Oregon’s Climate Protection Program was established in 2021 to place a cap on greenhouse gas emissions from fossil fuels throughout the state. The program hadn’t gone into effect for most natural gas customers until November 2025. Natural gas users must use less natural gas, or face higher costs.
Many environmentalists are happy with the program and its progress towards reducing carbon emissions, but many policymakers view the program as flawed.
Nigel Jaquiss, the senior investigative reporter at the Oregon Journalism Project, has been looking into this program, and how the climate policy is affecting businesses throughout the state.
Editor’s note: This description and headline has been updated to more accurately describe Oregon’s Climate Protection Program’s impact on industrial and commercial users of natural gas.
Note: The following transcript was transcribed digitally and validated for accuracy, readability and formatting by an OPB volunteer.
Dave Miller: From the Gert Boyle Studio at OPB, this is Think Out Loud. I’m Dave Miller. Oregon’s Climate Protection Program was first established in 2020 to place a cap on greenhouse gas emissions from fossil fuels throughout the state. Commercial and industrial businesses are worried about what it’s going to mean for their bottom lines and some lawmakers are talking about potential changes to the program, but environmental advocates say it is a crucial tool to reduce CO2 emissions in Oregon.
Nigel Jaquiss is the senior investigative reporter at the Oregon Journalism Project. He wrote about this recently and he joins us now. It’s great to have you back on the show.
Nigel Jaquiss: Thanks for having me, Dave.
Miller: Let’s start with the basics. What does Oregon’s Climate Protection Program do?
Jaquiss: It essentially draws a downward slanted line that would reduce emissions by 50% by 2035 and by 90% by 2050. So it’s essentially an effort to get Oregonians to use less natural gas and transportation fuels.
Miller: Can you remind us of some of the political history here? This has been a pretty torturous story. What did Democrats’ efforts to pass carbon reduction legislation over decades look like?
Jaquiss: As early as 2007, there were bills in the legislature to try and cap and reduce emissions. They really struggled. Democrats really struggled to pass that legislation. When they got close in 2019 and 2020, Republicans walked out in both of those years to prevent bills from passing.
Miller: That eventually led then Governor Kate Brown to say if it’s not gonna work at the legislative level, I’m gonna do this by executive order. She created the Climate Protection Program back in 2020, and then a successful legal challenge followed, and then that was changed or tweaked. And where are we right now in terms of implementation of this program?
Jaquiss: Sure, so, last November, people started seeing it on their bills. Northwest Natural, which covers about 80% of the gas customers in the state, started putting it on their bills. We don’t really see a true up. In other words, we won’t really know how much people owe for the first, what’s called compliance period until 2028, but we are in that now.
Miller: This part’s a little bit confusing because DEQ would say no, it hasn’t officially begun yet, but you’re saying that people are already seeing this on their bills.
Jaquiss: Well, NW Natural told me, yes, that they started billing in November. So basically what happens, Dave, is that the DEQ will count, will record all the emissions in the over a three-year period, and if they’re above that downward curving line, there will be a financial reckoning in 2028 for this first period. So, that puts the three gas companies that serve customers and liquid fuel suppliers in a position where they know they’re going to have a liability in the future. They’re just not sure how much it is, so they’re trying to accommodate for that now.
Miller: Let’s hear about one of the particular businesses that you profiled to hear how they’re thinking about how this will affect them and their calculus of what they’re doing now. You spent some time at Woodburn Nursery & Azaleas. It is a third generation business run by a family called the Fesslers. How are they thinking about the effects of the climate protection program?
Jaquiss: They have an astonishingly large operation in Woodburn, 4.5 million square feet of greenhouses. They raise about 6 million plants a year. They sell about 6 million of those because the other 3 million are in process. So they bring a lot of plants inside to get them ready for the spring season. To keep those greenhouses heated, they burn natural gas directly.
They’ve done all kinds of things. They just bought 70 new heaters that are very high in efficiency. They’ve put new coatings on the outside of the greenhouses to try and reflect the sun and keep the heat in. So they’ve done as much as they can to be more efficient, but they’re still very dependent on natural gas. It accounts for 6% or 7% of their costs. And so they’re worried when they see projections that those costs are going to go way up.
