Will Inslee Impose Low Carbon Fuel Standards by Executive Order? – Issue Looms Over Legislature’s Upcoming Transportation Debate

Potential Dollar-a-Gallon Impact Sends Chills Through Business Community – Governor’s Office Keeps Mum, But Ecology Says it Has Authority

By Erik Smith
Washington State Wire

Washington Gov. Jay Inslee addresses reporters at a news conference early this session.

Washington Gov. Jay Inslee.

OLYMPIA, Jan. 3.—Suspicion and distrust are standard whenever the Legislature comes to town, but nothing like the cloud that seems to be settling over the Capitol a week before the 2014 legislative session. As lawmakers get set for the year’s rollicking transportation debate the big question seems to be – will Gov. Jay Inslee try to impose low-carbon fuel standards by executive order?

Never mind that little argument about whether taxpayers will accept an 11.5-cent gas-tax increase – the fear of an executive order alone could scuttle the whole thing. Low-carbon fuel standards could add another buck or so to the price of gas, by requiring refiners to blend motor fuel with costly and largely-unavailable clean-burning forms of ethanol. The idea, a green-group favorite, stands no chance in the Legislature – opposition in the Senate would write a quick finish to that. But there are many at the statehouse who think the green-minded governor might attempt an end-run and impose the standards on his own. Without some sort of assurance from Inslee, prospects for a transportation package look dim.

“If the governor starts talking any more about a low-carbon fuel standard or a carbon tax — anything that is going to increase taxes on the transportation industry — the [transportation] coalition would not stay together,” says Mike Ennis of the Association of Washington Business, one of the interests that is backing the gas-tax proposal. “It is a big fear, and it is something the business community is watching closely.”

Speculation about a possible executive order – will he or won’t he? – seems to be running wild. And while you might take it as an indication of distrust for the governor, it’s not as if Inslee has made any promises one way or the other. Business interests and dubious lawmakers say they have good reason to be nervous. Start with the fact that Inslee has made environmental policy the central push for his administration – particularly in the area of climate change. Then consider that he scored no major victories during his first year in office, the Legislature is unlikely to do him any favors with a midterm election coming up, and an executive order might be one way to shore up support in the environmental community. Inslee made his goals clear enough in October when he signed a pact with Oregon, California and British Columbia pledging to enact low-carbon fuel standards, together with a cap-and-trade policy. At the time he didn’t explain quite how he planned to do it. Ask the governor’s office about the possibility of an executive order and it says no decisions have been made.

The suspicions have run so deep these past few months that business groups and legislative staff have been studying their lawbooks and trying to decide whether the governor has the authority to impose fuel standards by himself. Clearly Inslee would face a court challenge if he wrote a new law without any help from the Legislature. But here’s the wrinkle. The state Department of Ecology says it already has the authority under existing state law to impose low-carbon fuel standards. All it would take is an order from the governor.

No Plans at Present Time

Bright future for biofuel industry: John Plaza of Imperium Renewables was among dozens last month who spoke in support of the governor's climate-change initiative.

Bright future for biofuel industry: John Plaza of Imperium Renewables was among dozens last month who spoke in support of the governor’s climate-change initiative.

For now the governor’s office is playing its cards close to the chest. “This issue has not come up in any of the many transportation negotiating sessions held in recent months,” says Inslee spokesman David Postman. “Those sessions are the appropriate forum for negotiations. No decision has been made about fuel standards, and much work and analysis has to happen before any decision is made about which policies should be pursued to reduce carbon pollution.”

But low-carbon fuel standards are definitely on the table. They were one of the hot topics this fall as the governor convened a task force to consider policies to reduce the state’s greenhouse-gas emissions. At a public hearing last month, green groups and alternative-energy boosters appeared to echo the governor’s campaign speeches about the sunny prospects for the biofuel biz. John Plaza of Imperium Renewables, a Grays Harbor biofuel firm that might benefit from the subsidies the policy would provide, painted a vision of “opportunities for innovation, job creation, and growth in our economy in leading the push for new energy solutions around the globe.”

