In Fall 2020, the Bureau of Planning and Sustainability (BPS) at the City of Portland proposed a “Clean Air, Healthy Climate” policy that attempts to institutionalize the principle of “polluters pay” through two fees:

1. a “Healthy Climate Fee” that would establish a $25 per ton fee on greenhouse gas emissions from facilities in Portland with emissions of 2,500 metric tons of CO2e (carbon dioxide equivalents) per year or greater. This program would use Department of Environmental Quality (DEQ) reporting requirements in order to identify entities subject to the fee. 

2. A “Clean Air Protection Fee” that would establish a tiered fee ($15,000/$25,000/$40,000) on facilities that generate substantial hazardous air pollution locally. The fees would be based on whether facilities hold Simple Air Contaminant Discharge Permits, Standard Air Contaminant Discharge Permits, or Title V Permits from the Oregon DEQ.

BPS estimates that about $11 million per year would be raised by these programs. Revenue would likely fund staff positions and programs inside of the city to fund the implementation of existing climate policy commitments.

Breach submitted the following public comment on the proposed fees:

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We are writing in support of the concept of assigning pollution fees to Portland’s largest carbon emitting and air polluting facilities in Portland. However, we believe that the policy proposal is inadequate in its current form and falls short of the urgent needs described in Portland City Resolution No. 37494, which declared that “a human-made climate emergency threatens our city, our region, our state, our nation, humanity, and the natural world[.]” The resolution called for “a new target of achieving at least a 50% reduction in carbon emissions below 1990 levels by 2030” while updating timelines for achieving renewable energy and the phase out of fossil gas infrastructure. As our elected officials and city staff have made clear again and again, we are in need of immediate carbon drawdown and this decade is when most of the emissions reductions must occur. Furthermore, Portlanders have consistently demonstrated at the ballot box (by overwhelming majorities) and in the streets that they support aggressive climate and redistributive policy. Whenever the city considers new climate policy — especially something as important as adopting carbon fees — it must act in line with the climate justice principles and follow the best available science. City staff have identified a very useful funding mechanism for carbon reduction and just transition activities, and we should maximize it to speed the just transition away from fossil fuels and to a renewable energy powered economy. 

Specifically, the final policy should increase the initial pollution fees in line with the Bureau of Planning and Sustainability’s (BPS) own social cost of carbon price, include more covered entities (including aggregate polluters like NW Natural and Brooklyn & Albina Railyards), explicitly lay the foundation for and/or adopt an indirect source regulatory program, and identify specific areas of activity where funding will be dedicated. 

Increase Carbon Fee to Reflect Social Cost of Carbon

The Healthy Climate Fee draft establishes a $25 per-ton fee on GHG emissions from facilities in Portland with emissions of 2,500 metric tons of CO2e per year or greater. By contrast, the city’s recent “Shadow Carbon Price” policy passed in December adopted a social cost of carbon of $117 per-ton. The defensible methodology adopted by the BPS staff for a $117 per-ton social cost of carbon should also be applied to the Healthy Climate Fee and with the same anticipated schedule for increase as with the Shadow Carbon Price. This will create a much stronger incentive for a carbon drawdown in Portland as well as significant additional revenue to support fuel switching, energy efficiency, and other carbon reduction alterations. It would be a mistake to underutilize this mechanism for strong climate action considering how few direct ways there are to price carbon at the local level. 

Include NW Natural as a Covered Entity

According to BPS staff and documents, NW Natural’s facilities and activities are currently excluded from the Healthy Climate Fee proposal. We are not yet satisfied with the rationale offered that because end users and large emitters will pay a fee for their gas emissions, NW Natural will be adequately regulated under this ordinance. Even if large-scale gas users are charged an emissions fee, the emissions from gas emitters under 2,500 tons / year will evade regulation. As natural gas is a significant source of carbon emissions in Portland, NW Natural should be directly included in the application of the Healthy Climate Fee program or subject to additional regulation that adequately prices their pollution footprint and disincentivizes the expansion of gas infrastructure within the City of Portland. 

