WAC 173-446-610

(1) When a covered entity or opt-in entity reasonably believes that it will be unable to fulfill an emissions obligation, the entity shall immediately notify ecology. Upon receiving notification, ecology will issue an order requiring the covered entity or opt-in entity to submit allowances in accordance with the requirements of this section.

(2) Penalty obligations. If a covered entity or opt-in entity does not fulfill an emissions obligation as described in WAC 173-446-600(3), it has violated its compliance obligation and correction is not possible. As a result, the covered entity or opt-in entity must, within six months after the emissions obligation deadline, surrender four allowances for every one compliance instrument that it failed to surrender by the emissions obligation deadline. This penalty obligation consists of a shortfall obligation and an untimely surrender obligation.

(a) Shortfall obligation. The shortfall obligation is the unfulfilled portion of an entity's emissions obligation, i.e., the number of compliance instruments that the entity failed to surrender by the emissions obligation deadline specified in WAC 173-446-600(3).

(b) Untimely surrender obligation. The untimely surrender obligation is three times the shortfall obligation.

(3) Surrender. Ecology may restrict the amount or kind of allowances a covered entity or opt-in entity may use to fulfill penalty obligations. This subsection specifies the manner in which an entity may surrender allowances to fulfill a penalty obligation. Starting on the linkage effective date, a covered entity or opt-in entity may use allowances issued by a jurisdiction with which Washington has linked to meet its penalty obligation as described in WAC 173-446-090, subject to the surrender rules in this section.

(a) Shortfall obligation. A covered entity or opt-in entity may only use the following kinds of allowances to fulfill a shortfall obligation:

(i) Allowances obtained from the allowance price containment reserve.

(ii) Allowances of a vintage of any year prior to the year in which the entity incurred the shortfall obligation.

(b) Untimely surrender obligation. A covered entity or opt-in entity may only use the following kinds of allowances to fulfill an untimely surrender obligation:

(i) Allowances obtained from the allowance price containment reserve.

(ii) Allowances of any vintage.

(4) Retirement. This subsection specifies the manner in which ecology retires allowances to fulfill penalty obligations. Once placed in a compliance account, allowances can only be removed by ecology. Immediately after the deadline for a covered entity or opt-in entity to fulfill an emissions obligation, ecology will remove from that entity's compliance account only the number of allowances needed to fulfill the penalty obligation, except as specified in WAC 173-446-320 (3)(b).

When a covered entity or opt-in entity surrenders allowances that are eligible to fulfill a penalty obligation subject to the requirements of subsection (3) of this section, ecology will retire the allowances in the following order:

(a) Allowances obtained from the allowance price containment reserve.

(b) In order of vintage, from earliest to latest, allowances not specified in (a) of this subsection.

(5)(a) If a covered entity or opt-in entity fails to submit allowances as required by subsection (2) of this section, ecology must issue an order or issue a penalty of up to $10,000 per day per violation, or both, for failure to submit allowances as required by subsection (2) of this section. The order may include a plan and schedule for coming into compliance.

(b) Each metric ton of CO2e not covered by a compliance instrument constitutes a separate violation. The number of metric tons of CO2e not covered by compliance instruments is calculated as equal to the remaining balance of allowances needed to fulfill the shortfall obligation portion of the penalty obligation.

(6) Ecology may issue a penalty of up to $50,000 per day per violation if ecology determines that a registered entity has:

(a) Provided false or misleading facts;

(b) Made false or materially misleading statements regarding the registered entity's participation in Washington's program or a GHG ETS of a linked jurisdiction;

(c) Withheld material information that could influence a decision by ecology;

(d) Violated any part of the auction rules;

(e) Violated registration requirements; or

(f) Violated any rules regarding the conduct of the auction.

(7) In addition to the specific sanctions in subsections (5) and (6) of this section, any person that violates the terms of this chapter or an order issued under this chapter incurs a penalty of up to $10,000 per day per violation for each day that the person does not comply. All penalties under subsections (5) and (6) of this section and this subsection must be deposited into the climate investment account. Beginning July 1, 2027, all penalties under subsections (5) and (6) of this section and this subsection must be deposited into the Climate Commitment Act operating account.

(8) Violators are also subject to the sanctions authorized in chapter 19.86 RCW, as appropriate.

(9) Orders and penalties issued under this chapter are appealable to the pollution control hearings board under chapter 43.21B RCW.

(10) For the first compliance period or until Washington enters into a linkage agreement, whichever occurs first, ecology may reduce the amount of the penalty by adjusting the monetary amount of a civil penalty or reducing the number of allowances required to be provided within six months under subsection (2) of this section. In no case will ecology reduce the number of allowances required to be provided within six months under subsection (2) of this section to a number below one allowance for each missing compliance instrument.

(11) An electric utility or natural gas utility must notify its retail customers and the Environmental Justice Council in published form within three months after paying a monetary penalty under this section.

(12) When ownership or operational control of a registered entity changes, whether by merger, acquisition, or any other means, the successor entity resulting from the change in ownership or operational control is expressly liable for any unmet compliance obligation(s) of the predecessor registered entity that is a party to the transaction resulting in the change in ownership or operational control. The unmet compliance obligations of the predecessor registered entity include the quantity of verified covered emissions, assigned emissions, and emissions that are attributable to the predecessor registered entity but not yet reported for which the registered entity would be required to submit compliance instruments to ecology absent the change of ownership or operational control, but that the registered entity has not submitted to ecology at the time of the change of ownership or operational control.