A climate change bill that promises to dominate this year's 2020 Oregon legislative session got its first public hearing Monday — with little sign that the political and cultural disagreements that scuttled a similar proposal last year have meaningfully changed in the last six months.
The bill to implement a so-called cap and trade program in Oregon took center stage in a three-hour meeting of the Senate Environment and Natural Resources committee. Lawmakers are meeting for part of this week in regularly scheduled interim committee hearings.
Currently known as Legislative Concept 19, the new cap and trade proposal includes many provisions that appeared in last year’s House Bill 2020. Its authors say it's a first draft, that will be tweaked during the 35-day session that begins Feb. 3.
Like HB 2020, the bill would force big greenhouse gas emitters to obtain credits for each ton of gas they emit, and create an overall cap for emissions allowed in the state. That cap would lower over time, in theory ensuring Oregon meets stringent conservation targets in 2035 and 2050. Entities required to obtain permits could trade them with one another.
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But the bill largely authored by Senate Democrats includes a number of changes designed to assuage critics in the manufacturing and utility sectors, and create fewer impacts for rural Oregon. Those tweaks are largely centered on how automotive fuel suppliers and big industrial players are treated.
Rather than uniform statewide regulation of automotive fuels, the new proposal splits the state into three geographic zones that would be phased in separately. That approach, which Democrats have been telegraphing for months, is designed to address concerns that cap and trade would hike gas prices statewide, disproportionately affecting rural communities that have little option but to drive.
The Portland metro area would see its fuels regulated first, beginning in 2022. The rest of the state’s metropolitan planning organizations — areas like Eugene, Bend and Salem — would follow in 2025, along with cities that receive at least 10 million gallons of fuel a year.
Backers of the proposal suggest these combined areas account for nearly 90% of Oregon’s auto fuel emissions. The remainder of the state would not see fuel supplies regulated until at least 19 counties decided to voluntarily participate in the program. In theory, that means rural Oregon would not be forced to pay more for gas because of cap and trade — a central issue Republicans raised in opposing HB 2020.
But there’s a trade-off for areas that wouldn’t see their fuel supply regulated: Money the state collects from selling credits for fuel emissions would largely flow back to the areas paying for emissions. Just 20% of that money would be eligible for transportation projects statewide. The rest would be put in the hands of local governments.
The other major tweak in LC 19 involves how the state calculates manufacturing emissions. Unlike last year’s bill, the new proposal doesn’t factor in a facility’s natural gas use when determining its emissions. Instead, those emissions are credited — free of cost — to the supplier of natural gas.
This move cuts the list of manufacturing facilities that would be regulated under the law by more than half, theoretically resulting in a corresponding reduction in opposition to the proposal.
Other changes designed to win over critics include:
- Money from sales of emissions credits would be specifically targeted toward wildfire prevention and suppression, a key concern of lawmakers from rural areas.
- The cap and trade program would fall under the authority of the Department of Environmental Quality, rather than a new entity. Lawmakers, including Democrats, expressed concern last year with the potential bureaucracy associated with cap and trade. LC 19 would still create a new office and oversight board within DEQ, however.
- An exemption in the bill is specifically aimed at Boeing, whose objections over an expected increase to electricity prices for its Gresham facility helped torpedo HB 2020. Sen. Laurie Monnes Anderson, D-Gresham, concluded she could not support the bill because of Boeing's objections.
- There's been an overall rebrand of the proposal. Last year's proposal was known as the "Clean Energy Jobs" bill, and promised the creation of a Carbon Policy Office to oversee the program. The latest iteration is called the "Oregon Greenhouse Gas Initiative," and would create an Office of Greenhouse Gas Regulation.
Backers of LC 19 have been adamant that these changes should create a path forward for their legislation, arguing that the bill will still allow Oregon to meet its climate goals despite its concessions.
“The goal was to get a bill that can pass this session,” said Sen. Michael Dembrow, D-Portland, who has played a leading role in pushing the climate bill. “That’s the priority.”
Last week, Dembrow held interviews alongside Sen. Arnie Roblan, D-Coos Bay, who had also been a holdout during last year’s fight over HB 2020. Roblan said that new approach to automotive fuels and natural gas are key to his conclusion that the policy won’t hurt his coastal district.
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The support of Roblan and Monnes-Anderson would be meaningful. After all, a lack of support in the Democratic caucus was a chief reason Senate President Peter Courtney gave for killing HB 2020.
Monday’s hearing also suggested some players who’d voiced reservations about HB 2020 appreciated the more lenient treatment for manufacturers.
But new allies could come at a cost. The same provisions that have Roblan signing onto the bill have soured some of the biggest proponents of HB 2020.
“What we saw in the LC that came out is a major overcorrection to accommodate industry push back,” said Meredith Connolly, the Oregon director for the group Climate Solutions. “What we’re hoping to see is a little more righting of the ship.”
Connolly and Tera Hurst, executive director of the Renew Oregon coalition, said they will push to change both the geographic phase-in for fuel regulations and the new approach to manufacturers’ natural gas emissions. Those provisions let key industries “off the hook,” they said, and may make Oregon’s system ineligible to link up with cap and trade markets in California — a long-held goal for state lawmakers.
“I think it’s just not finished,” Hurst said. “It’s not a final product.”
Doug Moore, the executive director of the Oregon League of Conservation Voters is also looking askance at the latest iteration of the bill.
“I don’t think the latest plan is something we can support,” he wrote in an email. “My hope is it gets better after the hearing.”
Environmental groups were largely laudatory of the plan Monday, despite their insistence that lawmakers make changes.
Meanwhile, some foes of HB 2020 showed up Monday to express concerns with the revamped option.
Mark Gram, the COO of the Jubitz Corporation, testified that the state would have difficulty regulating fuel sales by zip code. That’s because the state law would regulate fuel importers, who might not closely track where all of their product winds up.
“We think that there needs to be a substantial amount of time sitting down with the various parties,” Gram said.
Dembrow, who chaired the hearing, replied: “We all are going to have to feel confident that this fuel can be tracked… in order to effectively implement this program.”
The Oregon Trucking Association and AAA Oregon also expressed concerns over the proposal. A representative for the groups said that higher gas prices would result in lower fuel purchases, which would impact how much money Oregon has to spend on highways.
Some manufacturers also remain opposed to carbon regulation, despite provisions designed to make the program have less impact.
"We appreciate the efforts that have been made by the Governor’s office and legislators to come up with a more reasonable proposal,” Preston Mann, a spokesman for Oregon Manufacturers and Commerce and a related group, wrote in a statement last week. “Unfortunately, despite efforts to mitigate the worst impacts of the program, the draft maintains the vast majority of the framework from last session’s bill.”
Politically, Republican Senators have shown little indication they will budge from the strident opposition they showed last year when they walked out to kill HB 2020. Sen. Fred Girod, R-Stayton, had been the group’s key negotiator on the subject, but has made clear he will not support any approach to greenhouse gas regulation that involves a cap and trade system.
Both Girod and Senate Minority Leader Herman Baerstchiger Jr., R-Grants Pass, have indicated another Senate walkout isn’t off the table in the 2020 session.
Also unclear is how the latest cap and trade proposal might play in the House of Representatives, which passed HB 2020 last year, but whose members have not had a leading role in crafting LC 19.
“We did pass the bill on the House side so it’s not unusual for the Senate to take leadership,” House Speaker Tina Kotek, D-Portland, said last week. “There are still a lot more conversations to be had between now and the start of the session in early February, but we’re moving in a good direction.”