In theory those standards might work splendidly, albeit at the expense of anyone who drives a car. If you take ordinary gasoline and diesel fuel and blend it with an advanced clean-burning form of ethanol, you might reduce carbon emissions somewhere in the neighborhood of 10 percent. You might also require oil refiners to buy electric cars for public agencies if they can’t meet the targets. Trouble is, in California, the one state that has so far imposed such a policy, reality has gotten in the way. Ordinary corn-brewed ethanol won’t meet the goal; it has too much carbon. California was banking on the development of an advanced cellulosic-ethanol fuel industry – brewed from tree bark and agricultural waste. That still hasn’t emerged; meanwhile electric cars are not available in any widespread fashion and so refiners have trouble finding “credits” to buy. Big price spikes haven’t happened yet, but when California imposes stringent requirements in 2015, the oil industry warns of refinery closures, big price increases, fuel shortages and widespread economic disruption.

The technical problems are serious enough that the feds have backed off on national renewable fuel standards, and the state of California itself delayed imposing more-stringent requirements this year, notes Frank Holmes of the Western States Petroleum Association. Meanwhile the Oregon Legislature, which was headed down the same path, is gearing up for a debate this year on whether to let its policy-making process sunset. But Washington? Why would it want to follow California’s example? “Since we don’t have a low carbon fuel standard in Washington, you have to think that they would just duplicate what California did,” Holmes says. “But California basically goes infeasible in 2015, because the fuel stocks are just not available.”

Here’s the punchline. A recent study by the Boston Consulting Group, commissioned by the Western States Petroleum Association, concluded that the California standards will boost the price of gas in that state by 33 cents to $1.06 a gallon. Impact here is likely to be similar. The Science Applications International Corp., consultants to the state climate-change task force, used somewhat different assumptions and concluded the impact on Washington gas prices would be 93 cents to $1.17.

Can Inslee do It?

Senate Republican Leader Mark Schoesler, R-Ritzville.

Senate Republican Leader Mark Schoesler, R-Ritzville.

Those are the kinds of figures that cause jaws to drop, and lawmakers in the largely Republican Senate Majority Coalition Caucus say the idea would be laughed out of the statehouse if anyone even dared to introduce a bill. “Industry people have told us that a 60 cents-a-gallon increase might be a very realistic level,” says Senate Republican Leader Mark Schoesler, R-Ritzville. “Well, you know that 60 cents a gallon isn’t going to build any roads, and it is not going to attract a whole lot of jobs to this region, which is a real problem.”

But what happens if one person makes the decision, not 148? And what if that one person happens to have a passion for the policy?  What if he touted the biofuel biz at every campaign whistlestop in 2012? And what if he has already promised his fellow West-Coast governors he’ll do something to make it happen? That’s what has so many fuel-dependent interests worried. “It is a real fear,” says Larry Pursley of the Washington Trucking Associations. “He can’t get it through the Senate, but he is so enamored of this stuff I’m afraid he’s going to do it through the Department of Ecology with an executive order.”

The governor doesn’t have the ability to write a law on his own. That has been established by years of legal precedent. A 1991 opinion from the attorney general’s office states it baldly: “In the absence of a statute authorizing the governor to act, the governor cannot create obligations, responsibilities, conditions or processes having the force and effect of law by the issuance of an executive order.”

State Sen. Doug Ericksen, R-Ferndale, chairman of the Energy, Environment and Telecommunications Committee.

State Sen. Doug Ericksen, R-Ferndale, chairman of the Energy, Environment and Telecommunications Committee.

So you’ll find plenty of skeptics at the statehouse who say the governor can’t do it. It’s just that legality is a matter of opinion until a court has its say. Doug Ericksen, R-Ferndale, chairman of the Senate Energy, Environment, and Telecommunications Committee, says he had staff attorneys researching the issue all last fall. “Most people in the Legislature do not believe that the authority to make such a sweeping decision has been granted to the executive branch,” Ericksen says.  “But we all know Jay Inslee was in Washington, D.C. for a long time. The question would be whether he will try to behave like President Obama and push the limits of his authority.”

