Utah lawmakers are backing away from a showdown with Idaho leaders over a plan to start taxing gasoline exports to the northern neighbor.
Currently, fuel that is shipped from Utah’s five refineries to surrounding states is not taxed by Utah, but for weeks, House Speaker Mike Schultz, R-Hooper, had advocated to begin taxing those shipments.
Idaho leaders were furious, contending it would cost their drivers $250 million a year. They passed a resolution demanding Utah jettison the tax plan and threatened to retaliate — even suggesting that Idaho could withhold water that flows into Utah and to the Great Salt Lake.
But over the weekend, Rep. Calvin Roberts, R-Draper, who is sponsoring the bill on Schultz’s behest, released the long-awaited gas tax legislation. And it does not touch gasoline exported from Utah.
Instead, the bill lowers the state’s gas tax from 37.9 cents per gallon to 31.9 cents and aims to make it easier to build fuel infrastructure projects like pipelines and expanded refining capacity.
“We’re doing a 15% gas tax cut in the short term to bridge us to the long-term supply play,” Roberts said in an interview Tuesday. “So, within the bill, we’re trying to incentivize more manufacture of fuel supply in the state of Utah. That will help bring down, not only our prices, but [prices for] the whole region.”
Schultz said the reduction in the gas tax would mean Utah drivers would pay about $10-$12 million less per year at the pump. The gas tax is primarily used to build and maintain roads.
The larger goal, Schultz said, is to ramp up gas production at Utah refineries by encouraging more pipelines, refinery capacity and storage and offset “policies that are coming out of California and Democrats pushing their refineries out of existence.”
Asked about the bill Tuesday, Sen. Scott Sandall, the executive appropriations chair, said he hadn’t seen a fiscal analysis for the gas legislation yet, but he expects the state will need to make up the local road funding. Sandall thinks that sum, which he said local governments will be anticipating, is estimated to be around $10-13 million.
Utah’s five oil refineries produce about 220,000 barrels of fuel a day, according to data from the U.S. Department of Energy. About 75,000 barrels of that gasoline is shipped to neighboring states.
Schultz said the aim is for Utah refineries to increase their production by up to 100,000 barrels a day, which he said would drive down gas prices at the pump. The petroleum companies, he said, were threatened with a production tax in order to incentivize them to put more gasoline on the market.
That additional gasoline, to the extent there is a demand for it, would largely be shipped out of state and not taxed by Utah.
Schultz said the additional emissions from the increased production is “always a concern,” but that with new technology in refineries, he thinks the extra production will still emit less pollution.
The legislation resolves the simmering dispute with Utah’s northern neighbor in a way that Schultz said will “be good for the overall supply picture — not just for the state of Utah, but for Idaho, for Arizona, for all of our regional partners.”
The speaker had previously accused petroleum industry lobbyists of spreading misinformation and trying to pit Idaho against Utah.
The Utah Petroleum Association did not take a position opposing Schultz’s proposed export tax, but said it did create a risk of Idaho importing gasoline from other states and such a regulation of interstate commerce could violate the U.S. Constitution.
Gov. Spencer Cox said last week he had been in communication with leaders in Idaho and believed the issue would be resolved favorably for both states and the entire region.
Roberts’ bill will be heard in the House Revenue and Taxation Committee on Wednesday.
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