Energy Transit Fee / City County WA Franchise Fee Research Notes

Energy Transit Fee / City County WA Franchise Fee Research Notes

(ongoing- last edit : 06/08/10 - RMF)


I am interested in examining the franchise fee issue for both city and county on the whole on a philosophical and legal level. Then I may file PDRs for info from the City and County to understand how we compare with other similarly sized cities and counties for income generation from franchise fees.  Obviously, there are some complex political and legal issues at stake. After some digging (and with the help of County Councilman Ken Mann and County Prosecutor Daniel Gibson, I learned this:

"We do charge a franchise application fee which is intended to recoup our costs for processing an application for a new franchise or a franchise renewal.  State law allows franchise fees only to the extent necessary to recoup administrative costs incurred by the government, which explains our franchise application fee.  The Council could reset that application fee upward but would have to be able to justify the fee by reference to a demonstrable and reasonable administrative cost that it has incurred or will incur in the processing of the application and/or administration of the franchise agreement.  Here is what the Municipal Research Services website says on the topic:
Franchise Fees
Note that franchise fees allowed under current state laws are limited to the recovery of actual administrative expenses incurred by the jurisdiction. Cities can, however, impose a utility tax on the revenue of the company from services provided within the jurisdiction (see RCW 35.21.860 and RCW 35.21.865)."

So currently, according to WA state law, and unlike CA state law, we cannot collect anything like an "energy transit fee".  If true, this needs some reconsideration at the state level.  If Whatcom County could collect fees on the basis of "energy transit", we would a have a significant new source of county and possibly city revenue.

Franchisors often give up control and assume risk but they also gain important economic advantages from oil, gas, data, voice, electrical networks. For example, Whatcom and Skagit counties are critical pieces of the nation's infrastructure. Natural Gas pipelines from Canada feed Washington state their gas (and probably other states as well). High Power electrical lines that cross Whatcom County move Canadian and BPA electricity all up and down the "West Coast Intertie". California's growth regularly requires Canada and Washington's hydro-power. Canadian and  Alaskan oil is refined here and the resultant  petroleum products power Whidbey Island AF, Bangor (Hood Canal) Naval Submarine, Everett Naval, SEATAC, Fort Lewis Stryker Forces. However, we have to ask important questions at some level (federal, state, county, city) about the price/risk of all franchises and the value/loss derived from them. For example: It pays the DoD and the oil industry to have "pipeline security". Pipeline security is best obtained from secure, stable economic growth in franchise area. Significant franchise fees could help with develop secure economic growth in Whatcom County.

The protests at the COB council meetings were aimed at stopping the pipeline from carrying "dirty oil" from Canada's Tar Sands. (Carbon based energy in Alberta, West Virginia, the Gulf of Mexico is always a "dirty, highly polluting" enterprise as oil refining is here in Whatcom County. ) But stopping an oil pipeline with that supports national security interests is not an easily achieved goal.  A better goal would have been to argue for increased fees that could have been recycled into "green economic efforts" (e.g. heat pump, photo-voltaic, insulation subsidies) for homeowners/contractors in Bellingham (or Whatcom County)  to increase the standard of living and discretionary income of the residents by lowering their fuel costs.

Arguments can be made even more strongly for franchises that have "direct retail customers" (obviously we are all consumers of petroleum and national security in the case of oil pipelines) inside the franchise area. Growth in the city of Bellingham will increase subscriptions for Comcast, PSE, CNG (Macquarie), therefore, it is in the franchisees interest to help promote a strong economic policy in the franchisor's economy. Franchise fees properly applied could help create jobs here. Indeed many franchisees already create employment in the franchise area.  At some macroeconomic point, we have to ask the question: What is best for the economy of the country? How much should the franchise laws and negotiation efforts favor local communities over national or international interests?

Key Words and Acronyms

PMPA "Petroleum Marketing Practices Act"

Sites /Research

Here is the original COB 1985 Franchise document with Trans Mountain. 

Here is the COB 2010 Bill C18814 passed on March 25, 2010.

An Introduction to the Petroleum Marketing Practices Act July/August 2001

California Public Utilities Code Section 6231.5 Franchise Fee for Pipelines

Article describing oil pipeline Franchise Fees collected in Los Angeles, CA

Washington State RCW Title 78  Mine Minerals and Petroleum

§ 78.16.010. Leases authorized

“Whenever it shall appear to the board of county commissioners of any county in this state that it is for the best interests of said county and the taxing districts and the people thereof, that any mining claims, reserved mineral rights, or any other county owned or tax acquired property owned by the county, either absolutely or as trustee, should be leased for the purpose of exploration, development, and removal of any minerals, oil, gas and other petroleum products therefrom, said board of county commissioners is hereby authorized to enter into written leases, under the terms of which any county owned lands or county owned mineral rights, or reserved mineral rights, are leased for the aforementioned purpose, with or without an option to purchase. Any such lease shall be upon terms and conditions as said county commissioners may deem for the best interests of said county and the taxing districts, and as in this chapter provided, and may be for such primary term as said board may determine and as long thereafter as minerals, including oil, and/or gas, may be produced therefrom.”