Fresh off a bruising climate fight, Oregon Democrats set sights on diesel emissions

After a fight over greenhouse gas emissions tested the limits of the Oregon Legislature’s ability to function for two consecutive sessions, the issue has been largely absent in 2021.

Now, that’s beginning to change.

In the last week, House Democrats have unveiled big proposals to address air pollution and carbon emissions from diesel fuel in Oregon. Those bills have received blowback from Republican lawmakers and industry groups, calling to mind the dynamic that has repeatedly led Republicans to shut down the Legislature by fleeing the state.

One bill, House Bill 3305, would set a staggered timeline for ending sales of diesel in the state — first in the Portland area, then throughout Oregon. Its backers hope to spur widespread use of “renewable diesel,” a product with far lower emissions that can be used in any diesel engine. They say the fuel could be an important and near-instant way for the state to cut into greenhouse gas emissions while other technologies emerge.

But the state’s trucking industry and allied lawmakers strongly oppose any mandate, worrying that supply of the renewable fuel won’t be enough to meet its needs.

Another proposal has appeared in the form of a major amendment to an otherwise unremarkable bill, House Bill 2674. Using what’s known as a “gut-and-stuff” amendment to completely replace the bill’s contents, state Rep. Rob Nosse, D-Portland, is proposing an array of new taxes on logging, construction and farming equipment, along with the “off-road” diesel they use. The money from the tax would be used to help swap out older diesel engines with cleaner-running models, Nosse says.

The group Timber Unity, which has staged large rallies in Salem to combat bills that would hike taxes on its members, is already mounting a counter-attack.

Sponsors of the bills acknowledge their future is unclear. The twin crises of wildfire recovery and COVID-19 are demanding a lot of attention this year, and lawmakers also have to craft a balanced budget and redraw the state’s political boundaries. Meanwhile, an executive order issued last year by Gov. Kate Brown set goals for reducing greenhouse gas emissions.

But the proposals also send a clear signal that Democrats are not abandoning efforts to fight climate change and sources of unhealthy air pollution, despite a series of high-profile setbacks to a cap-and-trade proposal in 2019 and 2020.

In 2007, the Legislature set a goal that Oregon would decrease its greenhouse gas emissions 10% below 1990 levels by 2020. In 2019, the state instead saw emissions 10% above 1990 levels.

“We still need to reduce our greenhouse gas emissions and there’s still a lot of emphasis on that this session,” House Speaker Tina Kotek, D-Portland, said Monday. “That crisis hasn’t left us, either. It’s still there.”

A “magic juice” mandate?

The bill to phase out diesel sales in the state was introduced by state Rep. Karin Power, D-Milwaukie, who played a leading role in the cap-and-trade fights in recent years. But the bill is the brainchild of Keith Wilson, president of Portland-based trucking company Titan Freight Systems.

Wilson has long broken ranks with others in his industry over proposals to fight climate change, notably supporting the cap-and-trade proposal that was loathed by the Oregon Trucking Association. Now he wants to swap the fuel his industry relies on for another option.

Under HB 3305, sales of petroleum diesel would be phased out by industry and geographic region over the course of six years. Beginning in 2023, government fleets and government contractors in the tri-county Portland region wouldn’t be allowed to use the fuel. The next year, diesel sales would end for commercial truckers in the region, followed by other consumers in 2025.

Beginning in 2026, the process would start anew in the rest of the state. By 2028, petroleum diesel sales would be phased out altogether.

For Wilson and Power, the proposal is not as dramatic as it sounds. They insist so-called renewable diesel presents a cleaner, comparably priced alternative that could actually save Oregon trucking outfits money over time. By phasing out petroleum diesel, they believe, Oregon will create enough demand to bring more of its renewable counterpart to the state.

“This isn’t an energy war,” Power said. “It’s setting an amazing goal. It would continue to put Oregon at the forefront of adopting proven ways to reduce carbon emissions and clean up local air pollution.”

Discussions about renewable diesel can begin to seem fanciful. People interviewed for this story variously called it “a unicorn,” “magic juice” and “liquid gold.”

The fuel isn’t the biodiesel you’ve likely heard of. Renewable diesel has the same chemical makeup as petroleum-based diesel, meaning it can be put into any diesel engine with no change in functionality other than to burn more cleanly. And it’s made not from fossil fuel, but renewable sources like animal fats and used cooking oils.

