Alaska lawmaker retaliates after Washington proposes tax on fuel exports

Reps. Chris Tuck, D-Anchorage, and Kevin McCabe, R-Big Lake, leave the House floor session on June 1, 2021. On Tuesday, McCabe introduced two bills that would raise taxes on Washington-based businesses, in retaliation for a Washington State Legislature plan to tax refined fuel shipped to Alaska and other states. (Photo by Nat Herz/Alaska Public Media)

The Washington State Legislature is considering a tax on fuel refined there and shipped to other states, including Alaska. In response, an Alaska House member has proposed two taxes that would hit Washington. 

The Washington legislation would increase fuel exported to Alaska, Idaho and Oregon by 6 cents per gallon. It wouldn’t affect Washington residents. 

The tax would pay for projects, including public transportation and bicycle and pedestrian safety, that are intended to reduce emissions.

Washington State Rep. Jake Fey, a Democrat, said in a news conference on Feb. 8 that it would be fair to impose the tax on the states that receive fuel refined in Washington.

“All those states have lower case taxes and in terms of fairness, I think it’s only appropriate since we produce the fuels for their use that they support our climate activities and our overall activities in the package,” he said.

The proposal caught the attention of an Alaska legislator, Big Lake Republican Rep. Kevin McCabe

“They’re using our resources and buying our resources and we’re using theirs. It sort of should be a symbiotic relationship between two states,” he said. “And all of a sudden, it’s not.”

McCabe has introduced two bills in retaliation. One would add two taxes for fishing businesses per pound of fish caught or processed in the state. Alaska businesses would get a tax credit to offset the taxes. The amount of each tax? Six cents. 

The other bill would tax oil producers for the oil sent from Alaska to Washington to be refined by $15.75 per barrel. 

McCabe said he hopes his bills stop the Washington legislators from moving forward. 

McCabe said that as a conservative Republican, he doesn’t want to raise taxes on anyone. But he said he would understand the Washington proposal better if it affected Washington residents too

“If we’re all going to share in this tax, then we’re all going to share in it and then, possibly, that would be acceptable,” he said. “But just targeting three states and not their own drivers and not British Columbia, that makes it a problem.”

McCabe is in the House minority caucus. But a majority member, independent Rep. Josiah Aullaqsruak Patkotak of Utqiagvik, also is concerned about the Washington proposal. As the House Resources Committee chair, Patkotak would be in a position to hold a hearing on McCabe’s bills if they move forward.

“If we can kind of position ourselves to be able to strategically combat that – not necessarily fire with fire, but the thought that there could be fire with fire – to have them potentially, you know, reconsider their thoughts on things, then that’s some dialog I’m willing to engage in,” he said.

Patkotak noted that heating fuel prices are already locked in through the summer. And he added that much of his district, in the North Slope Borough, buys fuel that’s been refined in places other than Washington. But he said villages that could see higher costs in the long run are already paying a lot. 

“You’ve got villages that are paying $10 – some of them I think $15 – a gallon of home heating fuel or gasoline to go and hunt the land,” he said.  

The oil industry has been pushing back against the Washington bills. 

Kevin Slagle is vice president of the Western States Petroleum Association, which represents industry companies. 

He said the Washington bills are on a fast track. And he said they need to stop. He’s been watching the Alaska proposal closely. 

“When you think about trade wars between states: The folks that are going to lose the most are consumers at a time when we’re emerging from economic difficulties,” he said. “There’s a lot of challenges in the world. So it just seems like an unfortunate time to have something like this that could create a bit of a war of commerce between the states.”

This isn’t the first time Alaska lawmakers reacted to a Washington tax plan. McCabe drew inspiration from a similar proposal by former Alaska House Speaker Mike Chenault, a Nikiski Republican. In 2007, Washington had proposed a $100 fee on shipping containers bringing goods to Alaska. Chenault recalls how he later proposed a tax on oil headed to Washington to be refined.

“We didn’t think it was fair that they were going to try to tax Alaskans an extra $100 just to pay for programs and services that they wanted in their state and have somebody else pay for it,” he said.

Both sides defused the situation by dropping their proposals. Chenault said he hopes McCabe will have similar success this time. 

“It’s one way for the Legislature to send a message to another Legislature that we are watching what you do,” he said. “And we don’t appreciate what you’re trying to do.”

The Washington Senate has passed the tax legislation. The state’s House is now considering it. 

Andrew Kitchenman

State Government Reporter, Alaska Public Media & KTOO

State government plays an outsized role in the life of Alaskans. As the state continues to go through the painful process of deciding what its priorities are, I bring Alaskans to the scene of a government in transition.

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