Supplier-Focused Agricultural Fuel Exemption Under Washington’s Climate Commitment Act: Ecology May Implement Certificate-Based Exemptions But Cannot Police Fuel Surcharges Absent Statutory Authority

Introduction

In Washington Farm Bureau v. Washington State Department of Ecology, No. 103413-0 (Wash. June 25, 2026) (en banc), the Washington Supreme Court addressed a rulemaking challenge to the Department of Ecology’s implementation of the Climate Commitment Act (CCA), Washington’s “cap and invest” greenhouse-gas program codified in chapter 70A.65 RCW.

The legislature created an agricultural fuel exemption: certain emissions associated with motor vehicle fuel or special fuel “used exclusively for agricultural purposes by a farm fuel user” are exempt if the buyer provides the seller an exemption certificate. Former RCW 70A.65.080(7)(e)(i) (2022). Ecology adopted rules to implement and expand that exemption (including a five-year expansion for transportation of agricultural products on highways). WAC 173-446-040(2)(b)(iii)-(iv).

The Washington Farm Bureau (WFB) contended Ecology’s rules were “unworkable” and functionally failed to protect farmers and agricultural users from fuel suppliers’ CCA-related surcharges. After Ecology denied WFB’s petition for rule making, WFB sought declaratory and APA relief, arguing (1) Ecology exceeded statutory authority and (2) Ecology acted arbitrarily and capriciously both in promulgating the rule and in denying the rulemaking petition.

The central legal issue was not whether surcharges were occurring, but whether the CCA’s text and structure require Ecology to design an end-user protection or refund mechanism—and whether Ecology’s supplier-centered certificate framework unlawfully departed from the statute.

Summary of the Opinion

The court affirmed dismissal of WFB’s challenge and held:

  1. Statutory authority: Ecology’s rule did not exceed statutory authority because the CCA places compliance obligations on covered entities—fuel suppliers—and the exemption applies to supplier emissions from covered fuel, not to end users directly. Ecology also lacked statutory authority to prohibit surcharges or provide refunds.
  2. Arbitrary and capricious: Ecology did not act arbitrarily or capriciously either in adopting the rule or in denying WFB’s petition for rule making. Ecology considered implementation constraints, explored alternatives, and issued guidance; disagreements about policy outcomes did not meet the “willful and unreasoning action” standard.

The court also declined to entertain certain arguments targeting WAC 173-441-122 because WFB’s superior-court petition sought relief only from “WAC 173-446,” leaving the chapter 173-441 rulemaking file outside the record.

Analysis

Precedents Cited

1) Timing and scope of judicial review of rules and the administrative record

  • Wash. Indep. Tel. Ass'n v. Wash. Utils. & Transp. Comm'n, 148 Wn.2d 887 (2003): Cited for the principle that when an agency promulgates a rule under a prior statutory version, the rule’s validity is assessed as of the date of adoption. This anchored the court’s reliance on 2022 CCA provisions.
  • St. Joseph Hosp. & Health Care Ctr. v. Dep't of Health, 125 Wn.2d 733 (1995): Used to justify declining review of a rule’s validity where the rulemaking file was not part of the record. The court applied this to reject WFB’s attempt (on appeal) to litigate WAC 173-441-122 when it was not squarely placed before the superior court in the petition.

2) Presumption of validity, “reasonable consistency,” and statutory-implementation limits

  • Spokane County v. Dep't of Fish & Wildlife, 192 Wn.2d 453 (2018), and Wash. Fed'n of State Emps. v. Dep't of Gen. Admin., 152 Wn. App. 368 (2009): Cited for the presumption that administrative rules are valid.
  • Bostain v. Food Express, Inc., 159 Wn.2d 700 (2007), and Campbell v. Dep't of Soc. & Health Servs., 150 Wn.2d 881 (2004): These cases supply the operative test: rules are invalid if “inconsistent” with statute, but should be upheld if “reasonably consistent.” The court repeatedly relied on this standard to sustain Ecology’s supplier-based exemption structure.
  • Weyerhaeuser Co. v. Dep't of Ecology, 86 Wn.2d 310 (1976): Provides the burden framing: challengers must show “compelling reasons” why a rule conflicts with legislative intent and purpose.

3) Statutory interpretation methodology

  • Dep't of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1 (2002): Cited for Washington’s plain-meaning approach and use of related statutes to discern legislative intent.
  • In re Recall of Pearsall-Stipek, 141 Wn.2d 756 (2000), quoting Greenwood v. Dep't of Motor Vehicles, 13 Wn. App. 624 (1975): Used to reinforce the anti-surplusage canon—courts should give meaning to each word where possible.

