SHB 2322
In CommitteeHouse
Alternative jet fuel
Providing certainty for the development of low-to-zero carbon alternative jet fuel production in Washington state.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill creates tax incentives and a reduced tax rate to encourage the development and use of low-carbon alternative jet fuel (also called sustainable aviation fuel) in Washington. It sets a firm deadline for when these benefits begin and expire to help attract early investment, and clarifies how carbon intensity is calculated for electricity used in fuel production.
- Requires the Department of Ecology to allow specific carbon intensity pathways for alternative jet fuel and to recognize biomethane as a valid feedstock, aligning with existing clean fuels program rules.
- Establishes a new tax credit for producers of alternative jet fuel: $1 per gallon for fuel with at least 50% lower carbon emissions than conventional jet fuel, increasing by $0.02 per additional 1% reduction (up to $2/gallon), available only in qualifying counties (populations under 650,000).
- Creates a separate tax credit for users (e.g., airlines) of alternative jet fuel for flights departing in Washington, with the same credit structure and carbon reduction thresholds as the producer credit.
- Reduces the business and occupation (B&O) tax rate to 0.275% for manufacturing and retail sale of alternative jet fuel, but only after the state has at least 20 million gallons of annual production capacity and the Department of Ecology notifies the Department of Revenue.
- Sets a clear expiration date for both the tax credit and reduced tax rate: nine years after they take effect, or July 1, 2031—whichever comes first—providing certainty for investors.
- Requires verification that fuel production does not occur on historic cemetery or tribal burial ground land before credits can be claimed, and mandates that electricity used in production be assigned the carbon intensity from its specific power purchase agreement or utility fuel mix disclosure.
Who is affected
- Alternative jet fuel producers — Businesses that produce alternative jet fuel in Washington state may qualify for tax credits or reduced tax rates if they meet carbon intensity requirements and operate in qualifying counties.
- Alternative jet fuel users (e.g., airlines, airport operators) — Airlines, airports, and other businesses that purchase and use alternative jet fuel for flights departing in Washington may claim tax credits for using low-carbon fuel.
- Rural and smaller counties — Counties with populations under 650,000 may benefit from job creation and economic activity if producers locate facilities there to qualify for enhanced tax credits.
- State agencies (Ecology and Revenue Departments) — The Washington Department of Ecology and Department of Revenue will be responsible for certifying fuel carbon intensity, verifying facility operations, and administering tax credits and reporting requirements.
Pro/Con Analysis
Potential Benefits (5)
By restricting the producer tax credit to counties with populations under 650,000, the bill incentivizes siting new fuel production facilities in rural areas, potentially creating local jobs and economic activity in regions that have seen declining manufacturing employment—though this benefit is conditional on actual facility development, which is not guaranteed.
Business & EmploymentPeopleRef: Sec. 4(1)(b)(i) & Sec. 4(1)(h)The bill requires that electricity used in fuel production be assigned the carbon intensity from the specific power purchase agreement or utility fuel mix—preventing the use of generic grid averages and ensuring that facilities using clean electricity receive full credit. This strengthens environmental integrity and encourages renewable energy procurement, supporting Washington’s climate goals.
EnvironmentPeopleRef: Sec. 2(2) & Sec. 2(3)(a)(iii)The sunset date (July 1, 2031) provides regulatory certainty for investors, reducing perceived risk in a capital-intensive, long-lead-time sector. This clarity may accelerate early-stage project development and help overcome the “valley of death” between pilot and commercial scale—potentially catalyzing private investment that might otherwise stall.
FinancialPeopleRef: Sec. 4(1)(f)(ii) & Sec. 4(9)(a)(ii)The prohibition on fuel production on historic cemetery or tribal burial ground land—verified by Ecology in consultation with the Department of Archaeology and Historic Preservation—protects culturally significant sites and respects tribal sovereignty, aligning with state and federal legal obligations and reducing risk of community opposition or legal challenges.