Over the lifecycle of renewable diesel — a figure that takes into account not only production and use but the transportation required to get the fuel to market — the state of California found it has a carbon intensity between 15% and 80% below normal diesel fuel. In other words, it can generate the same amount of power as regular diesel with much fewer overall emissions.

The catch is that renewable diesel is also less abundant and more expensive to produce than petroleum diesel. Thanks to state subsidies from Oregon’s Clean Fuels Program, along with federal incentives, companies can currently market it in the state at a similar price — at least in the Portland area.

For Wilson, who says he uses renewable diesel for more than half of the miles his trucks drive in three states, the change has been a money saver. In a presentation he’s ready to deliver at a moment’s notice, Wilson explains how a goal to reduce his company’s emissions by 20% in a decade fell far short: a 5% drop in nine years.

“That’s despite replacing every single one of my tractors, every single one of my trailers and adding almost every aftermarket fuel efficiency-saving piece of equipment.,” Wilson said. The failure led him to try renewable diesel roughly a year ago, with instant results.

By locking in a favorable rate, Wilson says he pays the same amount for a gallon of renewable diesel as he would a gallon of normal diesel. But because the fuel burns more cleanly, he’s saved money on oil changes and exhaust system maintenance. According to figures he acknowledges are rough, Wilson says he saved nearly $21,000 in the last year running renewable diesel. He also believes Titan emitted nearly 1,300 fewer metric tons of CO2: a 34% reduction in one year.

Using those calculations, Wilson believes the trucking industry throughout the state could save $135 million if it were able to switch over to renewable diesel at the same cost-neutral price per gallon as he has and slash emissions by nearly 6 million metric tons a year.

“All of these benefits at no cost,” he says. “All we have to do is change our energy source and Oregonians continue business as usual.”

A question of supply

Others in Wilson’s industry aren’t convinced. Jana Jarvis, executive director of the Oregon Trucking Association says her group is opposed to any bill that would require a switch to another kind of fuel. She believes that, if renewable diesel is as good as Wilson claims, the market will make room.

Jarvis also doesn’t believe there’s enough renewable diesel to satisfy Oregon’s needs. And she notes that there’s not currently a cost-effective way to get the fuel to southern and eastern Oregon.

“Many of our members are very interested in moving in that direction, but there’s no supply,” she said. “It’s questionable why we would try to mandate a product in short supply.”

The question of supply is somewhat tricky. Wilson points to a report from the State of Oregon that suggests as much as 517 million gallons of renewable diesel are available to Oregon in 2021, an amount that would cover the vast majority of the state’s diesel use.

But that 517 million figure suggests only the total amount of fuel that could be available in Oregon in the most favorable circumstances, not the amount sitting ready to make its way here. Cory-Ann Wind, manager of the Oregon Clean Fuels Program, notes that most renewable diesel in the US flows to California, which offers more generous subsidies for low-carbon fuels. Oregon is currently the only other state with a similar policy, so it does attract some renewable diesel.

“Is there enough renewable diesel right now to satisfy everyone’s demand?” Wind said. “No. It’s an emerging market and as more people find out about it, there’s more interest.”

There’s also a lot more of the fuel on the way. Major oil producers like Valero and Phillips 66 have announced initiatives to produce more renewable diesel in the last year. Reuters noted last week that, by one estimate, production of the fuel is expected to increase 500% in the next three years.

And one of the largest renewable diesel refineries in the world could be headed to Oregon. A proposed facility in Clatskanie would produce around 600 million gallons a year by 2024.

“I really tell anyone who will listen: You want to have this stuff in Oregon,” said Chris Efird, executive chairman of Next Renewable Fuels, the Texas-based company proposing the refinery.

But even the possible emergence of a major refinery in Oregon doesn’t mean the state is necessarily going to be drowning in renewable diesel. “One hundred percent of our production is already spoken for with our customers,” Efird said, noting that Shell Oil is one of the companies he plans to sell fuel to. “Shell is going to be selling to people it sells to. We are not going to go take a truck to a local gas station.”

