Trucking companies do not usually line up behind tax increases. But in 2017, we made an exception. The California Trucking Association supported Senate Bill 1, the Road Repair and Accountability Act, even though it raised the diesel excise tax our members pay on every gallon.
Following a contentious debate at our board of directors meeting, CTA supported SB 1 because it was necessary to fix our roads and make vital upgrades to the freight system that California’s economy runs on. Truckers agreed to pay more at the pump on the promise that the money would rebuild the roads and bridges we drive every day.
That promise still matters, because the work is nowhere near finished. Half of California’s major roads remain in poor or mediocre condition. One in 20 bridges is rated structurally deficient, and more than half were built in 1969 or earlier.
Congestion alone costs California drivers roughly $55 billion a year in lost time and wasted fuel, and by the American Society of Civil Engineers’ count, driving on deficient roads costs Californians some $61 billion annually. No one feels that more directly than a driver hauling freight across a state whose pavement ranks near the bottom of the nation.
Now the Governor’s budget proposes to take an enormous portion of the very revenue that funds those repairs and give it away. The proposed budget includes a provision that would let fuel producers reduce their diesel excise tax liability if they produce what airlines call “sustainable” aviation fuel. The administration estimates the credit would drain diesel excise tax receipts by about $165 million a year at the outset, growing to $300 million.
Researchers at the UC Berkeley Energy Institute project the loss could run far steeper, between 20% and 75% of diesel excise tax receipts within a few years. The nonpartisan Legislative Analyst’s Office raised the same concern and recommended that the Legislature reject the proposal outright.
The damage does not stop at road funding. It will also mean higher emissions and higher prices for road transportation. Renewable diesel now makes up about 70% of the diesel sold in California, and sustainable aviation fuel is made from the same feedstocks. UC Berkeley found that pulling that supply toward aviation would raise diesel prices by 12 cents and gasoline prices by 11 to 14 cents for California consumers while delivering negligible and expensive carbon reductions.
Higher diesel prices land on the trucks that move nearly everything Californians buy, and those costs travel straight to grocery shelves and job sites. When the state Senate’s budget subcommittee examined the proposal, it heard the same warning and rejected the proposed credit.
Then there is the question of who actually benefits. To claim the credit, a company has to produce state-certified jet biofuel and owe diesel excise tax in California. By the Department of Finance’s own account, only two companies meet those conditions, and only one has confirmed it would qualify. That company spent $1.25 billion converting a single refinery to biofuel production.
Strip away the climate language and the structure is plain. It asks truck drivers to pay more for diesel, and to give up road repairs they were promised, so that a single refiner can improve the economics of its jet-fuel business. And at the same time, California renewable diesel refineries are enjoying the best production margins in years, the same refineries asking for a “sustainable” jet tax handout.
California’s truckers who annually contribute billions of dollars toward California’s transportation system have never asked to be exempt from paying for infrastructure. We argued the other way. We told our members that a higher diesel tax was worth it because the state would put the money into roads and bridges. Now there’s a risk their hard-earned investments will subsidize a single company while their fuel costs climb and the potholes get worse.
Aviation accounts for roughly 1% of California’s greenhouse gas emissions. If the state wants to decarbonize that sector, there are more honest ways to pay for it than draining a road-repair fund and raising diesel prices on the people who move goods in California.
The Legislative Analyst said reject it. The Senate budget subcommittee saw the same problems. The Legislature should finish the job, reject higher fuel prices, and leave the diesel tax where the voters left it: on our roads.
Eric Sauer is CEO of the California Trucking Association.