4) Mandatory vs. permissive statutory language

  • Regence Blueshield v. Off. of Ins. Comm'r, 131 Wn. App. 639 (2006): Referenced in the court’s discussion distinguishing permissive (“may”) from mandatory (“shall”) language, supporting the conclusion that the CCA does not mandate reporting of exempt emissions.

5) Agency expertise, deference, and the “arbitrary and capricious” standard

  • Port of Seattle v. Pollution Control Hr'gs Bd., 151 Wn.2d 568 (2004), and Hillis v. Dep't of Ecology, 131 Wn.2d 373 (1997): Support deference to Ecology’s expertise, especially on environmental regulatory implementation, so long as the agency’s view is not contrary to the statute’s plain language.
  • Pierce County Sheriff v. Civ. Serv. Comm'n, 98 Wn.2d 690 (1983), Abbenhaus v. City of Yakima, 89 Wn.2d 855 (1978), State v. Rowe, 93 Wn.2d 277 (1980), and Lane v. Port of Seattle, 178 Wn. App. 110 (2013): Establish and apply the controlling definition—arbitrary and capricious means “willful and unreasoning action” without regard to facts. Abbenhaus also supplies the “room for two opinions” rule: after due consideration, a choice is not arbitrary even if a court might prefer a different approach.
  • Schneider v. Snyder's Foods, Inc., 116 Wn. App. 706 (2003): Reinforces deference to specialized agency knowledge and the “heavy burden” on challengers.
  • Puget Sound Harvesters Ass'n v. Dep't of Fish & Wildlife, 157 Wn. App. 935 (2010): Quoted by WFB for the “willful and unreasoning” framing; the court distinguished WFB’s characterization from the actual record.

6) Limits on judicial rewriting of statutes; policy questions for the legislature

  • Dep't of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1 (2002) (n.9): Cited to emphasize that courts should not rewrite statutes and that policy disputes belong with the legislature.
  • Rios v. Dep't of Lab. & Indus., 145 Wn.2d 483 (2002): Invoked by WFB to argue arbitrary-and-capricious failure to act. The court distinguished Rios because, unlike there, Ecology’s materials did not show the requested regulatory shift was necessary and feasible at the relevant time; Ecology also supplied reasons for denial and identified authority limits.

7) Concurrences (institutional practice) and nonmerits citations

Separate concurrences debated the propriety of acknowledging staff contributions in opinions and disclosure of internal court actions. Those writings cited In re Recall of Clouse, 6 Wn.3d 42 (2026); Engberg v. Meyer, 820 P.2d 70 (Wyo. 1991); Holtzman v. Schlesinger, 414 U.S. 1304 (1973); and Parker v. Connors Steel Co., 855 F.2d 1510 (11th Cir. 1988), among others. These authorities did not drive the administrative-law holdings, but they contextualize the court’s internal governance discussion.

Legal Reasoning

1) The CCA’s structure makes suppliers the regulated “covered entities”

The court’s core interpretive move was structural: the CCA imposes compliance duties on “covered entities,” and, relevant here, fossil fuel suppliers meeting emissions thresholds qualify as covered entities. RCW 70A.65.080(1)(d). Because the CCA regulates suppliers, the statutory exemptions likewise operate at the supplier-emissions level. The agricultural exemption is framed as “emissions ... exempt from coverage in the program,” contingent on the buyer furnishing an exemption certificate to the seller. Former RCW 70A.65.080(7)(e)(i).

WFB argued this buyer certificate language indicates a user-focused entitlement—i.e., farmers should be insulated from CCA costs. The court rejected that reading, emphasizing that (a) the exemptions attach to supplier emissions, (b) the CCA does not regulate end users directly, and (c) importing definitions from RCW 82.08.865 does not alter who is regulated; it merely supplies the meaning of “agricultural purposes” and “farm fuel user.”

2) Ecology’s rules were “reasonably consistent” with the statute

Under Bostain and Campbell, the question was not whether Ecology’s rule was the best design, but whether it was inconsistent with the CCA. The court found a close textual match between:

  • Former RCW 70A.65.080(7)(e)(i)-(ii) (exempt supplier emissions for fuel used exclusively for agricultural purposes; require Ecology to “determine a method” for expanding the exemption to highway transport for five years), and
  • WAC 173-446-040(2)(b)(iii)-(iv) (supplier emissions not covered if the supplier can demonstrate to Ecology’s satisfaction that the fuel meets the exemption conditions, including agricultural use and highway transport).

On this record, the rule was “reasonably consistent,” so it remained valid.

3) Surcharges and refunds were outside Ecology’s authority under the CCA

A key doctrinal holding is the court’s explicit boundary setting: the CCA did not grant Ecology authority to regulate fuel prices, ban supplier surcharges, or provide refunds for surcharges. The court framed WFB’s complaint as a policy objection to statutory design and market behavior, not a statutory-implementation defect the agency could cure without legislative authorization.