Miller: As I understand the intention of this program, you could see that the cost of natural gas is going to go up, so the assumption on the part of regulators and environmental groups is that this will be an incentive for businesses like this to make different decisions in terms of what they’re buying. But you noted that they just spent hundreds of thousands of dollars for these high-efficiency gas heaters. Do you know if electrical heaters were a possibility?
Jaquiss: They said they’re really not. They’re not nearly as efficient. One thing to note, Dave, there’s a chart in the story that shows that since Governor Brown’s executive order, natural gas use in this state has absolutely skyrocketed. So we’ve had the opposite effect of what policymakers would like. That’s because the utilities, the electric utilities are not regulated by the CCP. It’s kind of crazy. So, what the Fesslers pointed out to me is if they were to buy electric heat from PGE or PacifiCorp, that electricity is made by burning natural gas at generating facilities. It’s incredibly inefficient. You lose half of the electricity in transmission. It’s much more efficient to burn it on site as they do.
Miller: What did you hear about the price of electrifying other industrial processes when you talk to other big current users of natural gas?
Jaquiss: I talked to some metal processors in Portland, a couple of them who sort of had the same problem, which is they use a lot of gas. If they buy electricity from PGE or PacifiCorp, it’s far less efficient than if they are to burn gas.
So, inevitably, yes, sure, there are a lot of consumers who are going to be able to reduce or switch, but there are, I think many industrial users who are not or can’t do it anytime soon. That’s why in fact, 36 of the largest users in the state are exempt from this first compliance period. These are the giant mills, these are cement plants. These are huge food processors in Eastern Oregon. They made a case to the DEQ and the PUC that they should be exempt, so they are for now, but there’s going to be a day of reckoning for them as well.
Miller: Right. That’s an interesting point, an important one that the nursery, for example, uses way more natural gas than you would in a home, but nowhere close to the biggest industrial users. The regulation for them will come a few years down the line.
Jaquiss: Yeah, they’re exempt from this first compliance period from ‘25 to ‘28, but it kicks in after that. It’s worth noting, Dave, that the two big surrounding states, California and Washington, already have similar programs in place. So the industry is getting used to these programs in those states. It’s not been the end of the world in either of them, and that’s one of the big criticisms that people that I talked to had. They’re like, hey, California’s got a program, it’s pretty good. Washington’s got a program, it’s actually better than California’s. Ours is not nearly as good as either.
So we’re coming late to the game. And we’re coming with a regulatory construct that seems to really trouble a lot of big big consumers of gas.
Miller: Well, let’s turn to those comparisons. And you get into this in your story, but I want to make sure that I understand it. Oregon’s DEQ recently set the price of carbon at $136 a ton. That’s what you’d pay if you can’t meet the cap, the declining cap. So for every ton of emissions over that, if you’re NW Natural, that’s what you have to pay today.
As you note in the story, that’s way higher than the price in Washington, in California or for a consortium of East Coast states. But what DEQ and environmental groups point out is that that’s not a fair comparison. It’s not an apple-to-apples comparison. They say that Oregon natural gas distributors will have to pay for a smaller portion of their total emissions than companies do in other states.
How do you think about a meaningful comparison of these different emissions reductions systems?
Jaquiss: Well, I think that this is very confusing even to people who are involved in the system. What we’re talking about here is using a price signal to get people to change their behavior. In five years or 10 years down the road, when people go to pay, in essence, a penalty for producing emissions above the allowed cap, they’re going to pay a larger penalty in Oregon than they pay in Washington, California or the East Coast states.
I think that the systems are different. And they’re not 100% comparable, but it’s pretty clear to me that the cost of noncompliance, the cost of not doing what you’re supposed to do, is going to be higher in Oregon.
Miller: From what I understand in Washington, in California or in the East, the majority of those allowances below the caps have to be paid for. And the argument I’ve heard is that in Oregon those allowances below the cap are given out for free. And so therefore you can’t compare the price and say that twice as much is necessarily a bad deal for Oregon companies. What am I getting wrong here?
