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Friday, June 9, 2023
June 9, 2023

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4 oil refiners spend big to stop Initiative 1631

Carbon tax measure could cost them $70M annually


Four oil companies that operate Washington refineries have invested more than $25 million to defeat Initiative 1631, the carbon fee on the fall ballot.

Should the initiative fail, that investment would have a big payoff. During the next decade, the companies would avoid what is likely to be hundreds of millions of dollars in fees assessed against greenhouse gases released from their Washington refineries, according to an analysis of state Department of Ecology records.

These carbon-dioxide and other emissions result from the energy-intensive process of producing petroleum fuels, which requires large amounts of heat.

BP, Phillips 66, Andeavor (now owned by Marathon Petroleum) and U.S. Oil and Refining Company campaign contributions represent more than 85 percent of the total raised in what has become the highest-spending opposition campaign in state history.

Their refineries produce fuel for Washington, other states and international export.

They collectively generated 4.6 million metric tons of greenhouse gases during refinery operations in 2016, the latest year for which data is available.

If those levels of emissions continue, the four oil companies would pay nearly $70 million in annual carbon pollution fees for their refinery operations in 2020. Since the fee escalates over time, that bill would more than double by 2030.

The fees assessed on refinery operations are in addition to those the initiative slaps on most transportation fuels that the oil companies sell for use inside the state. Gasoline and diesel fuels release carbon dioxide as they power cars and trucks, and are the state’s largest source of greenhouse gases from fossil fuels.

Overall, Initiative 1631 is projected to raise more than $1 billion annually by 2023 from fees assessed on oil, gas and some coal energy. This money would be invested in reducing the state’s greenhouse-gas emissions and adapting to climate change that has been spurred by the global use of fossil fuels.

Currently, Washington’s biggest source of revenue from fossil-fuel consumption is a state motor-vehicle fuel tax of 49.4 cents per gallon, which is paid by suppliers and reflected at service stations in state-provided stickers posted on pumps. Washington has the nation’s second-highest state fuel tax. It raises about $1.7 billion a year for spending on state roads as well as ferries.

This is the second time that Washington voters will decide whether to put a price on carbon dioxide, methane and other greenhouse gases released by fossil-fuel combustion, emissions that scientists say are causing global warming.

The 2016 ballot measure, Initiative 732, would have imposed a carbon tax on fossil fuels, and cut other taxes in an attempt to be revenue neutral.

A recent United Nations report called carbon pricing an essential policy for driving down demand for fossil fuel and cutting greenhouse emissions.

Some oil companies, including Royal Dutch Shell, which operates the state’s second-largest refinery, have embraced the concept. Though Shell’s chief executive Ben Van Beurden says he does not support the initiative due to “considerable imperfections,” the corporation’s overall support for carbon pricing influenced a decision earlier this year to opt out of the opposition campaign.

BP, which operates the state’s largest refinery, also has announced support for carbon pricing. But BP officials have criticized the structure of the proposed Washington carbon fee, which they say exempts some other major industrial polluters and would disrupt Washington’s economy without yielding significant emission reductions.

“We are saying it is flawed,” a BP spokesperson said in an earlier interview. “If we are going to do this, we have to do it right.”

The BP refinery at Whatcom County’s Cherry Point currently pays some $77 million in state and local taxes and fees annually in the state of Washington (excluding the fuel tax collected as gasoline and diesel are sold). This tax bill is more than any other BP refinery in the United States pays in such taxes, according to a company spokesman.

If the ballot measure passes, BP’s Cherry Point greenhouse-gas fees in 2020 would tally an additional $36 million, which would boost the refinery’s annual tax and fee bill in the state by more than 45 percent. That could be a big incentive to try to reduce greenhouse-gas releases from the refinery. If emissions remained at 2016 levels, by 2030 BP’s total payment to the state from refining operations would likely more than double.

Opponents of the initiative say these costs will ultimately be paid by the motoring public.

“The costs will be pushed down to the consumer in the form of higher prices,” said Dana Bieber, a spokesperson for the opposition campaign.

Eric de Place, a researcher at Seattle-based Sightline Institute, an environmental research group, said oil companies may find it difficult to fully pass on their refinery carbon fees.

“This is going to raise operating costs — but will consumers end up eating the whole thing? The short answer is that I don’t think it is likely,” de Place said.

Even if they can’t pass on the costs, some say the carbon fee would not represent an unreasonable financial burden on refinery operations, which have benefited from corporate tax cuts contained in legislation signed by President Donald Trump last year.

They include state Sen. Reuven Carlyle, D-Seattle, a supporter of Initiative 1631. Earlier this year, Carlyle asked a nonpartisan staffer at the state Senate Ways and Means Committee to analyze state excise taxes paid by the state’s five oil refineries. That review, based on state Department of Revenue information, found those refiners paid about $200 million in fiscal year 2017 on gross revenues of more than $17 billion.

At Carlyle’s request, the committee staffer also made a rough estimate of how the cut in federal corporate tax rates could impact refiners’ bottom line in Washington state. That review indicated that the federal tax bill on their Washington operations would be reduced by more than $200 million.

Earlier this year, Carlyle provided a copy of this analysis to BP officials. In a July 30 response, BP disputed the state Senate committee’s reviews.

Craig Boals, a BP assistant tax director, wrote that “we do not believe such analysis accurately reflects either the taxable income generated by BP operations in Washington or reflects BP’s tax position more broadly.”

Carlyle stands by the Senate committee reviews.

“There is not an ounce of evidence to suggest that they are an overtaxed industry,” Carlyle said.