The Oregon Department of Environmental Quality (DEQ) just announced that it would not appeal a recent decision by the Oregon Court of Appeals invalidating the Climate Protection Program (CPP), Oregon's sweeping administrative regulations intended to tackle climate change and help the state reach its emissions reduction goals. DEQ's announcement signaled that the CPP's rules are – or more precisely will be – dead, once the court's ruling becomes final in the coming weeks.
But DEQ's announcement was not an obituary; rather, it was an announcement that DEQ intends to initiate a new rulemaking to "re-establish" the Climate Protection Program after the court setback, which struck down the rules on procedural grounds for failing to comply with statutory notice requirements. What exactly the new rules will look like and the timeline for implementation remains to be seen. But if history serves as a guide, the new rulemaking could have a bumpy ride and be subject to further legal challenge.
The CPP has already had a tumultuous history. After legislative efforts to pass a cap and trade bill shut down the Oregon legislature two years in a row, then-Governor Kate Brown signed Executive Order 20-04 in 2020, an administrative order aimed at reducing greenhouse gas emissions in the state by at least 80% below 1990 levels by 2050. The Environmental Quality Commission (EQC) then adopted the CPP to meet that goal, imposing a cap on Greenhouse Gas (GHG) emissions attributable to fuel suppliers and adopting rules to reduce GHG emissions from certain large stationary sources through a "best available emissions reduction" (BAER) approach. According to DEQ, as adopted, the CPP was designed to curb climate pollution from fossil fuels by 90% by 2050, making it one of the most aggressive programs in the nation.
A number of industry members challenged the validity of the CPP rules. While the petitioners raised substantive issues questioning the Commission's authority to adopt the CPP, the Court did not address any of those questions. Instead, the Court found that the EQC had not complied with ORS 468A.237(1)(b), which requires the EQC to include in its notice of intended action a written explanation of "[a]ny alternatives the commission considered and reasons that the alternatives were not pursued." The Court found that while the EQC "engaged in a robust process that provided the public a great deal of transparency and numerous opportunities for engagement," it still did not meet the necessary statutory rulemaking requirements and the Court invalidated the whole program.
The Court's decision leaves DEQ and the EQC in a peculiar position. Addressing GHG emissions remains a core priority in Oregon, and the goal of reinstating the program is not surprising. However, the future CPP, even if procedurally compliant, is likely to be substantially challenged by at least some of the industry members who challenged the original CPP. The Court of Appeals' ruling did not provide any further clarity on how those challenges would fare or on how the EQC might tweak the new CPP to sustain future legal challenges. The new rulemaking process is expected to take about 12 months and include a public comment period to collect perspectives and feedback from interested parties and the public at large.
DWT's experts can help advise clients on potential impacts of the CPP on their operations and compliance options, and to prepare comments on the future draft rules.