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2015 Oregon Legislative Scorecard

March 9, 2015

A number of environmental and energy bills have been introduced in Oregon’s 2015 legislative session potentially impacting businesses and public agencies. Here is an update on some of the bills working their way through the legislature. While many of the bills may not ultimately become Oregon law, the significant implications of these legislative proposals for Oregon’s economy and environment are worth paying attention to.

Energy

A. Low Carbon Fuel Standards

SB 324A would repeal the sunset on Oregon’s low carbon fuel standards and make them permanent, requiring the Oregon Department of Environmental Quality to adopt a schedule to reduce the average amount of greenhouse gas emissions in transportation fuels by 10 percent below 2010 levels by the year 2025. Overcoming calls from some legislators to delay consideration of the bill due to possible ties between the Clean Fuels Program and former First Lady Cylvia Hayes[1], the Senate passed SB 324A by a significant margin on February 17, 2015. The House Energy and Environment Committee held a public hearing on the measure, and a lengthy (and at times heated) debate was held on the House floor on March 4, 2015. Despite objections from industry groups and a significant number of legislators that the measure will increase fuel costs and harm Oregon’s economy, the measure passed in a close vote of 31 to 29. The bill now moves to the desk of newly-installed Governor Kate Brown.

B. Carbon Taxes and “Fees”

HB 2086 would impose a “fee” on vendors of all fossil fuels and fossil fuel-generated electricity of $30 per metric ton of carbon dioxide emissions (or equivalent), subject to escalation beginning in 2017.

HB 2159 would impose a “tax” on each fuel supplier and utility at a rate of $150 per ton of carbon in a carbon-based fuel that is: (a) Sold by a fuel supplier to Oregon consumers; or (b) Used to produce carbon-generated electricity that is supplied by a utility to consumers in the state. In other words, the tax would apply extraterritorially, and electricity produced out of state would be subject to the tax if distributed to Oregon consumers. Biomass as fuel is generally exempt from the tax, as the definition of “carbon-based fuel” excludes “any product used for fuel that is from a resource that is less than 1,000 years old in its natural state.”

HJR 10 would amend the Oregon Constitution to specifically authorize the legislature to impose a carbon tax, while limiting the use of revenues derived from such a carbon tax for certain purposes: (a) Tax credits or other reductions in personal income tax and corporate excise tax; (b) Construction or installation of alternative energy systems that do not release carbon emissions into air or water or onto land; and (c) Implementation of systems or programs that result in the reduction of the use of carbon fuels. If approved by the legislature, the amendment would go before Oregon voters in the next election. A companion bill, HB 2082, would impose a to-be-determined rate of tax on each fuel supplier and utility based on amount of carbon in fuel sold Oregon consumers or used to produce electricity supplied consumers in the state. HJR 11 proposes to amend Oregon’s constitution to remove the limitation on tax rates imposed on oil or natural gas of six percent of market value, and would be referred to the electorate for approval or rejection.

Several other proposals focus on transportation fuel taxes. For example, HB 2272 would raise the gasoline excise tax from 30 cents per gallon to 33 cents per gallon, while HB 2550 would raise that tax up to 35 cents per gallon, with an additional 5 cent increase every five years. HB 2075 would increase taxes on aircraft fuel by between 44% and 500%, depending upon the type of fuel at issue.

C. Tax Credits for Renewable Energy

With many existing energy credit laws subject to sunset clauses, Oregon’s legislators have proposed to extend many of the tax credits for renewable energy and energy conservation projects. HB 2447 would extend the sunset for the existing alternative energy device tax credit from January 1, 2018 to January 1, 2022. Similarly, HB 2448 would extend the sunset for the energy conservation project tax credit from Dec. 31, 2017 to Dec. 31, 2021, while HB 2449 would extend the biomass project tax credit to that same date. HB 2450, HB 2192, and SB 324 would each repeal the sunset on Oregon’s low carbon fuel standards and make the standards permanent.

HB 2092 would establish a new $15 million tax credit auction, with proceeds used to fund incentives for alternative energy vehicles. Specifically, the State Department of Energy would be directed to establish an alternative fuel or zero-emission vehicle rebate program to provide rebates to purchasers of qualifying vehicles, with rebates of up to $3,000 for battery-operated or hydrogen-fueled vehicles.