In City of Portland resolutions No. 37289 and 37494, the Portland City Council voted for an end date to fossil gas by 2050 at the latest. And yet, there is little local action on the table to implement these goals. With their business model under threat, NW Natural has a strong incentive to build out as much fossil gas infrastructure as fast as they can in order to lock customers into their distribution network for decades to come. The company continues to offer significant rebates to potential customers for the installation of new fossil gas infrastructure which obscures the true cost of gas pollution. Also, the company has succeeded in confusing regulators and legislators about its future viability. Despite NW Natural’s repeated assertion that it will be able to replace fossil gas with so-called “Renewable Natural Gas” (RNG), a recent report from the Oregon Department of Energy shows that, in the best case scenario, the company would not be able to replace even one-fifth of Oregon's current consumption of fossil gas with RNG. As NW Natural adds more gas infrastructure to the grid, this best case scenario fuel replacement ratio will continue to fall. In addition, locking in RNG would support and incentivize some of the worst polluting activities in the state, such as those from confined animal feeding operations. Though there are benefits from localized use of biogas from waste treatment facilities and landfills, we see the push for RNG as simply another industry branding exercise intended to confuse and deceive decision makers while delaying measures to hold NW Natural accountable for their irredeemably polluting business model. Allowing them to continue to expand their market position will only delay and increase the costs of the inevitable energy transition.

Furthermore, we know well in Portland that gas infrastructure poses significant risks as shown by the explosion in NW Portland in 2016 that leveled several buildings. As with other types of fossil fuel infrastructure, gas lines and storage facilities are enormously susceptible to rupture, leaks, and explosions in a seismic event. In addition, there is a growing literature on the significant indoor air quality impacts of fossil gas appliances including:

• Children in homes with gas stoves have a 42 percent increased risk of asthma symptoms;

• Homes with gas stoves have 50 percent to over 400 percent higher nitrogen dioxide levels in their indoor air than homes with electric stoves, which can lead to heart failure and asthma; and

• One hour of cooking on a gas stove produces nitrogen dioxide levels that would be illegal if found outdoors.

Refusing to regulate NW Natural’s activities now will only create risky stranded assets and increased health problems that gas users, the City of Portland, and the State of Oregon will have to pay for at a later date. The longer we wait, the bigger the cost will be to “bail out” NW Natural’s investors. 

Finally, it is important to consider the life-cycle impacts that fossil gas has on the environment and communities on the frontlines of extraction and transportation. The majority of the gas that NW Natural is supplying residents in Portland is coming from fracking operations throughout the Rockies, which not only significantly impact the environment, but put lives at risk due to their degradation of local air quality and freshwater resources. The gas is then shipped via pipeline, endangering communities for thousands of miles along their routes. 

Considering the demonstrable effects and risks of gas appliances and pipeline infrastructure to human health and the environment, we believe that there is an urgent need to use local authority to regulate fossil gas infrastructure. We would be happy to share our findings about local authority in Oregon to regulate gas infrastructure in an appropriate venue. 

Indirect Source Program

We strongly encourage BPS to explicitly lay the foundation for an indirect source regulatory program within the City of Portland. This will be extremely useful in regulating air toxics and carbon emissions sources that are otherwise difficult to regulate and create human health and climate effects in the aggregate. Even absent additional city funding, there are significant resources available in the community to support the creation of this program in the immediate term. 

We do not need any more data to know these sources are the biggest source of acknowledged air quality issues in Portland. While more complex regulatory systems can be developed later, the city should adopt a regulatory framework alongside the Healthy Climate / Clean Air Fee programs. California’s San Joaquin Air District’s Rule 9510’s inclusion of off-site reduction fees provides a model for taxation of indirect sources such as construction sites. Although emissions from rail yards and commercial and residential gas appliances are more difficult to regulate, they account for a significant amount of both air toxics and carbon dioxide emissions that need to be reduced to protect human health and the climate. 

At minimum, the City should clarify how it intends to use funding generated by this proposal to initiate a local indirect source program. 

Specific Areas of Dedicated Funding

We believe that the Healthy Climate Fee should contain specificity as to where revenue will be spent. Specific areas where we believe that funding could be dedicated include, but are not limited to, developing an indirect source regulation program, developing regulations on new gas infrastructure, a just transition fund (secondary memorandum forthcoming), developing a gas powered yard equipment swap program, and a fire brigade at the Critical Energy Infrastructure Hub. 

We look forward to continued discussion about the Clean Air and Healthy Climate Programs and additional ways that the city can implement its commitments to strong climate action. 

Thank you for your consideration, 

Nick Caleb

Climate and Energy Attorney

Breach Collective