OLYMPIA — A Senate Democrat said Friday he will withdraw a bill to refund cap-and-trade surcharges to farmers, citing opposition on several fronts, including from farm groups.

The bill also faced a cool reception by the House and was opposed by Gov. Jay Inslee, said Sen. Mark Mullet, D-Issaquah. The bill was scheduled for a committee hearing April 10, but will be pulled from the agenda, he said.

“I threw up the white flag of defeat,” Mullet said.

The Climate Commitment Act exempts fuel used to grow and transport farm goods. Fees attributed to the law, however, have been filtering down through a complicated fuel supply chain to farmers.

Republican lawmakers pushed unsuccessfully for refunds for several weeks. Mullet and Sen. Joe Nguyen, D-Seattle, introduced a refund bill at the beginning of the week, but farm group lobbyists came out against it.

The bill would not have fully refunded carbon fees farmers shouldn’t be paying at all, Washington State Dairy Federation President Dan Wood said.

“When you’re making laws, you need to mean what you say,” Wood said. “Exemption means ‘zero.’ “

Inslee spokesman Mike Faulk confirmed the governor’s office opposed the bill. Oil suppliers are not obligated to buy allowances to cover emissions from farm fuels, he said in an email. 

“The money farmers and others have paid in surcharges for exempt fuels is not with the state — it is with the oil companies,” Faulk wrote. “To use state funds to pay farmers for money collected by oil companies is bad public policy.”

The oil industry says the Department of Ecology hasn’t written rules to make applying the exemption possible.

Mullet blames Ecology for not doing its job, while Nguyen accuses oil companies of misapplying the law. They agreed farmers should at least get refunds out of cap-and-trade auction proceeds.

Refunds were to be based on the most-recent price of allowances. If the bill were in effect today, the refunds would be 38.8 cents a gallon for gasoline or diesel.

Wood said farmers are paying more. “Everybody would be left holding a bag of some size,” he said.

Unlike with a direct tax, there is no sure way to know how much cap-and-trade is costing fuel buyers. It’s up to fuel suppliers to tell customers whether they are passing on all, some or none of the costs of buying allowances.

The Mullet-Nguyen bill would have made it a violation of the state’s Consumer Protection Act for businesses to call out cap-and-trade surcharges on fuel bills. The ban would have applied to all fuels, not just farm fuels.

Mullet called the provision “problematic,” but that it was important to Nguyen, chairman of the House Environment and Energy Committee.

Nguyen’s spokeswoman Erin Hunt said in a text that oil companies are being deceptive if they list cap-and-trade surcharges.

“They don’t know the cost of compliance, so to say these surcharges are the cost of compliance is deceptive,” she wrote.

Wood said Nguyen’s provision was another reason to oppose the bill since it would have further obscured the cost of cap-and-trade.

Western States Petroleum Association spokesman Kevin Slagle said cap-and-trade costs shouldn’t be a surprise.  “We don’t believe there is a circumstance where hiding the cost of the cap-and-trade program is good for the public,” he said.