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DEQ Climate 2023 Rulemaking�

What it is, why it matters, and how to engage.

August 2023

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Climate 2023 Rulemaking: Context

Climate Protection Program:

Requires oil companies and gas utilities* to cut emissions 50% by 2035 & 90% by 2050;
Regulates major industrial facilities (BAER)
Invests in environmental justice communities (CCI program)

*Regulated oil & gas companies can achieve their pollution reduction requirements by:

A) Directly reducing their own emissions; or

B) Investing in Community Climate Investment (CCI) program (up to 10-20%)

After years of collective advocacy on behalf of a broad coalition of businesses, non-profits, community organizations, and individual Oregonians and a robust year-and-a-half long agency rulemaking process, Oregon’s Environmental Quality Commission (EQC) adopted new regulations to “cap and reduce” climate pollution from Oregon’s top emitting sectors.

The historic Climate Protection Program (CPP) establishes a mandatory cap requiring oil companies and fossil gas utilities to reduce their emissions 50% by 2035 and 90% by 2050; first-ever emissions regulations of major industrial facilities, targeting 50% reductions by 2035; and a Community Climate Investment program that will invest up to $500 million annually in clean energy projects to benefit environmental justice and other communities across the state. Oregon is only the third state in the nation to adopt a declining cap on emissions from oil and gas companies and the only state to do so administratively (rather than through legislation). The program went into effect January 1, 2022.

The stated goals of Oregon’s Climate Protection Program (CPP) are to reduce climate emissions and other air pollutants, maximizing public health benefits and minimizing costs for consumers in environmental justice and other communities in Oregon. A key aspect of the CPP is its declining “cap” on emissions, which requires regulated oil and gas companies in Oregon to cut their pollution 50% by 2035 and 90% by 2050. Regulated companies can fulfill their required pollution reductions by either A) directly reducing their own emissions; or B) investing in Community Climate Investment (CCI) program. Regulated companies may only rely on CCI credits to achieve up to 10-20% of their emissions reduction requirements. Another key component of the CPP is its “Best Available Emissions Reduction”, or BAER, program for regulating large stationary sources– for example, data centers, semiconductor manufacturers, cement manufacturers, etc. This is significant, as it is the first-ever regulation of large industrial emitters in the state. However, these polluters are not regulated under the cap, and therefore are not held to the CPP’s mandatory emission reduction requirements. Rather, under the BAER program, each regulated entity works with DEQ to identify a plan for reducing emissions targeting 50% reductions by 2035; however, in theory, an entity could adopt all of the practices identified in their personalized plan, and STILL increase their climate and air pollution in communities by increasing production.

This rulemaking touches every aspect of these pillars of the CPP. And unfortunately, the current rules threaten to undermine the ability of the CPP to achieve its stated goals and benefits for oregon’s climate, environmental justice communities, and local economies.

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Climate 2023 Rulemaking: Overview

What: A joint DEQ rulemaking to clarify program requirements and policy adjustments, including process improvements and technical clarifications for regulated entities, while continuing to support the goals of three key climate programs:

GHG Programs Greenhouse Gas Reporting Program (Division 215)
Climate Protection Program (Division 271)
Third Party Verification (Division 272)

Stated rulemaking goals:

Improve the quality of collected emissions data.
Clarify reporting and applicability requirements for regulated entities.
Better align and simplify requirements for regulated entities.
Clarify and potentially adjust CPP requirements around potential compliance pathways.

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Climate Rulemaking: Advisory Committee

The majority of the RAC members represent organizations that have a financial stake in the outcome of these rules. Only 2 of the 14 members represent public interest groups, and no community-based organizations, environmental justice, or labor organizations were formally represented on the RAC.

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Climate 2023 Rulemaking: Timeline

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Why does this rulemaking matter?

The Climate Protection Program is essential to achieving Oregon’s climate pollution reduction goals.
This rulemaking is vital to ensure this program stays on track to achieve its stated climate, public health, and economic goals, and deliver benefits for environmental justice communities in Oregon.
Without strong advocacy engagement, the oil and gas industry could succeed in securing final rules that limit benefits for Oregon, including by diverting funds from the Community Climate Investment program.

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What specifically can we hope to achieve through this rulemaking?

Defend the CPP against industry attacks; ensure the program stays on track to achieve its climate goals & deliver public health, economic, and job benefits for Oregon communities.

Support an equitable transition to a clean energy economy through strong compliance and reporting requirements for regulated fossil gas utilities.
Limit emissions from new/expanded large industrial polluters in Oregon, ensuring there are no loopholes for corporations to try to exploit and dodge climate regulation.
Maximize benefits for Oregon communities, including by ensuring that any RNG projects produce air quality and economic benefits for Oregon communities (and therefore do not detract from Community Climate Investments).
Improve reporting requirements for hydrogen to support strong compliance with existing programs and inform future regulation.

