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The Other Shoe Drops – Service Station Owners File Lawsuit Challenging Oil Tax

Article by Erik Smith. Published on Thursday, March 25, 2010 EST.

Could Throw Baby Out With Bathwater, Disposing of State Environmental Program

 


Tim Hamilton of the Automotive United Trades Association.

By Erik Smith

Staff Writer/ Washington State Wire

 

OLYMPIA, March 25.—The state’s service-station association has followed through on its threat to file a lawsuit that could overturn the Washington’s Model Toxics Control Act – the tax on hazardous substances that is paid largely by the oil industry, and which finances environmental cleanup projects across the state.

            The suit was filed Tuesday in King County District Court.

            Though the tax has been in place since 1989, environmental groups have been pushing this year for a dramatic increase in the tax, in order to fund stormwater-drainage projects on Puget Sound and across the state. And over the last year, lawmakers have been spending the money generated by the existing tax for a purpose never intended by voters when they approved Initiative 97 in 1988 – namely, to balance the state budget. Lawmakers raided the account for $180 million last year and are contemplating doing it again. 

            Tim Hamilton, director of Automotive United Trades Association, an organization representing the state’s independent service-station owners, says lawmakers and interest groups have gone too far and are “killing the golden goose.” The tax boosts the price of gasoline, and his group, like other oil and transportation interests, maintains that the tax has been unconstitutional all along.

            Hamilton said, “They’ve got gasoline considered like a sin tax, like it is on tobacco. That’s basically what they’ve done. They consider it a sin to fill up your tank with gasoline or diesel. I didn’t know it was a sin to fill up your tank and go to work.”

           

            Would Blow Hole in Environmental Program

           

            The current tax adds a little less than two cents to the price of a gallon of gas, though the amount increases when gas prices rise. Oil refiners pass the cost along to service station owners and gasoline distributors who buy gasoline at wholesale.

That’s a fuel tax, Hamilton argues. His lawsuit contends that the tax is unconstitutional because it violates the 18th Amendment to the state constitution. The 1944 amendment says that fuel taxes must be deposited in the state’s motor vehicle fund, and may only be used for highway and ferry purposes.

            Though the tax has been in place more than 20 years, it has never been challenged in court. Oil pays about 84 percent of the tax, which raises $114 million at the current rates and the current wholesale price of gasoline. The remainder is paid by users of pesticides, fertilizers and other products – some 8,000 in all.

The suit would not invalidate the tax, but it would direct that the money generated by the tax on oil products be placed in the state motor vehicle fund.

And that would kick the props out from under a state program that uses the money to clean up hazardous waste sites.

           

            State Scrambles to Spend Existing Money

 

Over the last 20 years the tax has been used to finance hazardous waste cleanup projects statewide. The program was sold to voters as a way to clean up “orphan” waste sites contaminated years ago by long-defunct businesses. Over the last 20 years, the biggest, messiest and most urgent of those sites have been cleaned up. Only about 400 orphan sites are left, and Department of Ecology planning documents indicate that the cleanup work will be completed within 10 years at a cost of $50 million.

            Instead, most of the money now is being used for a grant program for local governments, under which the state pays half the cost of cleanup. But the program was devised years ago, when gas prices were less than a quarter of what they are today, and revenue was about $30 million a year. Because of the runup in gas prices over the last five years, the Department of Ecology’s 10-year plan for the fund doesn’t even come close to absorbing all the available money.

 So port districts statewide have been hoping to add another $1 billion worth of new projects to the state’s list. They include a $350 million cleanup of the Lower Duwamish Waterway at the Port of Seattle, the largest environmental cleanup project ever contemplated by the state.

 

            Stormwater Regulations Drive Tax-Hike Effort

 

            The push to raise the tax is being driven by a new set of environmental regulations. Federal regulators, after a generation of tackling water pollution from factories, sewage plants and other “point sources,” are now training their sights on the contaminated water that trickles from roadways and gutters to storm drains and out to sea.

The regulations hand the tab to local governments. In Washington, cities and counties have raised $250 million for drainage projects, but that isn’t enough. Dave Williams of the Association of Washington Cities points to a recent survey of local governments that shows $760 million in new spending plans over the next six years. Eventual costs are likely over $1 billion, he said.

            Local governments don’t have that kind of money, he said. That’s why they have gone to the Legislature, and are backing the effort to raise the oil taxes. It’s not that they’re interested in taxing oil in particular. But they say it’s the best idea that’s come along so far.

“We’re looking for money from somewhere,” Williams explained. “We keep on saying, ‘If you don’t like this idea, give us another.’ And people never do it.”

            Meanwhile, the state’s environmental organizations say it makes sense to target oil. Part of the argument is that oil is a contributor to water pollution, though the exact amount remains under study by the state Department of Ecology. But oil also is thought to be an industry with the ability to pay.

             The state shouldn’t have to decide between one type of cleanup or the other, said Brendan Cehovic, spokesman for the League of Conservation Voters. It should do them all.

“It’s really a false choice. For us it’s never been about one or the other. The total sum of the problem is far greater than what a lot of people believe.”

            Proposals before the Legislature this year would double or even triple the tax. None would eliminate the tax increase when the stormwater projects are completed, and the tax would remain permanently in place. The proposals have not considered how the money would be spent when the projects are finished.

 

            Includes Service Station Operator

 

            The lawsuit is filed on behalf of Tim Hamilton’s organization and Stanley Howard Peterson and Rebecca Rose Peterson, owners of a Tukwila Union 76 station. Representing Hamilton is attorney Phil Talmadge, a former state senator and Supreme Court justice who supported the tax when it was imposed.

            Hamilton said he plans to press the lawsuit even if the Legislature drops the plan to increase the tax. The Legislature’s decision to use the tax money to balance the budget last year was too much for industry to tolerate, he said. He said he hopes the case lands before the state Supreme Court.

            “This Legislature has totally lost track in modern times of the 18th Amendment,” he said. “I don’t believe this thing ends here.”

           

            Other Interests Watching

 

Other opponents of the tax are watching the case but have not made a decision whether to participate. Hamilton’s organization is part of a larger coalition fighting the tax increase, which calls itself Stop Washington Hidden Gas Taxes. Its members include the Western States Petroleum Association, the Washington Retail Association, the Farm Bureau, the Washington Friends of Farms and Forests, the Association of Washington Business, the National Federation of Independent Business, the Washington Roundtable, the Association of General Contractors, the Washington Trucking Associations, and the Washington Highways Users Federation.

            Coalition spokesman Dave Fisher said, “Like everyone else, we have just seen the lawsuit, and we need to determine what our options are. The more important thing is that when this year’s bill was first introduced, [lead environmental lobbyist] Clifford Traisman proudly proclaimed that it had eviscerated all the oil industry’s 18th Amendment concerns with the tax, and clearly this is not the case. This lawsuit proves otherwise.”

            Traisman did not return a call Thursday for comment.

           


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