Oregon Regulators' Ambitious Climate Change Plans Take Shape

The Oregon legislature is once again considering potentially far-reaching climate change legislation. But unlike prior years, Oregon agencies are not waiting to see what happens this session.

As we discussed, after climate policy bills failed two legislative sessions in a row, Oregon Governor Kate Brown issued a sweeping executive order (EO 20-04) last March, which directs a host of state agencies to adopt climate change policies within their regulatory jurisdictions. As EO 20-04 turns a year old, many of those agencies have prepared "progress reports" concerning their implementation plans. The reports are collected on the Governor's Carbon Policy Office website, and can make for an interesting read.

As we have done in the past, we will focus on the responses of two agencies in particular, the Department of Environmental Quality (DEQ) and the Public Utility Commission (PUC). As these processes move forward, remember that each agency offers opportunities for the public to comment and get involved in the implementation of EO 20-04. For example, earlier in March 2021, the PUC held a workshop on community-wide green energy products, and will hold other similar workshops in the future.

DEQ's Climate Protection Program

EO 20-04 directed DEQ to develop a new program to limit greenhouse gas (GHG) emissions from large stationary sources, transportation fuel, and other liquid and gaseous fuels, including natural gas—and to do so quickly, with rules to be in place no later than January 1, 2022.

As a result, DEQ is conducting a rulemaking to establish a new "Climate Protection Program." This rulemaking will:

• Set limits on GHG emissions from significant sources in Oregon;
• Define regulatory applicability and program requirements; and
• Prioritize equity by focusing on environmental justice and promoting benefits for and participation by impacted communities.

After holding planning and listening sessions last year, DEQ created a rules advisory committee (RAC) which held its first meeting in January 2021. While that meeting was mostly focused on introducing the goals of the new program, it nevertheless offered some good insight on what DEQ considers to be within its authority.

At the meeting, DEQ agreed it would provide additional resources explaining the Environmental Quality Commission's (EQC) authority to regulate emissions and clarified that emissions from landfills would be better addressed in a separate rulemaking. Similarly, DEQ explained that electric generators would not be a good fit for the Climate Protection Program because of the agency's limited authority over the state's electric sector since a significant portion of electricity used in Oregon is generated out of state.

Members of RAC expressed support for alternative compliance options for emissions reduction programs, and for multi-year compliance periods. In addition, DEQ explained that EQC may not have the authority to regulate biogenic emissions, but explained that participants may bring those emissions into the Program on a voluntary basis by crediting alternative compliance investments, such as forest carbon offsets and carbon sequestration. The next RAC meeting is scheduled for March 18, 2021.

DEQ's March 2021 Progress Report also reported on the following processes that are underway:

• Expanding the low carbon fuel standards to achieve a 25 percent reduction in carbon intensity from transportation fuel by 2035 from a 2015 baseline. Studies are evaluating a path for the Clean Fuels Program to extend beyond its existing target, with rulemaking expected between Q4 of 2021 and Q3 of 2022.
• DEQ will present proposed rules to EQC on March 26, 2021, to accelerate the generation and aggregation of clean fuel credits, including advanced crediting of electric vehicle deployment in heavy-duty fleets.
• DEQ is on track to present rules to the EQC in Q3 of 2021 adopting stricter regulations to reduce methane emissions from solid waste landfills.
• DEQ is developing plans and strategies to reduce food waste by 50 percent by 2030.

Public Utility Commission

The PUC has emphasized that it "welcomes" the Governor's direction on climate change. And in response to the Executive Order, the PUC's staff have drafted five "work plans" around three topics: reduction of greenhouse gases, impacted communities, and wildfire prevention and mitigation. Some of the highlights include the following.

GHG Reduction

The PUC is investigating how to drive reductions in greenhouse emissions through the established utility planning framework, programs such as utility distribution system planning and community green tariffs, and transportation electrification programs for regulated utilities. One of the notable aspects in this regard is the PUC's active evaluation of how to incorporate the social cost of carbon into its utility planning functions.

Impacted Communities

The PUC has emphasized that this initiative is intended to "inform, guide and support the implementation" of all the work plans. The PUC identified as a "threshold" activity the establishment of a Diversity, Equity and Inclusion Program Director position, which it has done.

The work plan identifies both internal (e.g., creation of a DEI Operations Plan for the PUC) and external efforts to increase and prioritize consideration of the disproportionate effect of climate change on impacted communities, and to identify practices to increase participation by communities that have traditionally been underrepresented in the PUC processes.

Wildfire Prevention and Mitigation

A rulemaking on utility mitigation planning is currently underway, with permanent rules for investor-owned utilities (IOUs) expected to be developed by the end of this year. Coming on the heels of a horrible fire season, this effort has attracted a lot of interest. The PUC is also continuing its Oregon Wildfire and Electric Collaborative work, which brings together public and investor-owned utilities.

The PUC's work plans reflect how climate policy will affect most areas of the PUC's work going forward—in fact, one takeaway from the work plans is that the PUC intends to incorporate the climate policy directives into existing operations and dockets as much as possible, rather than opening new investigations or rulemakings. The plans also reflect that while the PUC has taken some immediate, concrete steps in response to the Executive Order, the PUC envisions that the work will be ongoing for years to come.

The PUC's plans are also notable in light of the recent federal reaffirmation of the robust role that energy regulating entities should play in driving the U.S. response to climate change. The newly appointed chairman of the Federal Energy Regulatory Commission (FERC), Richard Glick, has identified four priorities for the agency in this respect:

• Break down barriers to new technologies;
• Improve incentives for transmission investment;
• Reform the interconnection process; and
• Reduce the tension between FERC and states with clean energy policies.

While FERC and the Oregon PUC certainly have separate mandates, Chairman Glick's priorities are an important indication that FERC is likely to respect and facilitate the implementation of aggressive clean energy goals policies by states like Oregon.