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New Oregon Climate Change Laws Expand Emission Performance Standards, Renewable Portfolio Standards, GHG Reporting, and Energy Efficiency Programs

August 26, 2009

Oregon Governor Ted Kulongoski recently signed several climate change, renewable energy, and energy efficiency bills that expand emission performance standards and greenhouse gas reporting requirements, promote renewable energy, and mandate greater energy efficiency. The most notable bill is H.B. 101, which establishes new and more stringent emission performance standards for power plants, virtually assuring that no new coal-fired power plants will be constructed in the state in the near-term.

Oregon Governor Ted Kulongoski recently signed several climate change, renewable energy, and energy efficiency bills that expand emission performance standards and greenhouse gas reporting requirements, promote renewable energy, and mandate greater energy efficiency. The most notable bill is H.B. 101, which establishes new and more stringent emission performance standards for power plants, virtually assuring that no new coal-fired power plants will be constructed in the state in the near-term. Other climate change bills signed by the Governor mandate a feed-in tariff program, expanded renewable portfolio requirements for solar photovoltaic power, and a low carbon standard for transportation fuels.

The legislature, however, did not pass S.B. 80 – a bill that would have established an enforceable greenhouse gas cap-and-trade program for the power, industrial, transportation, and other sectors. The bill would have made enforceable the greenhouse gas emission reduction targets Oregon adopted in 2007 (H.B. 3543), and set the state up for participation in the Western Climate Initiative – a partnership among western states and several Canadian Provinces to establish a regional greenhouse gas trading program. S.B. 80 failed to garner sufficient votes, at least in part, due to the pendency of federal climate change legislation that is progressing through Congress – specifically, the American Clean Energy and Security Act of 2009 (H.R. 2425), which narrowly passed out of the House of Representatives in May 2009. See Federal Climate Change Bill Works Its Way Through the 111th Congress, Marten Law Group Environmental News (May 20, 2009).

Governor Kulongoski also vetoed two climate-related bills passed by the legislature. The first bill vetoed was H.B. 2940, which would have allowed biomass power plants that were constructed prior to 1995 to receive credit under Oregon’s renewable portfolio standard. The second bill vetoed was H.B. 2472. That bill would have, in light of budgetary concerns, significantly reduced Oregon’s Business Energy Tax Credit – one of the nation’s most expansive tax credits for energy efficiency, renewable energy, and alternative fuel-related projects.

I. Revised Emission Performance Standards for Baseload Generation (S.B. 101)

In 1997, Oregon passed H.B. 3283 and became the first state to establish carbon dioxide emission limits for new power plants sited in, and electricity imported into, the state. Specifically, H.B. 3283 requires that all new baseload gas-fired power plants have net emissions 17 percent below the most efficient baseload plant in the United States (currently set by the Oregon Energy Facility Siting Council at 0.675 lbs. CO2 per kilowatt-hour). While the standards for baseload plants apply only to gas-fired plants, H.B. 3283 also established emission standards for non-baseload and non-generating energy facilities, regardless of fuel type. H.B. 3283 allows regulated facilities to meet their compliance obligations through efficiency projects, cogeneration, or offsets (including offset purchases from the Climate Trust).

S.B. 101, signed by Governor Kulongoski in July 2009, expanded the emission performance standard set in H.B. 3283. Under S.B. 101, facilities generating baseload electricity, whether gas- or coal-fired, must have emissions equal to or less than 1,100 pounds of CO2 per megawatt-hour, and utilities are prohibited from entering into long-term purchase agreements for baseload electricity with out-of-state facilities that do not meet that standard. Natural gas- and petroleum distillate-fired facilities that are primarily used to serve peak demand or to integrate energy from renewable resources are specifically exempted from the performance standard. In a notable departure from H.B. 3283, S.B. 101 does not contain provisions allowing facilities to achieve compliance through offsets. Thus, S.B. 101 effectively prohibits Oregon utilities from building new coal-fired power plants, extending the life of existing coal plants, or entering into long-term purchase agreements with coal plants located outside the state.

II. Solar Renewable Portfolio Standard and Feed-In Tariff (H.B. 3039)

In June 2007, Oregon passed S.B. 838, which established a renewable portfolio standard for the state. That legislation requires the state’s largest utilities to satisfy 25 percent of their load with new renewable energy sources by 2025. Eligible renewable resources include wind, solar, wave, geothermal, biomass, new hydroelectric, and efficiency upgrades to existing hydroelectric facilities.

H.B. 3039, passed in July 2009, is intended to foster increased solar photovoltaic development under Oregon’s renewable portfolio standard. H.B. 3039 requires utilities to proportionately incorporate at least 20 megawatts of solar photovoltaic capacity by 2020. To incentivize the development of solar generating facilities, each kilowatt-hour produced from qualifying solar systems will count as two kilowatt-hours for purposes of complying with the S.B. 838 renewable portfolio standard.

