PORTLAND — Eager to avoid the acrimony and Republican walkouts that temporarily paralyzed the end of last year’s legislative session, lawmakers have been busy crafting a new version of their climate change policy in hopes of passing it in the 35-day session that begins Feb. 3.
From Democrats’ perspective, the proposal includes significant concessions to appease critics who claimed the bill would be a disaster for rural Oregon; that it threatened the viability of some of the state’s biggest industrial employers; and that backers were trying to ram a bill through on party lines while ignoring Republican input.
There are already signs, however, that Republicans will continue to satisfy their rural base on the issue. Sen. Fred Girod, R-Stayton, who was invited by Senate President Peter Courtney’s office to contribute to the new concept, said he has abandoned the effort, adding that the concessions “are all fake,” and that he was disgusted by the process.
Climate change activists, meanwhile, worry that backers of the bill overreacted to criticism and so fundamentally diluted the program that it may be worse than doing nothing at all. They also worry a weakened bill would disqualify Oregon from linking its proposed carbon cap and trade market with California’s – a feature of last year’s bill designed to lower costs and keep the program uniform across state lines.
Backers acknowledge that they’ve had to water down the legislation in hopes of getting it passed. But they say the proposal maintains the same emissions caps and will generate the desired pollution reductions in the same time period as last year’s failed House Bill 2020. Senate backers plan to unveil Legislative Concept 19 for their colleagues at a hearing Monday, and stress that it’s a work in progress.
“We got the message there was fear out there around HB 2020, particularly in rural areas,” said Sen. Michael Dembrow, D-Portland, chair of the Senate Environment and Natural Resources Committee and co-chair of the Joint Carbon Reduction Committee. “I believe those fears would not have come to pass, that there would have been more benefits than difficulties for rural parts of the state. But we took those fears seriously and addressed them in these changes.”
The upcoming climate debate will once again spotlight the hyper-partisan, populist dynamics at work in the Oregon Legislature, as nationally. If it fails, there are potentially ballot measures and executive actions in the offing to accomplish similar goals. Its outcome may also play an important role in upcoming elections.
“It’s clearly going to be the No. 1 issue everyone across the state is going to be looking at,” said Jim Moore, a political science professor at Pacific University. “It’s also the prism by which voters will view the upcoming elections and by which people decide to challenge incumbents in the primaries.”
The broad framework of HB 2020 remains in place. That means the bill would establish a gradually declining cap on statewide carbon dioxide emissions. It would also require polluters from the transportation fuels, utility and industrial sectors to acquire “allowances” to cover every metric ton of their emissions. As the supply of those allowances declines over time, the theory goes, the price of allowances will go up and force polluters to clean up — by electrifying transportation, building more wind and solar farms or adopting more efficient production technology.
Changes in the new version include:
• Protections for rural Oregonians from rising fuel prices: In the proposal, the requirement for transportation fuel providers to buy emissions allowances would be phased in geographically. It would be effective in metropolitan Portland in 2022 and metro areas with populations greater than 30,000 in 2025. More rural areas, meanwhile, would be exempted indefinitely, though counties would have the ability to opt in.
• Revenues generated by the sale of transportation allowances would also be restricted geographically. Eighty percent would go to those metropolitan areas and counties participating in the program, with the bulk likely headed to the Portland metro area. The remaining 20% would go to the Oregon Department of Transportation for use throughout the state.
• New exemptions/subsidies for industrial companies: Industrial companies would now be responsible only for the emissions from their own production processes, not the emissions from natural gas they bought from a utility or gas marketer. That reduces the number of companies that meet the emissions threshold to be directly regulated under the program from 30 to approximately 11. It also exempts the food processing and pulp and paper industries – some of the loudest critics of HB 2020.
The 11 companies still regulated under the program would receive 100% free emissions allowances until 2030 if they meet an energy efficiency benchmark for their industry, and some level of subsidization in their energy efficiency investments.
