fuels programs in other states and with other

state programs that require similar information to be reported by regulated parties, including

electric utilities.

specified carbon capture and sequestration projects;•

the fueling of electric vehicles by commercial entities that are not electric utilities; •

and

the use of smart vehicle charging technology that results in electric vehicle fueling

during times of comparatively low carbon intensity of the electric grid.

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Public Reporting Requirements.

Beginning in 2025, Ecology must submit a report to the Legislature every year on May 1

detailing certain information regarding the previous year's CFP activities, including

volumes of credits and transportation fuels. An estimate of probable costs or cost savings

per gallon of gasoline and diesel attributable to the CFP must be prepared annually by an

independent consultant under contract to Ecology, and must be announced to the news

media in a press release when the annual report is submitted to the Legislature. Ecology

must also contract for a forecast that estimates probable costs or cost savings per gallon of

gasoline and diesel from the program, which must be completed and submitted to the

By December 1, 2029, the Joint Legislative Audit and Review Committee is required to

perform an analysis of the first five years of the CFP. This analysis must include the costs

and benefits of the program and an evaluation of the information summarized by Ecology in

their annual reports.

Other Provisions.

The current distribution is retained for revenues granted by the 2015 Transportation

Revenue Package, eliminating changes that would have been triggered as a result of the

establishment of a clean fuels standard.

biennial workload analysis. Fees are deposited into a Clean Fuels Program Account

(Account) used to carry out the CFP.

Ecology must establish and consult with a forestland and agricultural landowner stakeholder

advisory panel to solicit input on how to incentivize the sequestration of GHGs on forest

and agricultural lands through program credit allotment.

customers to generate credits under the CFP must be used for transportation electrification,

which may include the production and provision of renewable hydrogen. Of this 50

percent, 60 percent of the transportation electrification projects must be in or directly

benefit federal Clean Air Act maintenance or nonattainment areas, areas at risk of

maintenance or nonattainment designation, areas designated as maintenance or

nonattainment as of January 1, 2019, or areas identified by the Department of Health as

disproportionately impacted communities, if such areas are within the service area of the

utility. Ecology may adopt rules governing the limitations on the use of the other 50

percent of revenues earned by electric utilities from participating in the CFP, and must

require some portion of these revenues to be used for the establishment of a program that

Substitute Bill Compared to Original Bill:

The substitute bill makes the following changes to the original bill:

clarifies that the Clean Fuels Program's standards must reduce overall, aggregate

carbon intensity, rather than the carbon intensity achieved by any individual type of

transportation fuel;

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eliminates the exemption for electricity from carbon intensity reduction requirements;•

requires the Department of Ecology's (Ecology) Clean Fuels Program rules to include

a mechanism for certifying electricity that has a carbon intensity of zero and to allow

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authorizes Ecology to require such documentation;

authorizes utility investment, from Clean Fuels Program revenues, in projects that •

other pollutants, which is particularly important to poor and disadvantaged communities

that typically surround high-diesel-use areas like ports. There are large public health

benefits only available through fuel incentivized by the LCFS. We know that there is an

increased risk of asthma in children living in areas of higher prevalence of pollution. Other

child health. The clean fuel standard approach is an ideal mix of government regulation and

market response. Government sets the target and the market is allowed to figure out how to

reach those targets. We need to look at many other actions to deal with climate change.

(Opposed) The LCFS is not a strong state policy and the imbalance of costs and benefits is

concerning at this time of economic and public health challenges. The Legislature should

prioritize policies which improve the environment, protect consumers, create jobs, and grow

the economy. In California and Oregon the vast majority of the benefits leave the state,

emissions reductions have been minimal, and costs are pushed down to consumers. Many

workers could lose their jobs because of this policy. The implementation schedule is more

facilities. Fuel is one of the largest costs to farms. This would reduce the competitive

advantage in Washington's exported agricultural products. This price increase would be in

addition to proposed increases in fuel and carbon taxes. This bill is tone deaf to small

agricultural businesses which are struggling now more than ever. Our vehicles do not

qualify for red dye agriculture-exempt fuels. This bill drives up the cost of fuel even

further. Small equipment engines are not designed for biofuels, the blends gunk up our

engines, add to wear and tear, which causes more down time and repair costs. This will

decrease our bottom line. Trucking will pass through the costs of increases to fuel and the

policy favors out-of-state companies. The Washington food industry operates within low

profit margins and is a leader in trying to reduce emissions. Every penny can increase the

percent. There is a direct and significant impact on the transportation budget. Any fuel cost

increases directly affect transportation taxing and revenue capacity. The LCFS would

provide zero improvements while raising the price of gas by 57 cents, making it impossible

to pass a transportation revenue package. It is unlikely that voters will accept both. This

policy increases the cost of energy. Why not just increase the gas tax to generate revenue

for investments? Voters have repeatedly said "no" to carbon taxes and yet legislators want

emissions. In California it costs $200 to reduce one metric ton of carbon dioxide, Seattle

City light pays $7 for that same amount. We need to reduce carbon dioxide emissions in the

most effective way.

Persons Testifying: (In support) Representative Fitzgibbon, prime sponsor; Larry Luton,

350 Spokane; Pragya Rai; Cliff Traisman, Washington Environmental Council and

Washington Conservation Voters; Christine Cooley, Tacoma Power; Matthew Hepner,

International Brotherhood of Electrical Workers; Ryan Calkins, Port of Seattle; Tim Zenk,

Neste; Floyd Vergara, National Biodiesel Board; Curt Augustine and Steve Douglas,

Alliance for Automotive Innovation; Patrick Serfass, American Biogas Council; and Joel

(Other) Todd Myers, Washington Policy Center.

Persons Signed In To Testify But Not Testifying: None.