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Climate Rulemaking Issue #1 - Gas Utilities

Current proposal: Allows fossil gas utilities to rely on out-of-state RNG/biomethane and hydrogen (e.g. “book and claim”) projects to comply with CPP. �
Why it matters: Allowing gas utilities to comply with the CPP via risky, expensive investments in out-of-state RNG projects will hinder the transition to electrification and fail to achieve climate, public health, consumer/economic, and job benefits for environmental justice and other communities in Oregon.

Recent example: NW Natural seeking to comply with the CPP by purchasing Renewable Thermal Certificates (or Credits) associated with RNG outside of Oregon.�

Desired outcome: Strengthen requirements by restricting biomethane used for CPP compliance to that which produces direct benefits for Oregonians. Maintain strong definition of biomethane, which rightfully excludes synthetic methane produced from anthropogenic feedstock.

RNG brief: https://www.oregon.gov/deq/rulemaking/Documents/c2023m2briefBioM.pdf

One of the most consequential pieces of this rulemaking relates to how fossil gas utilities in Oregon can comply with their required emissions reductions under the CPP’s cap. Again, under the CPP rules, regulated oil and gas companies in Oregon can fulfill their required pollution reductions by either A) directly reducing their own emissions; or B) investing in Community Climate Investment (CCI) program.

This rulemaking will add specificity to the first category: what qualifies as direct emissions reductions.

Despite consistent pushback and concern raised from our coalition over the course of the last 5 months, DEQ’s current rules would allow fossil gas utilities to rely on out-of-state RNG/biomethane and hydrogen (e.g. “book and claim”) projects to comply with CPP.

Out-of-state biomethane projects and investments deliver no direct benefits to Oregon’s air quality, or its workers, ratepayers, or communities, unlike the CPP’s existing, robust alternative compliance option (i.e, the Community Climate Investment (CCI) program), which will provide substantial economic, health and job creation benefits to environmental justice and other Oregon communities and improve air quality in their communities.

Allowing covered fuel suppliers to rely on out-of-state biomethane presents the alarming likelihood that investments will be diverted from the Community Climate Investment (CCI) program. The CCI program was developed and informed by many months of engagement with environmental justice communities in Oregon, with the goal of supporting investments that maximize public health, jobs, and cost-saving benefits for these and other communities historically disenfranchised and disproportionately impacted by economic disinvestment, health challenges, and environmental harms.

Through the CCI program, a fuel supplier or fossil gas utility is allowed to invest in projects to reduce emissions in Oregon communities – for example, replacing fossil gas appliances with electric heat pumps in an apartment complex – instead of directly reducing some of their own climate pollution.

If this rulemaking allows for reporting and compliance of out-of-state biomethane (through the likely use of Renewable Thermal Certificates or RTCs) to count toward CPP compliance, gas utilities will take advantage of this avenue and purchase the cheapest RTCs they can, which will result in underinvestment in CCIs.

[biomethane definition]

NOTE: Since DEQ does not possess the authority to regulate CO2 emissions from the combustion of biomass unless necessary to comply with the federal Clean Air Act, effectively requiring it to treat biomethane as a zero emissions fuel, and since the least expensive biomethane provides the least emissions-reduction benefits, we anticipate gas utilities will prioritize investments in biomethane that will do little to reduce greenhouse gas emissions even outside of Oregon.

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What do we want to say to DEQ? - Gas Utilities

The stated goals of the CPP are to reduce GHG emissions and other air pollutants, maximizing public health benefits, and minimizing costs for consumers in environmental justice and other communities in Oregon.
The CPP already provides significant flexibility/cost constraints for gas utilities to comply.
Allowing further flexibility–e.g. use of RTCs–will hinder the transition to non-emitting alternatives and fail to reduce climate/air pollution or deliver health/consumer benefits for environmental justice communities in Oregon.
RTCs deliver no direct benefits to Oregonians, while CCIs will provide economic, health and comfort benefits to the communities most in need as well as significant emissions reductions.

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Climate Rulemaking Issue #2 - Industry

Current proposal: Enables growth of new and existing large industrial polluters (e.g. data centers, semiconductor manufacturers, etc.) without mandatory emissions limits; Improved public engagement and input in BAER determinations. �
Why it matters: As the only existing state regulation on major industrial emitters, it is vital that the CPP works to ensure science-based emissions reductions from existing stationary sources and deter development of new stationary sources in Oregon.

Recent example: Amazon seeking permits to build fossil gas-powered data centers.�

Desired outcome: Strengthen requirements for stationary sources: new emitters should be subject to lower GHG thresholds. Maintain improved public engagement and input in BAER determinations.