• Rebates for big industrial gas users: Natural gas use would be regulated upstream, with utilities and gas wholesalers responsible for purchasing allowances to cover emissions from the gas they sell. But those gas companies would get free allowances to cover so-called “trade exposed natural gas users,” which they could sell and use the proceeds to provide rebates to their customers, holding them harmless for the fuel price increases.
• Boeing freebie: Boeing was a big critic of HB 2020. It buys its power from a so-called Energy Service Supplier that resells electricity it buys on the wholesale power market. The company said it was under contract and claimed its power bill would go up by $1 million annually. The new legislative concept grandfathers existing wholesale contracts, giving Boeing and a few other companies a break until their existing contract expires and they can structure a greener one.
• Oversight: Instead of a creating an entirely new state agency to run the program, it would now be managed by the Department of Environmental Quality in a new Office of Greenhouse Gas Regulation.
There are apparently widely varying views of how all this will work — or not.
Girod said he came to the table with ideas that Republicans would find acceptable, but found Dembrow and Sen. Arnie Roblan, D-Coos Bay, were focused on concepts developed by the governor’s office.
He dismissed the rural fuel breaks, saying the obligation to buy emissions allowances would fall on fuel importers, who would pass along the cost to distributors, who would in turn charge retailers for them.
“The prices of gas will be higher,” he said. “There’s nothing to differentiate rural gas from urban gas. There is nothing that guarantees there will be a lower price for rural Oregon, and the cities of over 30,000 take in the extra money.”
“It looks like she’s giving them something,” Girod said, “but it’s all smoke and mirrors.”
He is also skeptical about the new exemptions for industrial companies and the energy audits that will be required to receive them.
Environmental and climate advocacy groups, meanwhile, say that by phasing in the gas and diesel requirements and exempting rural Oregon, the program would only regulate emissions from half of the diesel fuel and 65% of gasoline consumed in the state by 2025. They also believe drivers and fuel companies could game such a system.
“The geographic phase-in is completely unworkable,” said Tera Hurst, executive director of Renew Oregon. “We’ll be continuing to push hard to try and change that. I understand the politics, but at the end of the day it has to make sense.”
Likewise, the groups are critical of proposals to shield large industrial users of natural gas from the price impacts of the program.
“We’re essentially paying them for business as usual,” said Meredith Connolly, Oregon director of Climate Solutions.
At the end of the day, Connolly said, the policy could exacerbate the state’s urban-rural divide by directing most of the job creation, environmental benefits and training investments into urban areas. Meanwhile, the state’s program would be too weak to link to California, much less inspire the kind of aggressive action that they hope Oregon’s program will spur in neighboring states.
To keep the pressure on lawmakers after last year’s end of session debacle, climate activists filed several initiative petitions for this November’s election that would have forced greenhouse gas reductions similar to HB 2020.
Initiative Petitions 48 and 49 would have required the state to transition to 100% renewable and carbon free electricity by 2045. Both were rejected, however, by Secretary of State Bev Clarno, who contends they violated the single subject requirement in the Oregon constitution by also requiring that the jobs created by that transition meet fair labor standards.
Clarno is in hot water with environmentalists around the state after making the same ruling on several forestry initiatives. They accuse the Republican appointed to serve out the term of former Sec. of State Dennis Richardson of making blatantly partisan decisions to keep popular measures off the ballot.
On the other hand, Clarno let Initiative Petition 50 stand, while modifying the title. That initiative would mandate the elimination of greenhouse emissions from fossil fuels and from industry by 2050, with interim reduction targets. This might be called the California approach, as the Golden State established its cap and trade system first by establishing hard emission caps, then leaving it up to the Air Resources Board to establish a plan to get there through administrative rulemaking.
Gov. Kate Brown’s staff were heavily involved in developing some the proposals that made their way into the draft legislation.
“Oregonians across the state have strong feelings on this issue, and we’ve heard from a lot of them throughout the fall as our staff worked alongside legislators, businesses and advocacy groups,” said Kate Kondayen, a spokeswoman for the governor’s office. “While the latest Senate bill draft is a work in progress, it demonstrably reduces impacts on rural manufacturers and drivers, which was a central goal.”