4) No statutory mandate for reporting exempt emissions; optional reporting survives

WFB also argued the CCA’s exemption must be mandatory in a way that effectively compels supplier reporting and differentiation of exempt fuel. The court disagreed, observing the statute does not expressly mandate such reporting—and contrasted this with other statutes where the legislature did mandate reporting (e.g., RCW 70A.15.220(5)(a)(i)). The court treated the absence of mandatory reporting language as intentional and compatible with Ecology’s voluntary exemption reporting framework.

5) Arbitrary-and-capricious review focuses on process and reason, not dissatisfaction with outcomes

Applying Abbenhaus, the court found no “willful and unreasoning action.” Ecology acknowledged implementation challenges, explored options (including rejecting “dyed fuel” as nonviable for highway use), provided guidance, and explained why reopening rulemaking was unnecessary and why refunds were beyond its authority. Even if WFB’s preferred design was plausible, “room for two opinions” defeats an arbitrary-and-capricious claim when the agency acted with due consideration.

Impact

  • Clarifies who benefits vs. who is regulated under the CCA: The decision cements a supplier-centric understanding of the CCA’s fuel-related exemption architecture. Future challenges arguing that exemptions create direct end-user entitlements (e.g., protection from pass-through pricing) face a steep uphill climb unless the statute clearly confers such rights.
  • Limits judicial and administrative remedies for market pass-through effects: The court treated surcharges as a market response outside Ecology’s delegated power under the CCA. This channels disputes over price impacts to the legislature (e.g., explicit refund schemes, appropriations, or price-regulation authority).
  • Strengthens “reasonable consistency” as the controlling lens for climate-program rule challenges: Especially in complex regulatory programs, the court signaled that close statutory tracking will usually suffice—even if stakeholders find implementation difficult.
  • Procedural lesson for APA litigants: The record and pleading choices matter. By focusing its superior-court petition on WAC 173-446, WFB lost traction on attacks aimed at WAC 173-441-122. Future litigants must ensure they properly place all targeted rules and rulemaking files into the record.
  • Legislative drafting signal: The court’s contrast between the CCA and explicit reporting mandates in other statutes encourages the legislature to use unmistakably mandatory terms when it intends compulsory reporting or specific compliance mechanics.

Complex Concepts Simplified

“Cap and invest”
A regulatory program that sets an overall emissions limit (“cap”) and requires regulated entities to hold allowances/credits for emissions, with trading to reduce emissions cost-effectively.
“Covered entity”
The person or business the statute directly regulates. Here, large fossil fuel suppliers are covered entities under RCW 70A.65.080(1)(d).
Agricultural fuel “exemption certificate”
Documentation a buyer provides to a seller to support the seller’s claim that fuel qualifies for the agricultural exemption (i.e., the supplier’s associated emissions are exempt from the CCA program). Former RCW 70A.65.080(7)(e)(i).
“Statutory authority” (agency power)
Agencies can do only what the legislature has authorized. The court held Ecology’s authority covered implementing the exemption but did not extend to regulating fuel surcharges or issuing refunds.
“Reasonably consistent” rulemaking
Under Bostain v. Food Express, Inc. and Campbell v. Dep't of Soc. & Health Servs., an agency rule need not be the only or best interpretation; it survives if it aligns with the statute’s text and purpose and is not inconsistent.
“Arbitrary and capricious”
A high bar: “willful and unreasoning action” taken without regard to facts and circumstances (Abbenhaus v. City of Yakima). A debatable choice made after due consideration is not arbitrary even if critics prefer a different policy.
Guidance vs. rules
Rules are binding regulations adopted through formal procedures; guidance documents are advisory interpretations or best practices. Ecology used guidance (including suggesting use of a DOR form) to facilitate implementation without changing the binding rule text.

Conclusion

Washington Farm Bureau v. Washington State Department of Ecology establishes (and reinforces) a practical administrative-law rule for Washington’s climate regime: when the CCA regulates suppliers as covered entities, Ecology may implement the agricultural fuel exemption through supplier-facing certificate and demonstration requirements, and the exemption remains an emissions-coverage limitation—not an enforceable guarantee that end users will be shielded from price pass-through.

The decision also underscores two broader themes in Washington APA litigation: (1) challengers must show a rule is inconsistent with the statute, not merely imperfect or burdensome, and (2) “arbitrary and capricious” claims rarely succeed where an agency considered the problem, explored options, and explained its choice. Policy remedies for surcharge impacts, the court held, lie with the legislature—not with Ecology or the courts absent clearer statutory authorization.