Article by Erik Smith. Published on Wednesday, March 11, 2010 EST.

New Plan Emerges in Senate, and Service Station Operators Get Set to Sue

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, March 10.—Feverish efforts are being mounted in the 2010 Legislature’s final days over a green plan to raise taxes on oil and use the money for water-pollution programs.

            A new tax proposal has emerged in the Senate, another is being talked about in the House, and everywhere lobbyists for environmental organizations can be seen at the Capitol counting votes.

            Meanwhile, efforts to defeat the measure are just as intense. The most notable is a declaration on the part of the state’s independent service-station operators that they will file a lawsuit to overturn the tax. In case anyone doubted it was coming, the Automotive United Trades Organization, their trade association, has begun circulating copies of the planned court filing. “I just wanted them to know I’m going to sue their lips off,” said director Tim Hamilton.

            And finally, a state senator says he plans to propose an amendment on the floor if the bill gets that far. It would shift most of the burden to what many say is the number-one source of stormwater-runoff problems – not oil, but dog poop.

            The last-minute agitation is providing one of the biggest dramas of the session, which officially ends Thursday but may be thrown into overtime. The bill is one of the top priorities for the state’s environmental groups this year, and the green organizations are one of the most important constituencies for the Democrats who control the House and Senate, meaning that their positions are difficult for the Democrats to ignore.

            But bills are rarely brought to the floor of the House and Senate unless they are assured of passage in advance. At least as far as the Senate is concerned, the vote-count appears stuck at 24, one vote shy of passage. Although advocates say they are gaining traction, the count has been stuck at 24 all session long. All 24 senators signed on as sponsors when the original bill was introduced early in session.

            A New Proposal in the Senate

            The proposal concerns the state’s hazardous substance tax, which has been levied since 1989 on a wide variety of products, including pesticides and fertilizers. But by far the majority of the tax is paid by the oil industry – some 84 percent. The impact is felt at the gas pump, one of the reasons the plan is hotly opposed by transportation groups and the oil industry. Also lined up against the tax-hike plan are agricultural and forestry associations and unions employed at the state’s oil refineries.

            The lucrative tax currently generates $114 million a year. That’s one of the problems. Originally, when environmentalists succeeded in imposing the tax with a 1988 initiative, the money was supposed to be earmarked for environmental cleanup. But the proceeds have become so enormous as gas prices have risen that lawmakers have started using the money to bail out the state’s general fund. About $160 million was raided last year, and lawmakers are considering doing the same again this year.

            The original proposal from environmental groups and city and county lobbying organizations would have nearly tripled the tax, so that at least some money it generates might go back to environmental programs. And to make the deal sweeter, they suggested that some money temporarily might be used to bail out the general fund. That idea appears to have been discarded however, and green-minded lawmakers are scrambling in the final hours of the legislative session to come up with smaller-scale proposals.

            The Senate Ways and Means Committee passed a bill Tuesday evening that would increase the tax from the current 0.7 percent to 1.2 percent. That would raise about $80 million a year. The bill was passed on a 12-8 party-line vote, all Democrats favoring the measure, and now it moves to the Senate Rules Committee. Senate Democratic leaders still must decide whether to advance the bill to the floor.

            Meanwhile, supporters of the tax in the House are trying to line up votes for a slightly larger increase.

            Threat From Service Stations

            Hamilton, director of the service-station association, has been circulating copies of a lawsuit he says the group will file whatever the Legislature does. Like many in the oil industry and in the state’s transportation lobby, Hamilton’s organization maintains that the tax is a clear violation of the 18^th Amendment to the state constitution. The amendment says fuel taxes may only be used for highways and ferries. The whole idea behind it was to keep fuel taxes from being used to bail out the state’s general fund, or to finance schemes that had nothing to do with transportation, Hamilton said.

            “We’re going to do it no matter what,” Hamilton said. “They swept the account for hundreds of millions of dollars. They think this is a golden goose, and this is the only way we can get them to stop. We’re going to be suing come hell or high water.”

            Hamilton began circulating copies of a draft lawsuit among legislators this week. His organization has hired attorney Phil Talmadge, a former state senator and Supreme Court justice. Talmadge authored an opinion for the Western States Petroleum Association that showed how the tax might be beaten. The service-station group is a frequent adversary of the large oil companies represented by the pertroleum association, and Hamilton is careful to note that the refiners are not participating in the lawsuit.

            “We’re not a front for big oil,” Hamilton said. “If anything, we’re a front for consumers.”           

Hamilton said the suit will be filed shortly, but he wanted lawmakers to know about it before session’s end because they might be tempted to build a budget that counts on the oil money. The lawsuit ought to cause them to think twice, he said. “We wanted them to know we’re not bluffing.”

A Matter of Dog Poop

Republicans have two words to say about the bill: Dog poop.

It’s absurd, they say, to expect the oil industry to bear 84 percent of the cost of cleaning up Puget Sound. If the whole idea is to make polluters pay for the havoc they are causing to the waters of Puget Sound, state Sen. Jim Honeyford, R-Sunnyside, says it makes sense to apportion the costs according to the source. There’s still no official accounting of where the pollution comes from – the Department of Ecology is working on an analysis, but the work still isn’t done. So all Honeyford can do, he says, is to rely on testimony from the environmental community.

“When we had this bill in front of our committee last year the environmental community came in and testified that 50 percent of the problem was dog poop. So I do really believe that we should have a dog license [fee] to cover their share of the cost.”

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