Why does Big Oil get a tax loophole anyway?

Every year, Washington State gives away more than $20 million in tax breaks to oil companies. Meanwhile, our public schools are so underfunded that the Supreme Court had to step in, ordering the state to increase education funding by billions.

It’s appropriate to correlate these two situations. With funding levels for education and other essential services in crisis, it seems absurd for Washington state taxpayers to be subsidizing an industry in which the five largest oil companies pocketed nearly $120 billion in profits in 2012 alone. But we have been doing so ever since the first Washington oil refinery was built in 1956. It’s long since time that we closed the Big Oil tax loophole.


Back in 1949, seven years before even a single refinery existed in Washington, the Legislature created an "Extracted Fuel Exemption" to benefit lumber mills that were using unmarketable scrap wood as fuel. Today, however, just a tiny portion of the tax loophole goes to lumber mills. 98% is gobbled up by oil refineries, who use natural gas-like byproducts to power their refineries. The oil companies call this "recycling"– but it’s hard to see how natural gas is reused after it has been combusted. (Then again, the oil companies have never been very good with simple concepts such as “recycling,” or "not polluting Puget Sound").

The loophole has even confounded the state’s own bipartisan tax review committee, which tried, without success, to identify a good public policy justification for giving handouts to oil companies. The oil companies that own Washington’s refineries will make many billions of dollars this year, while Washington’s schools will remain underfunded. The Big Oil Loophole was never intended to benefit oil companies. Bottom line, it serves no purpose except to divert tens of millions of dollars away from essential services, toward a massively profitable and polluting industry.

Fortunately, Representative Reuven Carlyle has proposed legislation to close the loophole for oil companies, following both the proposed budgets of Governors Gregoire in 2010 and Inslee in 2012. Ending this undeserved tax break is critical to aligning our tax code with our values and supporting our children’s future. Tell your lesiglator to close the Big Oil loophole.

Author Bio

Ben Serrurier

former Washington Policy Specialist, Climate Solutions

As Climate Solutions' Washington Policy Specialist, Ben provided policy research and expertise for Climate Solutions in and out of the Washington legislature. Working with the policy team from 2012 to 2015, Ben worked on legislative, budgetary, and regulatory issues related to electricity generation and transmission, fossil fuel transport, and transportation fuels at the state and federal level. In 2014 he was named a Young Climate Leaders Network Fellow. 

Before moving to Seattle, Ben consulted for the Ministry of Commerce in Cambodia, studied economic development in Brazil, worked on carbon market policy for The Nature Conservancy in San Francisco and attended college in Walla Walla, Washington, where he received an honors degree in Politics-Environmental Studies from Whitman College.

Ben enjoys Seattle’s rain, coffee and forgiving clothing culture where anything plaid counts as a dress shirt.

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