*This op-ed was originally printed in the Bellingham Herald on April 24.
Taxing recycled fuels hurts environment, economy
By DOUG ERICKSEN — COURTESY TO THE BELLINGHAM HERALD
By supporting a new tax on recycled fuels used in the petroleum-refining process, politicians in Olympia and stakeholders are overlooking serious questions that such a tax would raise for both the environment and the economy.
If the state were to begin imposing use taxes on by-products that are reused in a manufacturing process, there could be serious implications for other industries and production techniques we all consider environmentally desirable. Consistency would argue that the same taxation approach should be applied to waste vegetable oil that is re-used in producing biofuels, “hog fuels” used in the pulp and paper process, and scrap materials used by anaerobic digesters to produce electricity in rural areas. It doesn’t make sense to start taxing all prudent and efficient reuse of these resources.
Rather than imposing new costs on recycled fuels, we should celebrate the fact that they currently provide more than half of the energy required to run the state’s five petroleum refineries. It means that these refineries are making their processes as energy-efficient as possible.
But if new taxes make their recycled fuels too expensive, refiners will have no choice but to utilize more natural gas in their production processes. This would decrease efficiency and actually increase consumption of fossil fuels – not exactly what proponents have in mind.
The new tax makes no more sense from an economic standpoint than it does from an environmental one. If the tax were consistently applied, it would impact a wide variety of industries. But arbitrarily confining the tax to the petroleum industry also has serious and far-ranging consequences.
Contrary to popular opinion, Washington’s five refineries are low-margin operations that are already heavily taxed – more than $261 million in state and local taxes in 2011. The Washington Research Council recently estimated that the state and local taxes paid by a refinery in Washington are four times what is paid by a similar refinery in California.
This imbalance should concern us all. Capital investments – and the family-wage jobs they support – will go where they produce the highest return.
Imposing additional operating costs on Washington refineries will make them less competitive. If that happens, the impact can be measured in upward pressure on fuel prices for Washington drivers or the loss of high-paying jobs for Washington families – or both.
Our state has lost far too many high-skilled, family-wage jobs over the years, and Washington’s refineries are one of a declining number of manufacturing bright spots. They are responsible for 26,000 jobs and $1.7 billion in economic activity in our state. And their products are critical to keeping the broader economy running.
As Washington struggles to emerge from the recession, we can’t afford to put jobs and economic activity at risk. And we can’t create a tax climate in the state that has potential investors worried that their industry or facility could be the next target of an arbitrary tax hike.
As lawmakers, we have a responsibility to look past the rhetoric, and instead take an objective and thorough look at all the implications of our decisions. When we do that, it’s clear that a new tax on recycled refinery fuels is more of a problem than a solution.
ABOUT THE AUTHOR
Sen. Doug Ericksen, R-Ferndale, represents the 42nd district, which includes the northern half of Bellingham and Whatcom County north to the Canadian border, in the Washington State Legislature. He is chairman of the Senate Energy, Environment and Telecommunications Committee.