The Oregon Court of Appeals heard arguments Friday from gas and oil companies seeking to overturn a cornerstone of the state’s climate strategy, while environmental and labor groups rallied in a show of support for the regulations.
Oregon’s three natural gas utilities — NW Natural, Avista and Cascade Natural Gas — are challenging the state Climate Protection Program, the state rules requiring gas companies and major industrial facilities to progressively cut greenhouse gas emissions. The program requires a 50% cut in Oregon’s overall greenhouse gas emissions by 2035 and a 90% cut by 2050.
At least a quarter of those reductions will have to come from the three gas utilities, which have made slow progress and may face fines. The climate program also created a carbon credit program for polluters, allowing them to earn credits in exchange for climate investments.
Attorneys representing the utilities and more than a dozen business advocacy groups argued Friday that the Oregon Department of Environmental Quality exceeded its authority with the climate program and that the regulations are too broad, which lawyers representing the state denied. It’s unclear when the Court of Appeals will rule on the case.
Supporting the legal challenge are the Oregon Farm Bureau; the Oregon Forest and Industries Council; the California-based Western States Petroleum Association, whose members include oil giants Chevron, Shell and Exxon; and other trade groups and oil companies.
Senior Assistant Attorney General Carson Whitehead represented the environmental quality agency, along with Maura Fahey of the Portland-based nonprofit Crag Law Center. Environmental groups, tribes and businesses have filed amicus briefs supporting the climate program.
NW Natural filed the case in March 2022 in the Court of Appeals, which first decides on cases involving administrative rules.
After the hearing, several dozen activists and lawmakers rallies in support of Oregon’s climate rules. The program regulates climate-warming gases including methane, a potent greenhouse gas. Natural gas is about 80% methane and is responsible for about 13% of Oregon’s emissions.
NW Natural serves about 650,000 customers and is responsible for about 6% of emissions in Oregon, according to the company.
Together, the three gas utilities will have to cut 1.25 million metric tons of emissions by 2025 — equal to taking about 284,000 cars off the road each year — and more than twice that by 2028. To get there, the companies can use any technology to reduce their emissions, or buy carbon credits through the Community Climate Investment Fund, which will invest in electrification and clean energy projects in low-income communities and communities of color.
Megan Burge of the international law firm Baker Botts is one of the attorneys representing NW Natural. She argued Friday that the climate program unfairly targets utilities for providing natural gas, which is mostly used for home-heating and gas stoves.
Burge said that customers also bear some responsibility for the emissions, and that the regulations will penalize customers, such as farmers who rely on diesel tractors.
“Fuel does not combust itself,” she said.
She also argued the state Public Utility Commission, not the Department of Environmental Quality, is the only state body that can legally require the emissions cuts. The commission sets rates for various utilities including Avista, Cascade Natural, and NW Natural.
However, Whitehead said state law clearly allows the agency to regulate utility emissions.
He said climate change is causing “real harm” to Oregonians through heat waves and extreme wildfires. His comment garnered agreement from Justice James Egan, who said the automaker Ford is introducing electric models of its popular F-150 “for good reason.”
After the hearing, Sen. Jeff Golden, D-Ashland, told several dozen activists at a rally on the stoop of the Oregon Supreme Court in Salem that wildfires had devastated his southern Oregon district. He said the lawsuit by gas and oil companies is proof that the climate program is “bold” enough to meet the threat of climate change.
“We don’t have a choice but to be ambitious and bold,” Golden said.
Tim Miller, director of Oregon Business for Climate, helped craft the Climate Protection Program as a member of an agency advisory board. He said NW Natural and other utilities have plenty of flexibility to meet the mandates, which “simply require that they achieve their stated ambitions.”
NW Natural aims to achieve carbon neutrality by 2050, in large part by selling renewable natural gas captured from landfills or cattle farms. However, the company reported in July that it is not on track to reach its target for delivering renewable gas. In February, the Public Utility Commission found that NW Natural is over-relying on renewable natural gas and green hydrogen technologies that aren’t widely available.
The commission also said that adding new gas hookups will hurt climate goals and customers’ wallets. The commission is allowing NW Natural to raise gas bills by 25% by next spring.
Greer Ryan, clean buildings policy manager for the nonprofit Climate Solutions, said the utility should pivot to invest more in electrification, energy efficiency and weatherization.
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