Ecology Says It Has Authority

Now for the twist. Maybe the governor can’t write a law all by himself, but the state Department of Ecology maintains it already has the authority to impose regulations. It comes from the state Clean Air Act, last revised in 1991, which grants the Department of Ecology broad authority to adopt emissions regulations and performance standards to meet clean-air objectives. So says Stu Clark, manager of the agency’s air-quality program. The agency considered the issue four years ago, when former Gov. Christine Gregoire tried and failed to pass a cap-and-trade bill. The conclusion was that cap-and-trade required legislation, depending on how it was configured.  Low carbon fuel standards did not.

“That is as far as we have looked at it,” Clark says. “It is a major policy issue if you do something like this, and we certainly want to take our direction from the governor’s office before we move forward.”

Phil Talmadge, the former state Supreme Court justice who is pressing the case for AUTO.

Phil Talmadge, the former state Supreme Court justice who is representing the Washington Trucking Associations.

Attorney Phil Talmadge, the former Supreme Court justice who represents the Washington Trucking Associations, has researched the question as well and comes to the opposite conclusion. The Clean Air Act offers a general grant of authority, he says. But the Legislature already has spoken, by considering and rejecting the cap-and-trade bill in 2009. That measure might also have been interpreted as an implied endorsement of low carbon fuel standards. So when the Legislature said no, it set the policy. “This is really kind of a core separation of powers issue,” Talmadge says. “The Legislature makes policy, not the executive. And the executive branch agencies don’t get to make policy in the absence of authority from the Legislature with specific kinds of guidelines for how that authority is exercised by the Legislature. They don’t have that here.”

Wildest of Wild Cards

Senate Majority Leader Rodney Tom, D-Medina.

Senate Majority Leader Rodney Tom, D-Medina.

There are all sorts of questions to keep the lawyers busy. Two big lawsuits in California challenge the mechanics of that state’s policy, and a September ruling on one of them by the 9th Circuit Court of Appeals has the attorneys stroking their chins. The ruling says only California has a waiver under federal law allowing it to regulate fuel components and additives. What exactly that means is a matter of dispute; down in Oregon, where the low-carbon fuel standards debate is being queued up for the Legislature, opponents say state action is preempted and Oregon’s Department of Environmental Quality says it isn’t. And so on.

But matters of jurisprudence aside, where things get wild in this state is in the political arena. Speculation about the impact on the coming session runs rampant. At a news conference last month, leaders of the Senate Majority Coalition Caucus said they are concerned they might pass a gas-tax increase this session – and then Inslee might issue an executive order the moment they get home. “We need to have a level of trust,” says Senate Majority Leader Rodney Tom, D-Medina. As long as there is a chance that Inslee might do it, Talmadge says, “it is certainly going to cause him no end of difficulty, I would say from a political standpoint, with a transportation package.”

It is hard to imagine the governor being able to resist the temptation, says Allen Hayward, the retired former counsel for the House Republicans. “The worst that could happen is that somewhere down the road, a court throws it out – O.K., so you are no worse off  than if you hadn’t done it in the first place. My guess is that he will try it, particularly if he needs to win something – and I don’t expect the governor is going to have a lot of policy wins that his base is going to like, in 2014, with the current Legislature.”

There’s even the possibility he might use a possible executive order as a negotiating tool to keep the business community in line during the coming session, Hayward says. “You know, still thinking! Still thinking! Might impose it. Still might!”

Trent England of the Freedom Foundation, which filed a suit in 2010 challenging former Gov. Gregoire’s executive-order authority, says it wouldn’t surprise him in the slightest to see Inslee try it. “There is a lot of speculation that because the governor is unlikely to get anywhere in the Legislature, he is going to use the executive order the same way that Gov. Gregoire did, to placate his allies on the environmental left. It also might be sort of a common-sense maneuver for someone like Inslee, who really sees himself as the next Al Gore.”

The governor has one easy way out: He ought to promise he won’t do it, says AWB’s Ennis. That is, if he wants a transportation package. “I guess we will need some assurances from the governor that he would not pursue something like that.”

Tagged as
  • Jeff Kropf

    My prediction as a former OR legislator where this idea has been debated for years, Inslee does not issue the EO until after the Nov 2014 elections as the impact on his party would be devastating, especially if you add to the growing anger over ObamaCare.