Redo of Oregon program to cap greenhouse gas pollution ready for public review

A technician turns off a gas pipeline. Under the newly proposed rules for Oregon's Climate Protection Program, gas companies would still need to meet state emission targets of reducing their pollution 50% by 2035 and 90% by 2050. (Getty Images)

Oregon’s plan to regulate fossil fuel companies and reduce greenhouse gases is ready for public comment after being derailed seven months ago by a lawsuit brought by natural gas companies. 

Draft regulations for the state’s redo of the 2021 Climate Protection Program were published Tuesday by the Oregon Department of Environmental Quality. The agency gave the public until Friday, Aug. 30 to comment on them. The state’s Environmental Quality Commission, which oversees rulemaking for DEQ, is expected to vote on final rules by the end of the year, once again putting the state’s landmark climate change laws into action.

Provide comment on the draft Climate Protection Program rules here

Little has changed from the original program standards, which were passed three years ago by the commission. The targets for reducing greenhouse gas pollution would remain the same. Under the proposed rules, Oregon would attempt to reach a 50% reduction in greenhouse gas pollution by 2035 and a 90% reduction by 2050 to confront the growing threat of climate change. 

Fossil fuel companies would have to gradually decarbonize their energy supply, largely by shifting away from petroleum and natural gas and instead incorporating renewable energy sources such as wind, solar and so-called biofuels – made from captured gas and decomposing matter – into their energy offerings. 

Natural gas is almost entirely methane gas, among the most potent climate-warming greenhouse gases that trap heat in the atmosphere. One-third of global warming is due to human-caused emissions of methane, according to the U.S. Environmental Protection Agency. 

Under the newly proposed rules, some heavy energy users in the state would need to meet emissions reduction targets and companies would need to show compliance with the program every two years, as opposed to every three years in the original plan.

“We did build off of the work that we already did in the prior Climate Protection Program,” Nicole Singh, senior climate change policy advisor for DEQ, told the Capital Chronicle on Tuesday. “We didn’t throw that out the window. We’re using that information to help inform this.”

To give companies a little flexibility, they would be able meet some pollution reduction targets by purchasing credits sold by the state. Money from those credits are invested in projects that reduce greenhouse gas emissions. 

Expanding the program

Besides the three-year compliance schedule, the largest change to the newly proposed rules is who has to follow them. 

The state, for the first time, would regulate the emissions of companies that are heavy natural gas users, not just the suppliers of their gas. These include some cement, fertilizer and gypsum producers. Gypsum is in plaster, drywall and some cement. Companies operating in Oregon, including cement maker Ash Grove and Georgia Pacific, which works with gypsum, would need to meet new emissions standards, Singh said.

The agency included other changes in the investment portion of the Climate Protection Program. This section covers what is ostensibly Oregon’s carbon crediting market, where polluters can offset some of their greenhouse gas emissions by investing in projects that reduce overall emissions. One credit would be equal to one metric ton of carbon dioxide released into the atmosphere, and companies could buy them for $129 per credit. This market, which would have begun operating this year, was previously projected to bring in $150 million a year for community decarbonization and renewable energy projects, according to the Portland-based nonprofit Seeding Justice, which had previously been tasked with overseeing the investments.

Credit recipients, largely nonprofits working on community-based projects, could use the grants to help people and businesses buy and install solar panels and heat pumps, purchase electric vehicles and chargers and help weatherize homes and buildings.

Under the proposed rules, Oregon’s nine federally recognized tribes would play a bigger role in determining grants and would receive more funding, according to Singh. It’s unclear yet what role Seeding Justice could play in distributing grants in the future, she said, because such details would follow final rulemaking.

The state would also take a fraction of the funding – about 4.5% – to pay for its oversight of the grants and to undertake internal and external auditing to ensure money is being spent appropriately and that projects are, in fact, reducing the amount of greenhouse gas emissions required. 

Under the new rules, companies could offset 15% of their emissions through the purchase of these credits during the first two years of the Climate Protection Program and 20% during each two-year compliance period thereafter. Previously, companies could only offset 10% of their emissions through the credits in the first two years.

DEQ also proposes to work more closely with the Oregon Public Utilities Commission to understand how the Climate Protection Program will affect natural gas rates for Oregonians and to ensure companies aren’t passing all the costs of decarbonization on to their customers. 

Lawsuit triggers redo

The Climate Protection Program was approved in 2021 by the Environmental Quality Commission after more than a year of meetings, presentations from the environmental quality department and public comment. 

But in December, Oregon Court of Appeals judges agreed with lawyers representing NW Natural, Avista Corporation and Cascade Natural Gas Corporation, who argued that in the process of imposing state regulations to cap and reduce emissions, the commission failed to submit required disclosures to the companies and to other entities that hold federal industrial air pollution permits. The department was required to issue a written statement about why the state was adopting emission limits that exceeded federal rules, disclose a list of alternatives that were considered and explain why they were not adopted. 

The judges ruled the program invalid on those technicalities.

Rather than appealing the decision to the Oregon Supreme Court, which would likely not hear the case until mid-2025, state environmental regulators announced in January that they would start over.