Lower taxes for gas plant linked to carbon cuts

bshannon@theolympian.comApril 2, 2014 

Legislation awaiting Gov. Jay Inslee’s signature would give Puget Sound Energy a lower tax rate on the construction of a potential $250 million liquefied natural gas plant serving ships and truckers at the Port of Tacoma.

Important to the environmentalist governor, Senate Bill 6440 would for the first time in Washington link a tax rate with reductions in greenhouse gas emissions.

“This may be something that we will look back at and perhaps (take) note,” Inslee, a Democrat, said at the conclusion of the Legislature’s session in mid-March. “This is the first time a tax incentive will be tied to concrete carbon-emission reductions and includes other real accountability measures to ensure taxpayers receive maximum return on their investment.”

The measure, sponsored by Republican Sen. Curtis King of Yakima and reshaped by Democratic Rep. Reuven Carlyle of Seattle, is considered key for PSE to move ahead on its Tacoma project.

The legislation taxes the natural gas at transportation-fuel rates — far lower than the heating-fuel tax rates that otherwise would be levied on sales by a private utility like PSE. King said the goal was to ensure that users of the alternative fuel were not penalized by having to pay a higher tax than on conventional fuels, and he believes the trucking industry can be a big beneficiary as LNG becomes more available and trucks are converted.

Inslee is expected to sign the measure this week, but it is unclear how soon PSE might move forward to seek permits.

PSE spokesman Grant Ringel said Monday that the company is negotiating with the Port of Tacoma over sites for the facility, which would fuel two ocean-going ships run by Totem Ocean Trailer Express, or TOTE, and other customers. Construction of the facility would let the shipper, which is converting two Tacoma-to-Alaska ships by 2016, buy fuel locally rather than in Canada.

“Basically we would envision a three-year window for construction. So as soon as agreements are finalized, we would anticipate three years from then that we would be supplying LNG from the facility,” Ringel said.

Carlyle said language in the bill sets very specific performance goals — in effect writing another chapter in his ongoing effort to make sure those getting tax breaks give taxpayers something in return. These goals include reductions in carbon dioxide emissions by 300 million pounds per year and smaller reductions in emissions of particulates, sulfur dioxide and nitrogen dioxide.

He also inserted language to ensure that the ferry system, King County Metro or other public transportation agency can buy fuel at the best rates PSE offers.

PSE must put at least $250 million into the project to qualify for favorable tax rates on construction and equipment. Once operational, the fuel plant would need to employ at least 18 workers whose average pay was at least $35,000 a year. It also must apply for a tax refund rather than get an upfront exemption.

Ringel said the facility is expected to have the capacity of about 250,000 gallons of LNG per day, but the amount of production would depend on demand for fuel. He said it is designed for domestic use, not export, and is smaller than LNG export facilities built elsewhere for export.

TOTE is converting ships to use LNG in order to meet federal air standards. Rep. Jake Fey, a Tacoma Democrat who pushed for the bill, said lawmakers are helping Tacoma’s economic development by providing jobs and its environment by reducing emissions.

“Everybody comes out as a winner on this,” Fey said, adding that if the plant is built in Tacoma, it improves the chance that Tacoma can be a hub for converting trucks in the trucking industry to LNG.

Jessica Finn Coven, state director for the Climate Solutions environmental group, said TOTE’s move to replace dirtier fuels with natural gas is a good move and deserves support.

“I’m very pleased they are looking at ways to significantly reduce their greenhouse gases. That should be applauded,” Finn Coven said, adding that looking for ways to go beyond LNG is also important. “We can’t always say a conversion to natural gas is the way to go. When it is possible to move beyond fossil fuels, we should.’’

Brad Shannon: 360-753-1688 bshannon@theolympian.com

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