Washington state lawmakers advance tax on fuel shipped to Alaska, prompting an Alaska legislator to propose countermeasures

An Alaska lawmaker is proposing retaliatory taxes on fish and oil exported from Alaska to Washington State after Washington lawmakers unveiled a plan to levy a 6-cent-per-gallon tax on fuel refined in Washington and exported to neighboring states.

“Frankly, I’m tired of being thought of as a Washington colony,” Rep. Kevin McCabe, R-Big Lake, said on the House floor last week. “I’m tired of them depending on us and taxing us for their needs and ignoring ours.”

McCabe said in an interview on Friday that he is proposing two bills to counteract the Washington measure. The bills are expected to be formally introduced in the House on Tuesday. One measure would create a six-cents-per-pound tax on fish exports and a six-cent-per-foot mooring fee for any vessels that anchor or moor in Alaska harbors. Alaskans could apply for a tax credit.

Another measure would impose a $15-per-barrel surcharge on Alaska crude oil going to refineries in Washington.

The Washington fuel export tax is part of a 16-year transportation plan unveiled earlier this month. The tax is expected to raise $2 billion over the course of 16 years from fuel exported to states including Alaska, Oregon and Idaho. That money will then be spent on Washington projects including hybrid electric ferry construction and high speed rail.

Washington lawmakers say the tax makes up for the environmental impacts of the fuel refined in the state.

“This is really related to being fair with respect to climate impacts,” Rep. Jake Fey, D-Tacoma, Chair of the Washington House Transportation Committee, has said in a press conference. “In terms of fairness, I think it’s only appropriate since we produce the fuels for (other states’) use that they support our climate activities and our overall activities in the package.”

The Washington bill has already passed the state Senate and is expected to be considered by the House this week. If the bill is signed into law, the tax measure will take effect in February 2023.

Much of Alaska’s oil is refined outside of the state and transported back to Alaska by barge. Many rural communities rely on diesel electric generators for power, and Alaska ranks second only to Hawaii in the share of its electricity —16% in 2020— generated from petroleum, according to the U.S. Energy Information Administration.

Villages require millions of gallons of fuel per year to meet their electricity needs. Alaska consumed 39 million barrels of petroleum in 2019.

McCabe said the Washington proposal may violate the commerce clause in the U.S. Constitution, which prohibits states from passing legislation that excessively burdens interstate commerce.

“We know that it’s a violation of the commerce clause. I mean, anybody that has read a little bit of the Constitution understands that. But apparently the Washington lawmakers don’t,” said McCabe.

But Washington lawmakers point to several other states that levy a tax on fuel exported to other states, including Texas, Florida and Tennessee.

Oregon Gov. Kate Brown, a Democrat, and Idaho Gov. Brad Little, a Republican, also publicly vented their frustrations over the measure.

Brown wrote on Twitter that she spoke directly with Inslee, saying that “Washington taking unilateral action to increase gas prices for Oregon families and businesses is unacceptable.”

Little wrote in a letter to Inslee that the Washington Legislature “is venturing into new, uncertain territory” and called on Inslee to veto the legislation if it reaches his desk.

This is not the first time Alaska lawmakers have proposed a retaliatory tax in response to Washington tax proposal. In 2009, Alaska lawmakers proposed imposing a $16 a barrel surcharge on North Slope crude destined for Washington state in response to a Washington bill that would tax fuel that’s refined in Washington and exported to other states, including Alaska. After Alaska lawmakers proposed the retaliatory tax in 2009, the Washington proposal failed to pass.

“Washington State tried this before and we had the same exact response,” McCabe said. But he added that it’s hard to say if the measures he is proposing will have the same effect this year.

Republican Gov. Mike Dunleavy called out the measure, writing on Twitter that Washington’s “view of Alaska as a colony is reflected on a tax on all of us.” Dunleavy asked Alaska residents to call the office of Democratic Washington Gov. Jay Inslee to voice their concern.

When contacted Monday, Dunleavy spokesman Jeff Turner declined to say whether the governor would support the retaliatory taxes proposed by McCabe, but said Dunleavy “certainly support efforts to defeat the proposed fuel tax.”