Mayor floats proposal for heating oil tax

Last Friday, the Council had a first committee hearing on Mayor Durkan’s proposed new tax on heating oil. The details turn out to be very interesting (in a good way).

Currently the city estimates that there are between 15,000 and 18,000 homes in Seattle with oil-burning furnaces. Most of those were built between 1920 and 1950. The typical heating oil tank is steel, with a thickness about the same as a quarter. About 1,300 of those homes convert off oil-heat every year, and as the tanks have been decommisioned, the city has found that about 25% of them were leaking.

At the current rate of “organic attrition” nearly all oil-heat furnaces will be gone by 2030, but the city wants to accelerate that. There are several good reasons to do so:

• To reduce greenhouse gas (GHG) emissions. The city’s goal is to reduce residential GHG emission by 32% by 2030. Eliminating heating-oil furnaces alone would be a 16-18% reduction — more than halfway to the target.
• To improve energy efficiency. The preferred replacement, heat pumps, are more then twice as energy efficient than oil furnaces. Also, under state law heating oil isn’t a utility, so the weatherization and other energy-efficiency programs available through other utilities are not available to homes with oil-heat.
• To save customers money.  A typical oil-heat home pays $1700 per year for heating oil. With a heat pump replacement, the annual cost would be around $850 for electricity to run it. The savings would be even greater for low-income households enrolled in the city’s Utility Discount Program, which would results in savings of as much as $500 more per year. Currently 1100 homes with oil heating are enrolled in the Utility Discount program, but are not seeing any savings in their heating costs because heating-oil vendors don’t participate.

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Let’s take a moment for a side-note on heat pumps, the emerging HVAC technology standard that over time is expected to replace not only oil-heat furnaces but also natural-gas furnaces. Heat pumps don’t generate heat like a furnace; rather, they transfer it from one place to another through a fairly simple mechanism. Most air conditioners are heat pumps, but the same mechanism can also be run in reverse to heat your house (and most heat pumps being installed today are reversible so they can both heat and cool your house with the same equipment).

A heat pump system consists of:

• a closed pipe system containing refrigerant (a gas that is very efficient at transferring heat);
• a compressor (which increases pressure);
• an expander (which lowers pressure);
• a pump to circulate the refrigerant in the pipe;
• two fans.

Heat pumps work on two basic thermodynamic principles:

1. Heat moves in order to equalize over a space (from a hotter area to a cooler area);
2.  Pressure affects heat: pressurizing a gas heats it up, and de-pressurizing it cools it.

To run a heat pump as an air conditioner:

1. de-pressurize the refrigerant (which cools it below the ambient temperature in your house);
2. blow air from your house over coils of pipe containing the refrigerant, which pulls heat out of the air into the refrigerant;
3. pressurize the refrigerant (which heats it above the ambient temperature outside);
4. blow outside air over coils of pipe containing the refrigerant, which pulls heat out of the refrigrerant into the air.

To run a heat pump to heat your house, you simply reverse the process: pulling heat out of the outside air (even when it’s very cold, so long as the refrigerant is colder), and transferring it to the air inside your house.

A heat pump is an entirely electric system, which in Seattle is 100% green since the city’s electricity supply is mostly hydroelectric. So every conversion from oil-heat to a heat pump is a 100% reduction in GHG emissions. Plus it’s more energy efficient, cheaper to run, and gives you air conditioning nearly for free.

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Here are the policy elements of the proposed ordinance:

• It would impose a heating oil tax of $.236 per gallon on vendors of heating oil. If the vendors choose to pass the tax on to their customers, then they must list it as a separate line-item on the bill.
• The tax is expected to generate around $8.2 million in revenues through 2028, given predictions for conversion of existing oil-heat furnaces.
• The revenues would be used to fund conversions from oil-heat to heat pumps, for outreach, and for workforce retraining so that people in the heating-oil industry can reskill for installing and maintaining heat pumps.
• Conversion for low-income households would be prioritized: the program would pay 100% of the costs for up to 1,000 low-income households.
• The existing rebate program for heat pumps, which is available to non-low-income households, would also be expanded to 1,700 additional homes.
• Once converted, the low-income households would qualify for weatherization services and for utility discounts for the electricity used to run the heat pumps.
• In addition, the ordinance requests city departments to plan a program that would require all existing heating-oil tanks to be either decommissioned or replaced with a modern tank by 2028.

As you can imagine, the proposal received a warm reception in its first discussion with Council members as there is plenty of upside and very little downside. The most pain would be felt by existing heating-oil companies, but if the city’s projections are to believed there will be almost no oil-heat furnaces in ten years anyway; at least with this bill, funding becomes available to retrain those workers so they can gracefully transition out of the business.

Council member O’Brien, who chairs the committee that the bill is moving through, said last Friday that it would return for a second hearing in September.