Public SafetyPeopleRef: Sec. 4(1)(h) & Sec. 4(1)(f)(ii)The escalating credit ($1–$2/gallon tied to carbon intensity reduction) creates a strong financial incentive to maximize emissions reductions, pushing producers toward best-in-class technologies and feedstocks—potentially lowering aviation emissions more than baseline clean fuels programs alone.
EnvironmentPeopleRef: Sec. 4(1)(b)(ii) & Sec. 4(1)(c)
Potential Concerns (5)
The producer tax credit is limited to facilities in counties with populations under 650,000, which excludes major population centers like King, Snohomish, and Pierce counties—where most aviation infrastructure and large-scale fuel distribution networks are located. This geographic restriction may concentrate benefits in smaller, rural counties but limits broader economic impact and could discourage investment in more efficient production hubs near airports or ports.
Business & EmploymentIndustryRef: Sec. 4(1)(b)(i)The producer tax credit structure—$1/gallon base, increasing by $0.02 per 1% additional carbon reduction up to $2/gallon—creates a steep marginal incentive for high-emission-reduction projects. However, achieving >75% reduction is technically challenging and capital-intensive; only well-capitalized producers (e.g., large biofuels firms, energy majors) are likely to reach the top credit tier, concentrating financial benefit among firms with deep pockets and R&D capacity.
Business & EmploymentIndustryRef: Sec. 4(1)(b)(ii) & Sec. 4(1)(c)The B&O tax reduction to 0.275% for alternative jet fuel manufacturing and retail sales is contingent on achieving 20 million gallons/year of production capacity—roughly equivalent to 1–2 large facilities. This threshold is high relative to current Washington production (near zero), meaning the tax break may only materialize years after implementation, if at all, delaying fiscal benefit and potentially distorting investment decisions around the arbitrary deadline of July 1, 2031.
FinancialIndustryRef: Sec. 2(3) & Sec. 3(5)(a)(ii)The nine-year sunset (or July 1, 2031, whichever is earlier) creates a short investment window, favoring large, well-financed developers who can rapidly deploy capital before the deadline—while smaller or newer firms may lack the resources to meet timing and technical requirements, skewing participation toward incumbent energy companies.
FinancialIndustryRef: Sec. 4(1)(h) & Sec. 4(1)(f)(ii)The producer tax credit is capped at $2/gallon and only available to producers in qualifying counties, but the credit is not refundable and can only offset B&O tax liability—meaning small or unprofitable producers with low tax liability cannot fully utilize the credit, effectively limiting its value to profitable, large-scale operations with significant tax liability to offset.
FinancialIndustryRef: Sec. 4(1)(b) & Sec. 4(1)(c)
Who Is Most Affected
Large biofuel producers (e.g., LanzaJet, Neste, Chevron) with capital, technical capacity, and existing infrastructure can quickly scale in qualifying counties to capture the full $2/gallon credit. They benefit most from the tax incentives and reduced B&O rate, especially if they can locate near ports or rail hubs outside major metro counties.
Airlines and airport operators (e.g., Alaska Airlines, Sea-Tac) may benefit from lower fuel costs if producers pass through the $1–$2/gallon credit via contract pricing (as required by Sec. 4(1)(g)). However, the credit is not directly paid to them, and they must still pay for fuel—so net benefit depends on market dynamics and whether producers reduce prices proportionally.
Rural counties (e.g., Yakima, Spokane, Walla Walla) may see job creation and capital investment if producers locate facilities to qualify for the geographic preference. However, this depends on whether the facilities are labor-intensive and whether local workforce skills match needs—risks of boom-bust cycles exist if production scales back post-sunset.
Small or new entrant producers without access to capital, land, or technical expertise may be unable to meet the 20M-gallon threshold or qualify for credits—especially if they lack ties to qualifying counties. The credit’s non-refundable nature and tax-liability limitation further disadvantage smaller players.
State agencies (Ecology, Revenue, Archaeology & Historic Preservation) face increased administrative burdens: verifying carbon intensity, confirming facility locations, reviewing credit applications, and ensuring compliance. These costs are not offset in the bill, potentially diverting resources from other climate or cultural resource priorities.