Oregon Policy Landscape for Natural Gas
This piece is written in partnership with the Institute for Energy Economics & Financial Analysis and Climate Solutions
In many ways, 2021 has been a turning point for Oregon’s natural gas industry. The governor, legislators, regulators and activists are positioning Oregon to be a national leader in the transition away from natural gas.
During the 2021 legislative session, Oregon lawmakers passed a variety of bills to spur this transition, including a 100% clean electricity mandate that effectively prevents any new natural gas generators for the electricity sector. The Department of Environmental Quality is completing a rulemaking to implement the Governor’s Executive Order that requires natural gas suppliers, including the three major gas utilities in Oregon — Northwest Natural, Avista, and Cascade, to cap and reduce their associated greenhouse gas emissions over time. And in early 2022, the Oregon Public Utility Commission (OPUC) will wrap up a fact-finding investigation about the future role of natural gas utilities in the state, releasing a report which may include recommendations for significant changes to gas utility regulation. Meanwhile, a broad coalition of energy and climate justice and ratepayer advocates fought off the Jordan Cove LNG pipeline and pushed a variety of local proposals to encourage building all-electric buildings and reducing our reliance on gas.
State agencies move forward with emissions reduction rules
In 2021, Oregon saw significant action in state agencies to support the transition off natural gas. The Department of Environmental Quality (DEQ) convened a variety of proceedings to implement the state’s Climate Protection Program, as ordered by the Governor. This program requires the state’s three natural gas utilities to cap and reduce their associated greenhouse gas emissions by at least 45% by 2035 and 80% by 2050.
Consequently, the Oregon Public Utility Commission (OPUC) has opened a “Future of Gas” docket to explore the costs and risks to consumers resulting from the gas utilities’ plans to meet new mandatory greenhouse gas requirements. Within this proceeding, stakeholders have successfully pushed the OPUC to require utilities to model electrification-based scenarios, to explore what decreased demand on the gas system could look like. The “Future of Gas” docket will model what customer rates might be if gas demand decreases due to widespread electrification. When gas customers defect as they choose to electrify their homes and businesses they could leave remaining customers to foot the bill of stranded gas assets. Stakeholders in the proceeding have also pushed the OPUC to implement regulatory tools to protect low and moderate income ratepayers as the state transitions off of natural gas.These tools were presented by the OPUC Staff and the Regulatory Assistance Project (RAP) and are all under consideration for the OPUC Staff’s final report, expected in February 2022.
Legislative efforts to curb natural gas emissions
The Oregon legislature is moving comprehensively against natural gas use in the state, beginning with prohibiting new natural gas power plants in the state through its new 100% clean electricity mandate.
Oregon lawmakers have made major strides in energy efficiency policy which will have a significant impact on the gas industry. First, the Legislature passed H.B. 2062 and H.B. 3141, which increase energy efficiency appliance standards and extend utility and Energy Trust of Oregon efficiency programs, respectively. These laws will continue to reduce growth in the gas sector because electric appliances are more efficient than gas appliances. A critical low-income ratepayer protection and empowerment law enacted through H.B. 2475 financially supports frontline organizations’ engagement at the Oregon PUC. This law will undoubtedly be used to fight natural gas growth. Many of these organizations recently released a report highlighting the public health, climate, and safety concerns with natural gas use in the Pacific Northwest. Finally, “Healthy Homes” (H.B. 2842) passed, increasing weatherization and energy efficiency for low-income families, which will further reduce gas use in these homes.
The upcoming short session could also see further progress on energy efficiency to continue reducing Oregon’s reliance on gas. The Legislature is likely to bring back a bill to allow local jurisdictions to strengthen local energy codes by mandating the existing statewide reach code. This new code would allow cities with ambitious climate goals to more easily require energy-efficient construction, ultimately incentivizing all-electric building development and reducing gas demand in new buildings. Advocates are also hopeful that the Legislature will pass an emergency cooling bill, which would, among other things, incentivize homeowner adoption of high-efficiency electric heat pumps instead of gas furnaces.
Local efforts and powerful grassroots actions are growing
Local efforts to curtail natural gas are also moving forward. Multnomah County adopted a resolution prohibiting gas hookups for new and renovated county buildings, including its new library. Eugene is negotiating with Northwest Natural to require the gas company to pay millions of dollars in carbon fees for its ongoing gas service in the city. On November 17, 2021, the Eugene City Council voted to advance two motions that would implement an all-electric new construction mandate by 2023 and create a roadmap to equitably electrify all existing buildings by 2045. The Salem City Council is considering a similar proposal to create an all-electric new buildings requirement. Portland Public School Board’s policy team is developing a policy proposal to address the climate crisis, including a planned transition of its buildings off of natural gas. And the City of Portland is in the process of developing building performance standards for existing multifamily and commercial buildings, which will decrease the use of gas in those buildings over time and likely drive building owners to transition off gas. Meanwhile, the Portland Clean Energy Fund (PCEF), funded by a tax on large retailers, has raised more than $50 million annually for investments in clean energy homes and jobs, including building electrification and solar power for buildings.
An industry in decline
If Oregon is anything like its West Coast neighbors, this local progress is likely to continue. In just two years since Berkeley became the first city in California to ban gas in new construction, another 50 local California jurisdictions have passed natural gas bans or electrification policy. Oregon is likely to see a similarly rapid increase in the number of local ordinances designed to phase out natural gas in the coming years.
State and local actions pushing the transition away from natural gas are harbingers of more progress to come. As in Washington, Oregon’s natural gas industry is facing a decline in demand for natural gas as more customers and local jurisdictions move to electrify.