Washington’s DNR wants to take part in carbon-credit markets

OLYMPIA – The Department of Natural Resources is asking state legislators to allow the agency to sell carbon credits, a move that supporters say could help Washington fight climate change and bring in revenue.

The state House of Representatives last week passed a bill that would authorize the department to use state lands for carbon sequestration, a process to store carbon dioxide, or habitat restoration, such as reforesting land post-wildfire, planting forests on lands without trees or adding aquatic projects in the state’s kelp forests. Those projects could then generate carbon offset credits, which the department could sell in carbon markets, such as Washington’s new cap-and-trade program.

Commissioner of Public Lands Hilary Franz argues the proposal would put the state on par with private businesses, nonprofits and local governments that can already sell carbon credits.

State law allows the Department of Natural Resources to sell resources that can be extracted from the land, Franz said.

“We can sell timber. We can sell wheat. We can sell apples. We can sell grapes. We can sell even marijuana. We can sell geoducks,” Franz said, “but we can’t sell carbon.”

The department already can lease lands for carbon-capture projects but can’t directly sell the carbon credits from those projects, Franz said. This bill would allow the department to use the land it owns for a number of projects that could generate more money for the state and its beneficiaries, such as schools and counties.

Through Washington’s new cap-and-trade program launched this year, the state’s largest polluters must meet an emissions cap set by the state.

If they cannot meet the emissions cap in any given year, they could purchase allowances from the state in a quarterly auction. In Washington’s first auction, allowances for each metric ton of carbon emissions sold for $48.50, more than double the floor price set by the Department of Ecology.

Another way companies can comply without directly cutting their own emissions is by investing in carbon offset projects, such as the projects the Department of Natural Resources is proposing in this bill.

In Washington, emissions allowances and offset credits each equal one metric ton of carbon dioxide.

Over time, the number of offset credits and allowances available for purchase in Washington will decrease, requiring more companies to clean up their own emissions instead of purchasing from the state.

“It’s in the best interest of the Legislature to give us this authority,” Franz said.

Bill sponsor Sen. Liz Lovelett, D-Anacortes, said projects in the bill have never been fully funded in Washington, but they’re the state’s best approach at capturing carbon in the state’s atmosphere and restoring habitats.

“DNR, as an agency, has one of the single biggest roles to play in terms of drawing down the carbon that’s in the atmosphere,” Lovelett said.

Initial versions of the bill received some pushback from the timber industry and rural communities that rely on funding from the mills.

Port Angeles Port Commissioner Connie Beauvais said the bill could have negative effects on their rural community. She urged the Legislature to allow for further collaboration on the bill before passing it.

Doug Cooper, from Hampton Lumber Company, had concerns about rushing the bill through this session.

“Claims of what this bill will and will not do must be thoroughly examined,” he said. “Do not advance without appropriate due diligence.”

Paul Jewell, of the Washington State Association of Counties, said questioned the bill’s effect on revenues and programs.

“We do support the broad ideas of the bill, especially if they’re intended as an added value to existing programs,” Jewell said. “However, we are not interested in programs that undermine or reduce our current revenues.”

Lovelett said much of the concerns from timber were addressed in the final version that passed the House last week.

The new version would require that any new projects the department takes on result in a net increase in revenue for beneficiaries. Any projects would have to comply with existing tribal agreements and treaty rights. The project contracts could last for up to 125 years.

The amended version that passed the House last week would require the department to replace any timber volume and timber value on lands constrained by these projects. If the department is purchasing new land specifically for these projects, it would have to prioritize purchasing lands at risk of being converted for something else, according to the bill.

Lovelett said she wants the timber industry kept whole, especially after the economic devastation they’ve already felt.

“It’s not mutually exclusive,” she said. “I think this bill has the potential to really be a win-win.”

In the vote in the House, Republicans remained split on the bill, something that House Minority Leader J.T. Wilcox, R-Yelm, said was a sign of a good bill.

“I’m behind the people who voted yes, and I’m supportive of the people who voted no with concerns,” said Wilcox, who voted yes.

He said those who worked on it in his caucus did everything they could to help protect timber harvests and ensure that the bill didn’t destroy rural jobs.

Rep. Ed Orcutt, R-Kalama, said during the floor debate he was still concerned about some of the language in the bill not being clear enough. He said he didn’t want the state to get so caught up in these offset projects that they’re losing the ability to get revenue from other projects on state lands.

“It’s not quite there yet,” he said.

Rep. Joel Kretz, R-Wauconda, said he was initially skeptical of the bill but has since realized there is a new market emerging in carbon.

The Department of Natural Resources has an opportunity to make some extra money for the state and its beneficiaries, Kretz said in a floor debate last week.

Some of the revenue from the credits could support the reforesting of 138,000 acres of lands that have burned, expand state-owned forests and enhance kelp forests, according to the Department of Natural Resources.

The carbon credit bill passed the state House of Representatives 82-13. It now heads to the state Senate for further consideration.

Lovelett said the bill likely will get a public hearing next week in committee. She said there likely will be a few more changes in the Senate, such as expanding the types of projects that the department can take part in.