Oregon court strikes down state climate program, rules in favor of utilities, industry

An Oregon court on Wednesday delivered a blow to Oregon’s signature Climate Protection Program, invalidating it over the state’s failure to follow rule-making requirements.

The program mandates ever-increasing cuts in emissions from the state’s natural gas utilities, suppliers of gasoline, diesel, kerosene and propane and large industrial plants.

Oregon’s three gas utilities, an oil-industry group and a dozen other local trade organizations had challenged the program’s rules last year, aiming to block them.

The Oregon Court of Appeals found that the Environmental Quality Commission, the policy and rule-making board for the state’s Department of Environmental Quality, did not meet heightened disclosure requirements.

The requirements come into play when the state adopts rules that apply to industries that must obtain a so-called Title V air permit, reserved for major sources of air pollution.

The Climate Protection Program – approved by the commission in December 2021 – calls for graduated cuts in emissions from the state’s natural gas utilities and fuel suppliers. It also requires existing and proposed large industrial facilities to reduce carbon pollution through the best available emissions reductions approaches.

The goal, under the program rules, is for fossil fuel suppliers to reduce greenhouse gas emissions by 50% by 2035 and 90% by 2050. Large industrial plants must also aim for 50% reductions by 2035. The program went into effect in January 2022.

The legal challenge to the program involves three separate lawsuits filed against the Environmental Quality Commission: one by NW Natural, Cascade Natural Gas and Avista; another filed by the Western States Petroleum Association; and one filed by a coalition that includes the Oregon Business & Industry, a statewide trade association, and groups representing farming, logging, manufacturing and other interests.

Oregon law allows a direct petition to the Court of Appeals to determine the validity of a rule or program approved by the state.

The state Attorney General’s Office is deciding whether to ask the Oregon Supreme Court to review the opinion, said spokesman Roy Kaufmann.

The Department of Environmental Quality said in a statement that its leaders are “talking through next steps” with state lawyers.

“DEQ is confident the Environmental Quality Commission has authority to adopt and enforce the Climate Protection Program, and this does not deter us in ensuring this program is fully implemented,” the statement said.

In court, lawyers for the utilities and trade group had argued that the state cannot regulate their emissions and that the Climate Protection Program would reduce the amount of available fuel in the state. They also challenged the state’s compliance with the disclosure requirements.

They argued that the notice of proposed rulemaking in the secretary of state’s bulletin omitted any statement regarding whether the rules exceed federal requirements on Title V plants, any description of the alternatives considered and any explanation why those alternatives were rejected. They also said other forms of notice failed to include the information about alternatives and why they were not pursued.

The court chose to focus on that technicality, rather than on the substantive arguments about the program itself.

The state acknowledged that the notice it submitted did not include an explicit statement about additional federal requirements. The state said it “substantially complied” with state rules by posting the notice of proposed rulemaking on its website, sending it to over 20,000 recipients and conducting 18 months of public outreach.

They argued industries had ample time to understand that the program would impose additional requirements, why the rules were needed and what alternatives it had considered.

But the court ruled that is not enough.

“Substantial compliance … is not sufficient. The statute requires actual compliance,” the court wrote.

The challengers praised the decision.

“We think it is an important step forward in being able to constructively address climate change,” David Roy, a spokesperson for NW Natural, said in an email to The Oregonian/OregonLive. “We believe in effective climate policy and remain committed to moving toward a low-carbon energy future while safely and reliably serving our customers.”

Angela Wilhelms, president and CEO of Oregon Business and Industry, said in a statement: “While we believe that there are additional fatal flaws in the rulemaking, as this opinion notes, this confirmation is as far as the court’s analysis needed to go.”

Environmental advocates – including those representing dozens of organizations approved by the court as parties to the case – said the opinion was a disappointing setback.

“The Court based its decision on a procedural technicality in the rulemaking process. It did not undermine the Environmental Quality Commission’s authority to set climate pollution reductions on the oil and gas industry,” said Nora Apter, senior program director for climate at the Oregon Environmental Council, a statewide nonprofit that was a formal intervenor in the case.

“We believe the Environmental Quality Commission can and should quickly move forward with a process that meets the requirements specified by the Court and re-adopt the rules without delay,” Apter said.