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What do we want to say to DEQ? - Industry

Large industrial emitters must be held accountable for their significant climate pollution.
As the only existing state regulation on major industrial emitters, it is vital that the CPP works to ensure science-based emissions reductions from existing stationary sources and deter development of new stationary sources in Oregon.
Continuing to enable the development of new sources or expansion of existing sources flies in the face of the CPP’s stated equity and climate goals.
Any new stationary source or any proposed modification that has the potential to emit GHGs in any quantity should complete a BAER assessment prior to construction.

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Climate Rulemaking Issue #3 - Hydrogen

Current proposal: Allows “book and claim” for hydrogen applications. Requires robust reporting of information related to hydrogen.�
Why it matters: Oregon is swiftly moving away from carbon intensive hydrogen production and toward green electrolytic hydrogen. Additionally, blending hydrogen into gas pipelines achieves little in GHG emission reductions, and accounting for it is fraught with complexities. Transparent and accurate reporting of hydrogen is necessary to ensure informed policy decisions around the optimal role of this fuel in the transportation, buildings, and energy sectors moving forward. �
Desired outcome: Improve compliance requirements to disallow using book and claim accounting for hydrogen applications. Maintain strong reporting requirements, including lifecycle emissions, for hydrogen production.

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What do we want to say to DEQ? - Hydrogen

Oregon is swiftly moving away from carbon intensive hydrogen production and toward green electrolytic hydrogen.
Hydrogen is an emergent fuel type, and there are no conclusive results on the emissions reduction potential–or the safety–of hydrogen blending into gas pipelines as a method of reducing GHG emissions.
We therefore support DEQ’s proposed added requirements for reporting lifecycle emissions for hydrogen.
However, particularly given statutory limitations over the production of hydrogen outside of Oregon, we are concerned about DEQ’s current proposal to allow use of book and claim accounting for hydrogen applications, particularly for gas pipeline blending projects.

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What do we want to say to DEQ? - Topline Asks

Restrict biomethane and hydrogen used for CPP compliance to that which produces direct benefits for Oregonians;
Strengthen emissions reduction requirements for new or expanded large stationary source facilities in Oregon under the CPP’s BAER program;

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What do we want to say to DEQ? - Topline TPs

I am concerned that DEQ’s proposed 2023 climate rules would effectively undermine the cornerstone Climate Protection Program.
Specifically, I am concerned that DEQ’s current proposed rules will severely compromise the CPP’s public health, economic, and job creation benefits for environmental justice communities in Oregon, and will very likely hinder benefits for Oregon consumers, workers, and local economies across the state.
I urge DEQ to strengthen the proposed rules by [see asks on previous slide].
Doing so will help ensure that Oregon stays on track to achieve our climate goals, while maximizing the associated job creation, cost saving, public health, and economic development benefits for Oregon communities.

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What’s happening now?

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How you can help

Make your voice heard at the next EQC public forum

Sept. 14, 2023, 1:45 pm
Join via Zoom �

Testify at the DEQ public hearing on the rules

Sept. 18, 2023, 4:00 p.m.
Join via Zoom�

Submit public comments

DEADLINE: Sept. 22, 2023, 4:00 p.m.
Email comments to: Climate.2023@deq.oregon.gov �

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How you can help - Bonus Actions!

Send action alerts to your members/network�
Write op eds/LTEs�
Post on social media�
Host a letter-writing party�
Show up at the CPP litigation hearing on 9/29 (more on next slide)!

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CPP Defense Continued - Litigation

What: CPP litigation hearing/oral arguments
When: September 29th at 9:00 am
Where: Oregon Supreme Court
How to engage: Show up at the hearing! (+ possible rally ahead of time)

RSVP here!

Oil & gas industries have filed litigation against the State, challenging and threatening to overturn the CPP.

Climate, business, public health, environmental justice, and Tribal partners, who were engaged in the rulemaking process and have a stake in ensuring that the program is implemented, are committed to protecting the CPP.

Given the essential role of the CPP in achieving our state's climate goals; the precedent that it sets for other states looking to adopt similar programs in the face of continued federal inaction; and the potential for successful litigation to hinder DEQ’s authority to regulate climate pollution more broadly, it is absolutely critical that we use every tool to defend this program against rollbacks.

RSVP form: https://docs.google.com/forms/d/e/1FAIpQLSdXgubQ7UzDIpCxV-q5LnDpbg8Sh-8wBO2XGzwr-C-Ae5HwSg/viewform?usp=sf_link

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Thank you!

For more information, please contact:

Nora Apter, noraa@oeconline.org

Carra Sahler, sahler@lclark.edu