Washington farmers take state to Supreme Court over fuel exemption rules

OLYMPIA, Wash. (CN) — A farming interest group on Thursday accused Washington regulators of crafting cap-and-trade rules that let fuel suppliers bypass agricultural exemptions and pass higher costs to farmers, asking the state Supreme Court to declare the rules invalid.

“The Legislature unambiguously exempted agricultural fuel emissions from the Climate Commitment Act to protect farmers,” argued Callie Castillo, attorney representing the Washington Farm Bureau. “Ecology’s rulemaking scheme harms farmers and disregards the mandates that the Legislature put in place.”

Washington passed the Climate Commitment Act in 2021, setting a limit on overall carbon emissions in the state and requiring the state’s largest fuel suppliers to obtain allowances equal to their annual greenhouse gas emissions.

The Department of Ecology is tasked with administering the cap-and-invest program. However, certain kinds of emissions are exempt from the act, including those arising from the use of agricultural fuels.

If a supplier can demonstrate that its emissions were associated with fuels used for agricultural purposes or to transport agricultural products, they do not need compliance instruments. The Department of Ecology adopted rules to effectuate the exemptions and rejected the Washington Farm Bureau’s petition for new rulemaking. The farmers argued that the rules disincentivize suppliers from seeking the exemptions.

“Where Ecology has failed in its processes, in its rulemaking, is having no requirement that those fuel suppliers must accept the certificate exemption,” Castillo said.

The Farm Bureau argues the Department of Ecology wrongly framed the agricultural exemption as optional rather than mandatory. Exemption certificates are the intended route for farmers to avoid the surcharges, either when purchasing fuel or buying a vehicle.

Justice Sheila McCloud questioned the bureau about what outcome it was seeking.

“What remedy are you requesting? Because if we invalidate the regs, which I think is the remedy that you’re requesting, then you’ve got no regs at all,” McCloud said.

The Farm Bureau clarified that it wants the rules struck down and replaced with ones that don’t burden farmers.

Ecology maintains that the Farm Bureau’s issue lies with the law rather than the department’s regulations.

“As we sit today, dozens of fuel suppliers covering every corner of the state are providing surcharge-free fuel to agricultural users,” said Kelly Wood, attorney with the Washington Attorney General’s Office.

The justices questioned how exactly a farmer would benefit from the surcharge-free fueling.

“So they should know in advance which stations are going to honor the certificate and not pull in low on fuel to one that might not,” Gonzalez said.

Wood said several agricultural groups created a website listing all the fuel suppliers that offer surcharge-free fuel.

“That sounds like a workaround because the regulation didn’t adequately implement the statute’s goal,” McCloud said.

The Department of Ecology argued that it simply implemented the system it was given: one designed to exempt certain emissions and create a strong incentive for fuel suppliers to offer surcharge-free fuel to then receive certificates from farmers.

But why is the Farm Bureau before the Supreme Court with the challenge if the system works, Justice Salvador Mungia asked.

“I think the Farm Bureau’s position is that they believe that they should be able to go to every corner gas station and present a certificate to the clerk and get an instant discount on the fuel,” Wood responded. “That is tremendous authority that Ecology simply could not exercise.”

Plus, Ecology worked closely with stakeholders and farmers when developing the rules to make sure everyone understood exactly how they worked. But the Farm Bureau argued that plenty of fuel suppliers are still charging the Climate Commitment Act surcharge and accepting the exemption certificates to benefit from the break.

“That cannot be how the system was designed by the Legislature,” Castillo said.

The Washington Supreme Court did not indicate when it would rule.