The state Supreme Court on Thursday unanimously upheld Washington’s hotly contested regulations for how farmers and haulers of agricultural goods receive the exemption on fuel purchases promised under the state’s cap-and-trade system.
The court said the Department of Ecology didn’t exceed its authority with the rule it adopted. Nor did the agency’s rejection of a petition from the Washington Farm Bureau and Washington Trucking Associations to scrap it and start over “constitute arbitrary and capricious action.”
“At its heart, the (Washington Farm Bureau) challenge seems to be a disagreement with the legislature, not with Ecology,” Justice Raquel Montoya-Lewis wrote in the ruling, which upholds a lower court’s dismissal of the two groups’ petition.
Thursday’s decision culminates a multi-year fight by farmers and haulers on a contentious carveout in Washington’s landmark climate law.
Central to the Climate Commitment Act are auctions for pollution allowances that refineries and other companies need to buy to offset their carbon emissions.
Under the law, the agricultural, maritime and aviation sectors are supposed to be exempt from the law’s cap on emissions and any fees fuel companies might pass to customers to cover the cost of buying the allowances. Fuel used for trucking crops and other agricultural goods is exempt as well.
Soon after the program began in 2023, complaints started streaming in.
There were difficulties tracking whether diesel fuel was being used for exempt purposes. A process where exempt fuel buyers had to present certificates to fuel sellers was cumbersome and faulty. Farmers found it challenging to know where fuel exemption certificates would be accepted.
Farmers and truckers said fuel distributors were, in many cases, passing on the cost of allowances to the tune of as much as 70 cents a gallon. They wanted a more workable method to claim the exemption, as well as a smoother process to receive refunds for surcharges.
Ecology put together a workgroup that met several times in 2023 to try — unsuccessfully, said farmers and truckers — to iron out the wrinkles.
Even before the panel completed its work, the two trade groups went to court to try to make Ecology open a new rulemaking process.
A Thurston County Superior Court judge dismissed their lawsuit in the summer of 2024. The Washington Farm Bureau appealed directly to the Supreme Court, which heard arguments last fall.
The court concluded the rule Ecology adopted is “reasonably consistent” with the climate law and did not exceed the scope of the agency’s statutory authority. Justices said the two groups provided no compelling reasons the agency had overstepped or denied their petition arbitrarily and capriciously.
Montoya-Lewis acknowledged the Farm Bureau’s concern that the rule did not adequately protect agricultural fuel buyers from fuel surcharges.
“Ecology does not have the power to require fuel suppliers to stop imposing surcharges,” Montoya-Lewis wrote. “Ecology carried out the directive of the legislature.”
Beyond the courtroom
Meanwhile, two years ago, amid the legal scuffling, the Legislature set out to ease concerns of farmers and haulers of agricultural goods. It set aside $30 million for rebates to those who could show they paid a surcharge.
The program ran from August 2024 through June 2025. There were rebate recipients in every county but, overall, less than a third of the money was claimed. Some eligible farmers reportedly didn’t seek a rebate because they found it a hassle to pay the surcharge, then apply for reimbursement.
A 2025 law sought a simpler solution. It directed the Ecology Department to create an online map of retailers that sell exempt agricultural fuel at a price that excludes any surcharges associated with the Climate Commitment Act. That enabled farmers and haulers to avoid paying the surcharges at the pump.
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