Combine harvesting in Eastern Washington. File Photo

By Randy Bracht | The Center Square

(The Center Square) – The Washington Farm Bureau and the Washington Trucking Associations have sued the state Department of Ecology, alleging the agency has improperly adopted regulations which eliminate tax exemptions on diesel fuel used in farming and ranching operations and truckers hauling agricultural products on public roadways.

The lawsuit was filed Friday in Thurston County Superior Court. Through an administrative law review, the court is being asked to invalidate Ecology’s current regulations, which the plaintiffs allege are “ineffective” and costing the agricultural and trucking sectors tens of millions of dollars in fuel taxes that should be exempt.

It was not specified whether an answer to the complaint has been submitted by the Washington Attorney General’s Office, which represents the state, or if any hearings have been set.

In 2021, state lawmakers enacted Washington’s Climate Commitment Act, which requires Ecology to regulate greenhouse gas emissions from designated businesses, manufacturers, and other entities, and to conduct period “cap-and-investment” auctions that generate revenue for various state programs.

According to the farm bureau and trucking association, the CCA includes “a critical exemption from the cap-and-invest program” for emissions associated with diesel and biodiesel fuels used in farming operations and the transportation of agricultural products by truck.

Under the law, the plaintiffs allege, Ecology is supposed to maintain that exemption for five years in order to provide “a feasible transition period” for the agricultural sector before compliance was required.

But in developing regulations, Ecology instead created “an arbitrary exemption process inconsistent with its statutory obligations,” the lawsuit alleges. The plaintiffs contend the agency does not require suppliers to segregate ag-related fuels as specified by law, but instead makes that segregation process optional while requiring the fuel purchasers themselves to seek exemption approval from Ecology.

“Moreover, Ecology’s woefully inadequate regulations create a system whereby an otherwise-exempt fuel purchaser presents an arbitrary certificate to fuel sellers who have no obligation to accept the certificate,” the lawsuit states. “Meanwhile, fuel sellers and distributors continue to add CCA-related costs from the cap-and-invest program onto the price of exempt fuel, while the State of Washington continues to reap the revenue from such CCA-charges.”

The farm bureau and trucking association contend that the CCA-imposed charges, implemented in January, have increased ag-related diesel costs between 45 cents and 70 cents per gallon, resulting in an estimated $74 million increase in fuel prices “that should be exempt.”

The two associations say those “unlawful added costs” are particularly harmful to small farms – estimated at 67% of all farming operations across Washington – as well as small trucking carriers.

Last month, they said, Ecology rejected a petition submitted in June asking the agency to exempt the ag-related fuels from taxation and refund costs to farmers and ranchers who “have been illegally refused an exemption.”

The plaintiffs also alleged that the agency attempted to blame wholesale fuel suppliers for the lack of a workable exemption program, even though many small farm and trucking operations in Washington purchase fuel from local retailers, not wholesale suppliers.

“We feel like there are solutions that are ready, but unfortunately Ecology has not been willing to move forward,” said Bre Elsey, director of governmental affairs for the Washington Farm Bureau, in a press statement. “We have waited for nine months and we cannot wait longer for Ecology to address a crippling issue that should have been addressed by January 1 of this year.”

Sheri Call, president and CEO of Washington Trucking Associations, voiced frustration that in-state haulers “are losing business to outside carriers, companies who are not subject to CCA and have opportunity and access to buy fuel out of state.”

“Mitigating the exemption issue is important because it was relied upon during passage of CCA; however, it is just one aspect of bigger problems for trucking companies in Washington,” said Call.

The 46,000-member Washington Farm Bureau is an advocacy organization representing the interests of farm and ranch families who collectively raise 300 different commodities in the state. The Washington Trucking Associations is supported by over 600 member companies ranging from single truck operators to large fleet firms and the businesses which provide them with products and services.

The plaintiffs are represented by attorneys Callie Castillo and Jesse Miles with the Seattle law firm, Lane Powell PC.