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In March 2020, Kate Brown, then Oregon鈥檚 governor, issued Executive Order 20-04 鈥� the Oregon state climate action plan. It directed a long list of state agencies to take significant actions to reduce emissions of greenhouse gases and mitigate the effects of climate change in Oregon. EO 20-04 further advanced the state鈥檚 greenhouse gas reduction goals by setting targets of at least 45 percent below 1990 levels by 2035, and at least 80 percent below those levels by 2050. More specifically, this order required revamping the clean fuels program and creating a cap-and-reduce program for fueling facilities or other heavy stationary sources to address carbon emissions, a reduction in food waste program and a landfill oversight program to address methane emissions and adopting a building efficiency program for public buildings. All of this was to be done with an eye toward equitable outcomes and furthering public health and safety.

State agencies spent months identifying and developing programs to reduce greenhouse gas emissions in compliance with this order. Although the scope of the response was widespread, one of the cornerstone components was the Climate Protection Program rules adopted by the Environmental Quality Commission (EQC), the rulemaking authority for the Department of Environmental Quality (DEQ), in December 2021. These rules create a cap-and-reduce system applicable to natural gas utilities and fuel suppliers. These rules also require operators of existing and proposed large industrial facilities to determine the best available emission reduction approach and then take steps to achieve those reductions.

These rules were challenged in the Oregon Court of Appeals by natural gas utilities, the Western States Petroleum Association and a coalition of groups representing farming, logging and manufacturing interests in Northwest Natural Gas Co. v. Environmental Quality Commission. In addition to substantive challenges to the rules, the petitioners raised a procedural challenge as well. They argued that the notice provided by the EQC in advance of adopting the rules did not comply with statutory notice requirements when a rule would affect major industrial sources of air pollution 鈥� i.e., those that require a Title V permit under the Federal Clean Air Act. State law requires that when a proposed EQC rule would vary from otherwise applicable federal requirements, a heightened disclosure must be provided with an alternatives analysis and explanation of why the alternatives were rejected.

In response, the EQC acknowledged that the notice provided did not include an explicit statement about alternatives, but argued that provision of mailed notice to more than 20,000 recipients and 18 months of public process where the additional requirements and alternative were discussed should be sufficient to establish 鈥渟ubstantial compliance鈥� with the requirements. As established in previous cases, the 鈥渄octrine of substantial compliance鈥� serves 鈥渢o avoid the harsh results of insisting on literal compliance 鈥� where the purpose of these requirements has been met.鈥� Whether the doctrine applies depends on the statutory text, considered in context and taking into account any relevant legislative history.

The statute requiring written notice to Title V facilities uses the term 鈥渟hall鈥� in imposing a written explanation of reasons for exceeding federal requirements and the alternatives, suggesting that these obligations are mandatory. The legislative history from enactment acknowledged the need to do more when imposing additional Title V requirements that were more stringent than the federal rule. Including the alternatives analysis on the face of the notice, 鈥済ives assurances to industry鈥� that all issues were considered in advance. For these reasons the court concluded that full literary compliance was required.

In reviewing the notice provided, the court concluded that simply stating that alternatives were considered is not a sufficient written description of the 鈥渁lternatives considered and the reasons that the alternatives were not pursued.鈥� Further, because the EQC could not point to where in the record these alternatives were discussed in the rulemaking hearings, the court concluded that the EQC did not even substantially comply with the disclosure requirements. Simply engaging in a robust public outreach process with numerous opportunities for engagement was insufficient to substitute for the notice obligations provided in state law.

As for the appropriate remedy, the EQC sought disqualification of only those rules that regulate large stationary sources and not those directed to the cap and reduce regulations for the natural gas and petroleum industries. The petitioners argued such a separation was inappropriate because of the overlap between Title V regulated entities and fuel supplier entities subject to cap and reduce regulations. Agreeing with the petitioners, the court declared that all Climate Protection Program rules were invalid.

Although reportedly considering its appeal options, the EQC has also expressed relief that the defect was only procedural and did not include the identification of any substantive defects. Such celebration may be premature as the court elected not to address the substantive challenges, finding the notice defect dispositive. The EQC has also stated that it intends to continue to apply its adopted program notwithstanding the Court of Appeals decision. However, it is not at all clear how easy recreating the requisite notice will be if the record lacks sufficient discussion of alternatives in the first instance.

What may be of more interest to those in the land use field is that the central objection raised by a number of cities challenging the Climate-Friendly and Equitable Communities rules adopted by the Land Conservation and Development Commission (LCDC) in response to EO 20-04 and pending court review is eerily similar. The cities argue that state law requires the LCDC to make findings to address, among other things, 鈥渨hether alternative actions are available that would achieve the underlying lawful governmental objective and would have a lesser economic impact鈥� 鈥� an issue that the cities argue the LCDC did not address in any great detail. The state鈥檚 response is that it 鈥渟ubstantially complied鈥� with these obligations. The cities have responded that the statute mandates compliance with the alternatives analysis and that any efforts by the LCDC to address these objections were merely to 鈥減aper over鈥� the omission and non-responsive. The courts holding in the Northwest Natural Gas Co. case certainly does appear to favor the cities.

It is not unusual for rule changes to be challenged through the courts and there are occasions in which challengers prevail on procedural grounds. What is unfortunate is that obstinate agencies (or agency decisionmakers) refuse to address procedural defects when they become apparent. Ultimately, it is the environment, and those who live within it, that will suffer if these procedural defects delay efforts to address climate change.

Edward Sullivan is a retired practitioner of land use and municipal law with more than 50 years of experience. Contact him at [email protected].

Carrie Richter is an attorney specializing in land use and municipal law at Bateman Seidel. Contact her at 503-972-9903 or [email protected].

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the authors and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither author nor the 91视频 guarantees the accuracy or completeness of any information published herein.