D. Other Energy Proposals

In contrast to the above-described proposals designed to encourage vehicle fuel efficiency, HB 2271 grapples with the budgetary reality of reduced gasoline tax revenue resulting from increased fuel efficiency. Specifically, the bill would make an existing voluntary program mandatory for high efficiency vehicles. Vehicles exceeding 55 MPG would be required to pay either a per-mileage fee, or a flat fee based on an assumed 35,000 mileage driven annually. Tesla owners, take note.

Under HB 2586, the Oregon Public Utility Commission (PUC) would be required to establish by rule the “external cost of carbon,” and electric companies would need to account for that cost in their resource plans. HB 2216 would permit the PUC to authorize electric companies to recover in their rates above-market costs for power produced through certain off-shore wind power projects with a total generating capacity of 30 MW. SB 319 would require developers of ocean renewable energy facilities in Oregon waters to receive proprietary authorization from the Department of State Lands (DSL) under a permitting program to be established by DSL rule.

HB 2729 and SB 477 would require electric companies to completely eliminate the delivery of electricity from coal-derived generating resources to Oregon-based customers by January 1, 2025. Utilities sources would be required to replace this coal-based generation with a mix of energy resources that are at least 90 percent “cleaner” than coal-derived electricity generation, with the term “cleaner” as-yet undefined. With PGE scheduled to largely eliminate its coal use by 2020 with the scheduled closure of the Boardman Coal Plant, PacifiCorp and its Oregon customers would be most affected by the proposed legislation. PacifiCorp currently derives more than 60% of its electricity generation from coal resources.[2]

In another proposal focused at utilities, HB 2193 would mandate electric companies to procure energy storage systems with storage capacity of greater than 5 MW of electricity by January 1, 2020.

Finally, HB 2572 would mandate “carbon footprint labeling” to identify the “total amount of greenhouse gas emissions that occur as a result of a consumer product’s life cycle,” including “raw material extraction, production, processing or manufacturing, transportation, distribution, storage, use and disposal” for “all consumer products sold or offered for sale“ within Oregon. The Environmental Quality Commission (EQC) is directed to develop by rule and implement a certification program for verification that consumer products meet carbon footprint labeling mandate by January 1, 2016.

Agriculture

HB 2598 would prohibit the administration or other provision of certain “medically important antibiotics” to food-producing animals for non-therapeutic purposes, such as growth promotion, feed efficiency, weight gain, or disease prevention. In addition to the antibiotics ban, the bill proposes to require operators of concentrated animal feeding operations (CAFOs) to file annual reports detailing the administration of medically-important antibiotics to food-producing animals at the operation. Even further, the bill would create a private cause of action for adversely affected or aggrieved persons seeking to enjoin prohibited administration of antibiotics to food-producing animals.

HB 2589 would require the State Department of Agriculture to adopt rules prohibiting application of pesticide products containing neonicotinoids, including Clothianidin, Dinotefuran, Imidacloprid, and Thiamethoxam. Neonicotinoids have been identified as the source of several bee die-off events in Oregon over the past few years, including a highly publicized die-off of some 50,000 bees in a Target parking lot in the Portland metro area. In response, the Oregon Department of Agriculture has instituted temporary rules banning the use of Dinotefuran on certain types of flowering trees, and has proposed a permanent rule to ban the use of neonicotinoids on those trees. The proposed law would go well beyond the proposed rule and effectively ban the use of neonicotinoids in all outdoor agricultural applications. The Department of Agriculture, however, would be permitted to adopt rules to allow the application of the banned pesticides “under circumstances that the department, after consultation with the Department of Environmental Quality and the State Department of Fish and Wildlife, determines will not cause unreasonable adverse effects on nontargeted plants, seeds, pollen, soil, water, animals or insects.”

