State’s Tax For Oil Cleanups Challenged

Washington state’s nickel-a-barrel tax on oil shipments to pay for spill cleanup and prevention programs has been challenged in court by a small refinery in Tacoma.

In a lawsuit filed in Thurston County Superior Court, U.S. Oil & Refining Co. argues that the tax amounts to an unconstitutional state import duty.

The lawsuit asks that the tax be suspended and that the state refund the more than $1.2 million U.S. Oil has paid since the levy was imposed in 1991.

The tax generates $4 million to $6 million a year for tanker inspections, enforcement of oil spill cleanup regulations and a cleanup fund. A verdict in favor of the company would leave the state without money for that work, said Barbara Herman, director of the Washington Office of Marine Safety.

The tax is imposed only on the first water shipment of oil or petroleum products, so a refinery that receives crude by ship and then ships products by boat or barge pays no additional tax despite the additional risk.

That’s what makes the tax an import duty, said Frank Dinces, U.S. Oil’s lawyer. He said it could take years to resolve the case.

The smallest of the state’s five refineries, U.S. Oil gets most of its crude oil from Alaska. Most of the gasoline, diesel, jet fuel and asphalt made at the refinery is delivered by truck or pipeline to McChord Air Force Base and other customers.