Jaquiss: What you’re getting wrong here is simple facts. So in California, when their program started, the allocation of these allowances to natural gas utilities was 82% of their total emissions. In Washington, it was even higher, 93%. So in essence, those two states gave to their natural gas utilities, according to their official documents, almost all of the allowances that the Oregon utilities are going to get. So some people have said, hey, completely different. It’s not completely different. Both of those states have given the majority of allowances to their natural gas utilities. In Oregon, we’re going to start at 100%, but every year after that, the number gets less than 100%. So these people who say $136 is a meaningless number are just misinformed.
Miller: Another issue that I want to turn to is where the money that does come from this program is gonna go. The industry says billions of dollars. I haven’t seen a number from DEQ yet about how much money they say this will bring in, but we’ll see. But regardless, this money, first tell us where it is going to go.
Jaquiss: The money will go to one or more nonprofits that will be selected by DEQ later this year. Because this program was enacted by an executive order rather than by legislation, the state has taken the position that the legislature can’t touch this money and it must exist outside of state control. So DEQ will select nonprofit partners to distribute it. The money is supposed to be used to reduce emissions.
Miller: I have to say when I read the some of the quotes you had from Republican lawmakers, I did think that if you wanted to have some say in how this money was going to be spent, maybe you shouldn’t have blocked climate legislation for a couple of decades, but I’m curious what what Democratic lawmakers are saying about this.
Jaquiss: I’ve talked to a number of Democrats who are also uncomfortable with the idea that this amount of money, nobody knows how much, but the customer groups in NW Natural think it will be billions of dollars over the next couple of decades, many billions of dollars. Democrats and Republicans alike are very uncomfortable that this large amount of money is basically being created by a government action. It is effectively a tax and yet the money will not be subject to legislative control or oversight.
Miller: There’ll be agency oversight on the part of DEQ, but not legislative oversight.
Jaquiss: Correct. DEQ will administer and will oversee, but it is not subject to legislative oversight. That’s different from California and Washington, where the money is subject to legislative oversight in both states and where the money has been given back to state agencies to allocate to various programs.
Miller: Well, how serious do you think the frustration or fear is on the part of lawmakers? I guess I’m just wondering if you think there’s actual movement among Democratic leadership to significantly overhaul the Climate Protection Program, either in terms of how the money is collected or who is in charge of dispersing it?
Jaquiss: I think there’s a lot of pressure both in the Democratic caucuses and in the Republican caucuses. I think the business community is hell bent on revisiting this. And you’re right, there’s a lot of irony here. The business community blocked this in the legislature and now they’re unhappy about it. That is certainly ironic, but it doesn’t take away from the fact that I think there’s a good argument to be made that this program could be dramatically improved.
Miller: Another irony here is … I mean, it was interesting for me to see that a group of large natural gas users that you talked to said that they could live with a system like Washington’s because that program too has faced numerous lawsuits and challenges. There was an unsuccessful repeal attempt. It does make me wonder, if Oregon were to, say, completely backtrack and copy Washington’s program, would some of these same groups just fight that one instead?
Jaquiss: It’s hard to say. There’s been a lot of unhappiness in California and in Washington because nobody wants to be taxed or regulated. However, I think, as you pointed out, Washington’s program withstood a ballot challenge. I think people are getting used to it in California. So I think I would take them at their word. I think people know regulation is here. Climate climate regulation is here to stay. The question is, can you make it better than it is now?
Miller: We talked about the legislature. What have you heard from Governor Kotek’s office about this?
Jaquiss: Well, Governor Kotek’s office wants to retain an emissions reduction program. The governor is definitely getting lobbied heavily on this point. They seem to be open to ideas, but they want to see that the downwards-sloping emissions curve stays in place.
Miller: Nigel, thanks very much.
Jaquiss: Thank you, Dave.
Miller: Nigel Jaquiss is a senior investigative reporter at the Oregon Journalism Project.
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