On yet another controversial topic, SB 207 provides that the Department of Agriculture may establish control areas for the cultivation of genetically engineered crops “if, after careful investigation, the department determines that the control areas are necessary to avoid conflicts between growers of genetically engineered plants and growers of other plants that may arise from cross-pollination or the inadvertent presence of genetically engineered plants.” Another measure, HB 2674 would require the Department of Agriculture to establish such control areas for growing genetically engineered agricultural or horticultural plant products. HB 2674 would also makes genetically engineered plants grown outside authorized control area subject to eradication (unless already planted or growing at the time the control area is first established), require the department to establish a program to provide financial assistance to persons claiming damages from improper growing of genetically engineered commodities, and impose a fee on purchasers of proprietary genetically engineered commodity propagants. These measures respond to legislation passed in 2014 preempting local governments from imposing restrictions on the cultivation of genetically engineered crops. See In Absence of Comprehensive Federal Regulation, Battles over GMOs Being Fought in States, Localities (Sept. 4, 2014).

HB 2183 would require commercial growers of the plant species Arundo donax L., commonly known as Giant Cane or Giant Reed, to file a $1 million minimum surety bond with the state Invasive Species Council prior to commencing commercial grow operations of that crop. Giant Cane has been widely touted as a potential source for renewable biomass energy, but the crops is also seen as a potential invasive species due to its rhizome root system and lack of natural controls.[3]

Water Resources

Needed for full the implementation of the Upper Klamath Basin Comprehensive Agreement previously discussed in this newsletter, see D. MacDougal, Landmark Agreement Near in Upper Klamath Basin: Implementation Uncertain (April 1, 2014), SB 264 authorizes the Water Resources Director to participate in the Joint Management Entity described in that settlement agreement. The bill also affects the ongoing Klamath Basin Adjudication, currently pending in the Klamath County Circuit Court, by allowing the Director to request the circuit court to sever one or more determined tribal water rights claims from other claims and authorizing the court to enter a partial decree on the severed claims. The legislation would allow the court to condition a general judgment regarding certain off-reservation claims on implementation of the settlement agreement.

SB 267 extends an existing pilot program allowing irrigation districts and water control districts to temporarily transfer the place of water use within the district from June 2016 to January 2022. The bill also requires OWRD to report to the legislature by January 2021 regarding the pilot program.

In response to previous efforts to establish an annual water rights management fee, HB 2500 would specifically prohibit OWRD from collecting any periodic or recurring fee on exempt groundwater wells. In light of the political obstacles to such a water rights management fee, SB 268 would create a task force charged with studying options for providing OWRD with a stable budget or increased revenues.

Public Lands and Wildlife

HB 2401, the proposed “Wild Bird Conservation Act” would create a five cent per pound excise tax on wild bird feed. Revenues generated from the tax would be directed equally to new newly created funds: the Greater Sage Grouse Conservation Fund and the Wild Bird Conservation Fund. The Greater Sage Grouse Conservation Fund would be used for the purchase of fee simple property, conservation easements, and habitat enhancement projects directed to the conservation of the Greater Sage Grouse, currently proposed for listing under the Endangered Species Act. See J. Ferrell, Potential Sage Grouse Listing Continues to Shape Western Energy Development and Grazing Rights (Jan. 17, 2012).

In light of controversy regarding the management of predators of listed fish species, including sea lions and cormorants, SB 318 requires ODFW to develop a policy for coordinating management of species that prey on endangered species to be adopted by State Fish and Wildlife Commission rule. The bill establishes the Predation of Endangered Species Fund and appropriates funds to ODFW to carry out its to-be-determined predation of endangered species policy.

Finally, SJM 5 would have Oregon join the sagebrush rebellion, urging the President and Congress to transfer title to all federal public lands within Oregon’s borders directly to the state.

Flood Control and Natural Hazards

Given the critical flood control services provided in the Portland metro area by the Multnomah County Drainage District despite the absence of clear legal authority for drainage districts to conduct flood control activities, HB 2277 would fill the gap and authorize such districts to provide flood control services. HB 2436 would also permit the Oregon Infrastructure Finance Authority to provide financial assistance for essential levee projects that contribute to improvement, expansion or repair of infrastructure systems.

HB 2633 would require the Land Conservation and Development Commission (LCDC) to adopt administrative rules to implement the existing statewide land use planning goal related to natural hazards (Goal 7). The Department of Land Conservation and Development would be required to establish a program, or modify existing programs, to provide guidance to local governments regarding adaptive planning to reduce risks to people and property due to development in hazard areas. Similarly, SB 94 directs LCDC to adopt rules requiring local governments at risk of severe impact from tsunami inundation to “plan and zone to minimize the impacts of tsunami inundation and to implement best practices to achieve improved tsunami resilience.”

