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Washington Governor Gregoire Seeks Refiner Fee to Fix Roads, Run Ferries

Washington (STOWA1) Governor Christine Gregoire, whose state ranks sixth in U.S. oil-refining capacity, wants to charge a fee on the industry to help maintain roads, bridges and ferries over the next decade.

Gregoire, 64, proposed a charge of $1.50 a barrel to provide funds for the $3.6 billion maintenance plan in her final State-of-the-State speech yesterday in Olympia, the capital. She said the work would create 5,500 jobs, urging lawmakers to pass the plan and the proposed fee.

“Our oil companies are getting all the profit and leaving us with the bill,” said Gregoire, a Democrat who isn’t seeking re-election in November. “We can do better.”

Washington needs about $1.5 billion to close a deficit in its current two-year budget and replenish reserves, Ralph Thomas, a spokesman for the state financial management office, said by e-mail. The governor also said lawmakers should ask voters to pass a temporary sales-tax increase to 7 percent from 6.5 percent, which would raise an estimated $494 million. Oil company representatives said a fee would likely push up prices.

The state Transportation Department will be short $3 billion to maintain and operate highways and ferries over the next 10 years. Washington is among nine states that don’t tax wages. Voters rejected adding such a levy on the wealthiest residents in 2010.

Pain at Pumps

“Raising hidden taxes on the gasoline and diesel fuel that the people of Washington state rely on is the wrong idea at the wrong time, and will cause pain at the pump for everyone living in and traveling through the state,” Charles T. Drevna, president of the National Petrochemical & Refiners Association, said yesterday in a statement.

“Raising energy taxes will make Washington state less attractive to businesses and to tourists, and could threaten jobs,” Drevna said, calling it “a sure-fire way to make times even tougher.”

Gregoire’s fee would apply to barrels refined in the state for transportation purposes and needs to pass the Legislature to take effect, Karina Shagren, a spokeswoman, said by e-mail. The taxable products include oil for fuel and for making asphalt used on roads, she said.

Opposed in Past

“Wholesale taxes like this we have opposed in the past, and I would imagine we would this as well,” Bill Kidd, a director of government affairs for London-based BP Plc (BP) in Washington state, said by telephone.

Jill Davis, a U.S. spokeswoman for The Hague-based Royal Dutch Shell Plc (BP\), and Tina Barbee, a spokeswoman for Tesoro Corp. (TSO) in San Antonio, both referred questions to the Western States Petroleum Association.

Gregoire’s proposal may affect gasoline, diesel and other oil-products markets “up and down the supply chain” depending on whether the tax applies directly to refineries or at the pumps, said Tupper Hull, a spokesman for the refiners’ group in Sacramento, California.

“We don’t know how it will ultimately be administered, if it’s ever approved,” said Hull, whose group represents companies including BP (BP/) and Shell. “But there’s no question that a tax on crude oil makes it more expensive to produce transportation fuels for businesses and consumers.”

Rich Johnson, a spokesman for Houston-based ConocoPhillips (COP), wasn’t immediately able to comment.

Conventional, 87-octane gasoline in Portland, Oregon, often used as a price benchmark for the U.S. Northwest, rose 1.75 cents to a premium of 5.5 cents against gasoline futures traded on the New York Mercantile Exchange, according to data compiled by Bloomberg.

“Washington has the second-highest state gasoline tax in the country,” Hull said. “Washington consumers are already paying a substantial tax to support the state’s transportation infrastructure.”

Washington in 2011 trailed Texas, Louisiana, California, Illinois and Pennsylvania in oil-refining capacity, according to U.S. Energy Information Administration figures.

To contact the reporters on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net; Edward Klump in Houston at eklump@bloomberg.net.

To contact the editors responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net; Susan Warren susanwarren@bloomberg.net.

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