Wilson and Power believe that the increased demand brought by their bill will bring more supply to the state. The bill would also require Oregon’s Department of Environmental Quality and Department of Agriculture to study whether enough renewable diesel is available to make the proposal work. Wilson said he would build in “off-ramps” if enough renewable diesel isn’t available at a cost-neutral price.

The uncertainties, meanwhile, have prompted a harsh response from some lawmakers.

“If renewable diesel is viable, available and is cost-effective, there will be no need for any legislation,” said State Rep. Shelly Boshart Davis, R-Albany, who owns a trucking business. “I am always available for a conversation about fuel sources and would welcome one about renewable diesel outside of this session. This bill being dropped into the most unprecedented and very limited sessions we’ve ever experienced was very surprising.”

Boshart Davis and other House Republicans issued a press release in early March blasting the proposal as a “war on the working class” and claiming it would “cripple Oregon’s economy by effectively banning entire industries from operating altogether.” The release made no mention of renewable diesel as a possible alternative.

While the future of Wilson’s proposal is unclear in the Legislature, he appears to have a backstop in mind. According to a lobbyist for Titan Freight Systems, the idea could well appear before Portland-area voters as a ballot measure if it fails to win over lawmakers.

A “super aggressive” approach

As contentious as Power’s bill could prove this session, Nosse’s tax bill would likely draw more opposition.

The amendment the lawmaker proposed would create a series of new taxes he says will raise nearly $30 million a year — money that would go to a state fund to help swap out or retrofit older, high-polluting diesel engines. Taxes created under the bill include a 3% tax on tire sales, a tax on sales and rentals of off-road diesel equipment, a privilege tax on new heavy-duty vehicles, and a tax on “non-road” diesel used in logging, farming and construction equipment. The fuel, dyed-red to differentiate it from diesel sold for highway use, is not currently taxed in Oregon.

Nosse’s bill emerged from the work of a legislative task force created in 2019 after the Legislature passed a bill aimed at phasing out older diesel engines in the Portland region. The task force was charged with figuring out how the state might generate money to help businesses speed up the switch to cleaner-burning engines, and so reduce the hazards of greenhouse gases and harmful soot associated with older models.

In a report issued in late 2020, the task force identified five potential new revenue sources. Nosse’s proposal includes four of them.

“My bill is super aggressive,” the lawmaker conceded recently. “The way that this kind of works is there’s only so many tax votes that we can take. Maybe this is one of them that we’ll take but I think it’s too early to tell right now.”

The bill would require Nosse and his allies to muster the full weight of Democrats’ supermajorities in the House and Senate if the bill were to pass without Republican support. A bill to create taxes requires a three-fifths vote, meaning no more than one Democratic defection in the House, and none in the Senate.

Opponents aren’t taking any chances. The group Timber Unity, formed in part to oppose fuel increases that would have come with Democrats’ failed cap-and-trade proposal, wasted no time circulating Nosse’s amendment to its members.

The House Committee on Energy and Environment was so inundated with testimony opposing the bill that it pushed back a planned hearing on Nosse’s amendment last week. A makeup date has not been scheduled.

In a press release, Timber Unity board president Mike Pihl, a logging company owner, said the bill was a sneak attack.

“It’s pretty outrageous that the Legislature, while the session is largely locked down from public engagement, would use these tactics of gutting and stuffing bills in hopes nobody would notice a hefty tax hike, especially on those of us who are directly impacted and have limited access to the technology to access our legislators this session,” Pihl said in a statement.

Many others have lined up in opposition.

“It’s fundamentally unfair to saddle farm and ranch families with the cost of retrofitting Portland’s fleets or cleaning up Portland’s airshed,” Klamath County farmer Rodney Cheyne wrote in testimony opposing the bill. “Your [agriculture] industry and those transporting our goods, are the backbone of this Country. To implement taxes that would cripple both would skyrocket the costs of our products or put many of us out of business, leaving supply shortages.”

Meanwhile, the bill has supporters among air quality advocates and other groups, like the League of Women Voters of Oregon.

“The number of older diesel engines found to be currently in the on-road and off-road fleets has been surprising and daunting, and transitioning older equipment to newer, cleaner models can be incredibly expensive,” the League wrote in testimony supporting the bill. “It is essential that new funding strategies be developed to support businesses in upgrading their fleets and addressing diesel emissions statewide.”