Bill extending tax break to Washington business that use wood waste for energy awaits signature for final passage

Lawmakers in Olympia have voted to reinstate tax breaks for Washington businesses that use or sell hog fuel, a mixture of wood waste that is burned to produce energy.

The legislation passed last month with majority support across party lines and was delivered to Gov. Jay Inslee’s desk where it has sat unsigned.

The bill would continue for an additional 10 years, until June 2034, the current sales and use tax exemptions for businesses that buy hog fuel and burn it to produce electricity, steam, heat or biofuel.

If Inslee vetoes the bill, the current hog fuel tax break will expire in June 2024.

Rep. Steve Tharinger, D-Port Townsend, was the bill’s primary sponsor. He said continuing hog fuel tax breaks for another 10 years will support “tight margin” companies in the 24th district and across the state.

“This is a good way to recycle and reuse hydrocarbons,” Tharinger said in a phone call Friday. “It seems that taxing that exchange within the plant was a little excessive, so this bill is just continuing that exemption.”

Tharinger said tax breaks like the hog fuel bill help support mills to continue operating in Washington – something he believes will help the job market and planet.

“We would rather have pulp and paper and these mills operating in Washington under our environmental regulations,” he said, “instead of getting those materials from China or Chile or Brazil or some place where they don’t have those environmental guidelines. We’re going to use wood products. We’re going to use paper products. They’re not going away.”

Nick Bond, Washington state climatologist and professor at the University of Washington, said there are better uses for wood waste than letting it rot, and hog fuel burns are one of them.

“I’m not exactly sure where hog fuel fits in the ledger of carbon emissions,” he said in an interview. “In general, you could say it’s one use of that byproduct. I’m not sure if it’s the most efficient or most carbon-friendly use, but it’s better than letting it sit outside and decompose.”

According to the state Department of Revenue, 12 energy and timber companies in the state received tax breaks in 2021 for their use of hog fuel. Avista Corp. saved the most that year with a $567,000 tax reduction. Other beneficiaries included wood giants Boise Cascade Wood Products, McKinley Paper and Weyerhaeuser.

The bill’s text stipulates if a company closes, resulting in lost jobs, it must pay back two years’ worth of hog fuel exemptions. The bill also states the purpose of the exemption is to increase the ability of beneficiary companies to provide at least 75% of their employees with medical and dental insurance and a retirement plan, but it is not a requirement.

When asked why the benefits weren’t a requirement in the bill, Tharinger said benefits are negotiated in collective bargaining agreements.

“We don’t usually get involved with that as the state,” he said. “It’s between the unions and the managers. But this is obviously sort of a message that we think it’s important for those benefits to be included.“

In 2019, the state Joint Legislative Audit and Review Committee reviewed previous hog fuel tax breaks and estimated they saved beneficiaries a total of $5.6 million every two years. The legislative auditor concluded beneficiaries were meeting the bill’s public policy objectives.

The hog fuel passed in the House 96-0 and in the Senate 37-12.

One “nay” vote came from Sen. Joe Nguyen, D-White Center.

“I’m generally opposed to tax breaks for companies and hog fuel,” Nguyen said in a phone call Friday. “I get it, it’s more sustainable and safer than other options, like fossil fuel, but it’s still burning wood, right? So you’re still emitting (carbon dioxide.) I don’t want to incentivize that behavior.”

Nguyen, who is chair of the Senate Environment, Energy and Technology Committee, said he does not believe the beneficiary companies need the tax breaks to stay afloat, adding that the intent language in the bill is meant to “soften the blow” of the write-offs.

“If you’re a profitable business, you should be providing benefits to your employees,” he said. “You shouldn’t need a tax exemption to provide things you should be providing anyways.”

Former Spokane County Commissioner John Roskelley was also among those opposed to the hog fuel bill. He worked with Sherri Dysart, Forest Issues chair of the League of Women Voters of Washington, urging Inslee to veto the bill.

“Tax exemptions should not be given to industries that generate a high rate of emissions,” Dysart wrote in an email to Inslee dated April 22. “The hog fuel industry has been shown to degrade air quality and health, in addition to contributing significantly to Greenhouse Gas emissions. It is actually inconsistent with your Earth Day comments.”

Roskelley said if the Legislature won’t kill the bill, he hopes it will change the language.

“Direct that money that these 14 businesses are saving to clean up their stacks and implement new technology,” he said in an interview .

Sen. Mark Schoesler, R-Ritzville, said he sponsored the bill because he has prided himself as a friend of the timber industry for his entire tenure as a legislator.

“If you improve the bottom line in the plants, the possibility to bargain for benefits is a lot easier than if the plant is doing poorly,” he said in a phone call Friday. “A struggling industry has a harder time increasing and paying benefits.”

Schoesler said he thinks Inslee will likely sign the bill, adding that he wished further tax breaks would be put in place for other industries such as production agriculture and short line railroads.

Nguyen also said he thinks Inslee is likely to sign the bill.

“If he vetoes it, I would not be shocked,” Nguyen said. “But also I would bet that he doesn’t do that. It’s been going on, and it’s not big enough where I think he’d be upset by it. But he could.”

Attempts to reach Avista Corp. on Friday were unsuccessful.

Ellen Dennis is a freelance journalist based in Seattle. She writes about government, social issues and the environment. She can be contacted at reporterdennis@gmail.com or on Twitter @reporterellen.