This bill amends RCW 70A.65.080 and makes a series of regulatory and procedural changes defining which entities are “covered” for the program in that chapter, setting numeric and multi-year reporting thresholds for covered-entity determinations, and adding exemptions. Many covered-entity determinations use a common threshold of 25,000 metric tons CO2e; imported electricity from certain unspecified sources is treated as covered if associated emissions are greater than 0 metric tons CO2e, and the department must adopt by rule a methodology for addressing imported electricity associated with a centralized electricity market by October 1, 2026. The amendment adds an exemption for emissions from lubricants (as defined in 40 C.F.R. §98.6 (2025)) and lists other exemptions (aviation fuels, watercraft fuels combusted outside Washington, a coal-fired facility exempt under RCW 80.80.110, CO2 from biomass or biofuels, certain agricultural fuel uses subject to time limits and certificates, facilities with NAICS 92811, and municipal solid waste landfills in compliance with chapter 70A.540 RCW). The bill changes program procedures for how covered-entity status is determined and allocated. It specifies historic reporting years that trigger covered status for certain compliance periods (including 2015–2019 for the first compliance period, 2023–2025 for certain waste-to-energy county/city solid waste programs for the second, and 2027 or 2028 for railroad companies for the third), explains when coverage begins for sources that start or change operation after specified dates, requires sources that trigger coverage to transfer their first allowances on the first transfer deadline of the following year, and prohibits the department from imposing duplicate compliance obligations for the same emissions while authorizing agreements reallocating obligations among refineries, suppliers, facilities, and utilities (such agreements must be reported to the department at least 12 months before the applicable compliance period). The department must give at least 12 months’ notice before continuing to designate an entity as covered if emissions were within 10% of the threshold, and must notify appropriate legislative policy and fiscal committees whenever a covered entity ceases to be covered. The bill also inserts a procedural change into environmental review under chapter 43.21C RCW: when a life-cycle analysis is required for new or expanded facilities, the lead agency must evaluate and attribute potential net cumulative greenhouse gas emissions relative to existing or best-available technologies, and the department may adopt rules to set thresholds for applying that analysis. Covered emissions must be included in that analysis, but covered emissions may not be used as the basis to deny a permit; a lead or permitting agency must allow a covered or opt-in facility to meet mitigation requirements by submitting compliance instruments equivalent to its covered emissions during a compliance period. Several important items are not specified in the provided text: the specific identity of “the department,” the exact calendar definitions of each compliance period, the definitions and mechanics for “opt-in entities,” “compliance instruments,” and the “first transfer deadline,” and the omitted subsections referenced in the life-cycle analysis provisions.

If enacted, the law would make a large set of industrial and fuel-related businesses likely face new compliance obligations if they meet a common threshold (generally 25,000 metric tons CO2e based on specified multi-year reporting windows), with special rules that treat imported electricity as reportable when any emissions occur for some sources and require the state to adopt a methodology for electricity from centralized markets by October 1, 2026. Practical effects include likely new costs and administrative duties for facility owners, fuel suppliers, refineries, natural gas utilities, railroads, farms that use fuel, and county/city waste-to-energy programs: those entities may have to obtain and transfer allowances, prepare multi-year emissions reports to gain or lose covered status, notify the agency when reallocating obligations, and can use reallocation agreements to shift responsibilities but must give 12 months’ notice. The bill creates new exemptions that reduce obligations for specific emissions (for example lubricants, aviation fuels, certain watercraft fuels, biomass/biofuel combustion, time-limited farm fuel uses, and certain landfills or national security facilities), and it requires the agency to notify the legislature when an entity stops being covered. For permitting and project review, lead agencies must add a life-cycle analysis that compares a proposed new or expanded facility’s net cumulative greenhouse gas emissions to best-available or best-in-class alternatives, but covered emissions cannot by themselves be used to deny a permit. Covered or opt-in facilities gain a practical option to satisfy mitigation requirements by submitting compliance instruments equivalent to their covered emissions rather than facing permit denial, which may shift mitigation costs toward purchasing instruments. Important implementation details are missing from the provided text—most notably which state department has the rulemaking and notification role, the precise compliance-period calendars and allowance transfer timing, the definition of opt-in entities, and how compliance instruments will be quantified or traded—so the timing and size of compliance costs and administrative burden remain uncertain until rules and the rest of the chapter are finalized.