H.B. 3039 also established a pilot feed-in tariff program for distributed solar generation. The bill directs the Oregon Public Utility Commission (PUC) to develop incentive rates and payments for 15 years for small-scale solar photovoltaic systems that are permanently installed by retail power consumers. Individual qualifying systems may not exceed 500 kilowatts of generating capacity, and 75 percent of the energy generated under the program must be from “small sources” as will be defined by the PUC. The feed-in tariff is capped at 25 megawatts. PUC is required to develop the program rules by April 2010.

 III. Expanded GHG Reporting (S.B. 38)

On January 1 of this year, Oregon’s mandatory greenhouse gas reporting program went into effect. See State Greenhouse Gas Reporting Deadlines Looming, Marten Law Group Environmental News (Nov. 5, 2008). Oregon developed its reporting rule as part of its participation in the WCI, and the program established phased reporting requirements. Under the first phase, businesses with annual greenhouse gas emissions exceeding 2,500 MtCO2e and that are subject to a Title V or Air Contaminant Discharge Permit were required to begin measuring emissions on January 1, 2009 and must submit annual emission reports starting in 2010. On January 1, 2010, the program will expand to include solid waste, wastewater, electric generation, and electricity and natural gas distribution systems that are not required to have an air quality permit, but that exceed 2,500 MtCO2e in annual greenhouse gas emissions. For the time being, third-party verification is not required.

Oregon’s reporting requirements, however, will soon be expanded by S.B. 38, which authorizes the Oregon Environmental Quality Commission (EQC) to promulgate greenhouse gas reporting requirements for entities that: (1) import, sell, or distribute electricity from out-of-state power plants that generate greenhouse gas emissions; or (2) import, sell, or distribute for use in Oregon greenhouse gas-generating fossil fuels. Consumer-owned utilities will be able to comply with the reporting requirements by submitting a report by a third-party that may include information from more than one consumer-owned utility, but must include all required information for each utility. Electric companies must also report total energy losses from electric transmission and distribution equipment that they own. Fossil fuel importers, sellers, or distributors in Oregon may base their reporting on the type and quantity of fuel sold in the state.

 IV. Low Carbon Fuel Standard (H.B. 2186)

In an effort to address greenhouse gas emissions attributable to the transportation sector, Oregon also recently passed H.B. 2186, which requires the Oregon Department of Environmental Quality (DEQ) to develop rules to cut the carbon content of car and truck fuels by 10 percent below 2010 levels by 2020. The low carbon fuel standard will require fuel providers in, or importing into, Oregon to ensure that the mix of fuel they sell meets, on average, a declining standard for greenhouse gas emissions. The standard will measure the carbon intensity of a fuel on a lifecycle basis, including emissions from production, storage, transportation and combustion of fuels, and from changes in land use associated with the fuels, in order to include all emissions that contribute to the global warming impact of the transportation fuels. It will likely apply to the biofuels, biogas, compressed natural gas, gasoline, diesel, hydrogen, and electricity used to fuel transportation vehicles. The standard will begin on July 1, 2011, and will sunset in December 2015. Oregon’s low carbon fuel standard is similar to standards recently adopted in California. See California Moves to Reduce Greenhouse Gas Impacts from Transportation Fuels, Marten Law Group Environmental News (Jan. 16, 2008).

H.B. 2186 also includes other transportation-related energy efficiency provisions, including: (1) authorization for DEQ to conduct a study on retrofitting medium and heavy duty trucks to improve aerodynamic drag; (2) a requirement to ensure that replacement parts for vehicle emissions control systems perform as well as the original equipment; (3) a requirement for mechanics to check and fill tires when otherwise servicing vehicles to improve fuel efficiency; and (4) establishing a planning task force to examine ways to reduce greenhouse gas emissions through alternative land use and transportation.

V. Energy Efficiency

Finally, Oregon passed two new bills directed at increasing energy efficiency. First, S.B. 79 mandates building code revisions to increase energy efficiency in residential buildings by 10-15% and in commercial buildings by 15-25% by 2012. The bill also mandates the development of a Reach Code that highlights best practices for builders and developers, as well as a voluntary energy performance scoring system for new and existing commercial and residential buildings.

Second, H.B. 2626 authorizes local governments to issue bonds for residential and business energy efficiency projects. The bill also allocates $5 million in lottery bonds as grant money to capitalize a program that gives homeowners and building owners access to long-term, low-cost financing for energy efficiency improvements. The program will be established statewide by January 2, 2012.

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