Forestry

In another tax proposal, HB 2588 would impose a severance tax on harvest of timber from forestlands in Oregon at rate of $19 per thousand board-feet, with revenues to fund a new tax credit for milling of logs in Oregon, fire suppression activities, and distribution to timber-dependent counties.

Hazardous Waste and Cleanup

HB 2289 would provide a 50% tax credit up to $500,000 for certain brownfield cleanup costs. An additional 25% credit, up to a $1 million total credit, may also be claimed for certain socially-desirable types of cleanups and redevelopment projects, including cleanups that occur in low-income areas, result in the designation of significant amounts of open space, or involve the construction of affordable housing.

HB 2241 would require the Oregon Department of Environmental Quality (ODEQ) to study and propose recommendations for developing a single, coordinated process for parties to conduct voluntary cleanups meeting both state and federal requirements for obtaining releases from liability for hazardous waste cleanup, including Oregon’s cleanup laws, CERCLA, TSCA and RCRA.

Air and Water Quality

HB 2207 would require vessels with empty ballast tanks to undergo saltwater flushing of their ballast tanks before entering Oregon waterways, subject to civil penalties to be used to fund invasive species eradication and control efforts by the Invasive Species Council. SB 261 also increases the state’s existing ballast water trip fee from $70 to $88.

HB 2188 would require the Oregon Environmental Quality Commission to establish fees for customers of water suppliers who use treatment works. Collected fees would go into a newly-established Water Pollution Control Grant Fund, which would be used to make grants for the purpose of providing financial assistance to public agencies for the construction, maintenance or replacement of treatment works.

In addition, several new task forces related to air and water quality have been proposed. HB 2191 would establish the Task Force on Air Pollution, which would be charged with studying and developing recommendations on legislative proposals needed to respond to the EPA’s Clean Air Act Section 111(d) rules, requiring state plans to reduce greenhouse gas emissions. For more information on the 111(d) rules, see R. Allan, Clean Air Act: EPA’s Proposal for Reducing CO2 Emissions from Electric Power Sector Would Present States With Complex Task (July 8, 2014). SB 22 establishes the Task Force on Ocean Acidification, while SB 205 would create a Task Force on Innovations in Water Quality, charged with addressing non-point source pollution on farm and forest lands, including market-based methods such as water quality trading.

HB 2498 and HB 2499, would prohibit the EQC and ODEQ from adopting any rule or issuing any order that imposes requirements, standards or any other limitation that exceeds federal standards with respect to water quality or water quality and air quality, respectively. Any preexisting rules that exceed federal requirements would be deemed void.

Mining

SB 388 would raise new land use permitting hurdles for mineral exploration in agriculturally-zoned areas. The bill would provide that mineral exploration on Exclusive Farm Use lands would be a conditional use, instead of a permitted use, and subject to analysis under ORS 215.296. Specifically, project developers would need to demonstrate that the exploration activities would not force a significant change in accepted farm or forest practices on surrounding lands devoted to farm or forest use, or significantly increase the cost of accepted farm or forest practices on surrounding lands devoted to farm or forest use, prior to any exploration activities.

SB 362 would establish a Task Force on Mining.

Conclusion

This year, as in most, a large number of bills were introduced into the Oregon Legislature that are unlikely to be voted out of Committee. Significant bills related to low-carbon fuel standards, tax credits for brownfield cleanup, and levee infrastructure financing, however, appear to already be gaining momentum as they work their way through the legislative process. As the April 10, 2015 deadline for holding work sessions on proposed legislation approaches, interested parties will be better able to evaluate the prospects for passage of many other pending bills that could impact Oregon’s economy and environment. For more information, please contact any of the attorneys in Marten Law’s Oregon offices.

[1] Cylvia Hayes is the fiancée of former Oregon Governor Kitzhaber who resigned several weeks ago while he and Ms. Hayes were under ethics and criminal investigations pertaining to (among other things) Ms. Hayes’ activities as a paid consultant for organizations advocating limits of greenhouse gas emissions.

[2] http://www.oregon.gov/energy/pages/oregons_electric_power_mix.aspx

[3] http://farmprogress.com/library.aspx/giant-cane-has-huge-potential-oregons-next-biofuel-source-25/31/1070

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