DEQ Rules Helping to Make 2022 a Dismal Year

Date: November 29, 2021

State Director Anthony Smith's column in the December issue of the Salem Business Journal

By Anthony Smith

In 2019 and 2020, cap-and-trade legislation failed to pass in Oregon following a series of aggressive lobbying campaigns, legislative walkouts, and multiple grassroots rallies by truckers, farmers, and loggers, the likes of which had never been seen before in Salem.

Opponents of cap-and-trade were justified in expressing their concerns. The key aim of any carbon pricing policy is to artificially inflate the price of commonly used fuels like gasoline, diesel, natural gas, and propane. The thinking here is that if these fuels cost more, Oregonians will use them less, which would reduce our statewide emissions. For those unable to reduce their use, they would just have to pay more for the same amount of fuel, which raises revenue for the state to invest in clean energy projects.

Frustrated by the failure of cap-and-trade in the Oregon Legislature, the state’s environmental agencies are now seriously considering adoption of a similarly impactful policy by rule — based solely on an executive order issued by Gov. Kate Brown last year, without authorization from the State Legislature.

Higher fuel costs (for everyone) would not be the only consequence for Oregonians if the state’s Department of Environmental Quality (DEQ) presses ahead with rules for implementing its proposed Climate Protection Program.

As energy costs rise, small-business owners are not always able to adjust the price of their goods and services quickly enough (if at all) to match potentially steep energy cost increases without hurting their customer base. For example, most owners cannot afford to buy new, more energy-efficient equipment if current equipment still has a useful life. They are effectively caught in a dilemma that only time and/or good fortune can change.

Small-business owners depend on energy supplies at globally competitive prices to operate and effectively run their businesses. According to NFIB, the nation’s largest small-business association, energy costs are one of the top three business expenses in 35% of small businesses. Small companies use energy for several business-essential purposes. The primary energy cost:

  • For 38% of small firms is operating vehicles
  • For one-third of small firms is heating and/or cooling
  • For one-fifth of small firms is operating equipment.

If DEQ’s rules are adopted, it will make living and working in Oregon more expensive – especially for those Oregonians lacking the ability to pay more for fuel. Many families will bear the cost of increased natural gas rates and higher prices for propane, two key fuels that Oregonians rely on to heat their homes and businesses in the cold, winter months.

As for gasoline prices, which are an especially sensitive subject for Oregonians, they have already been scheduled to increase by the Legislature in recent years.

We know that higher fuel prices lead to higher prices for all types of products and services. This is especially true in Oregon where we depend on agriculture, manufacturing, and natural resources for so much of the state’s economic activity. But we also know that higher fuel prices have a disproportionately negative impact on those struggling Oregonians who can least afford to pay more.

If adopted in December, as the current timeline suggests, the DEQ rule would become operative in January 2022 and would regulate fuel suppliers, requiring them to reduce emissions or buy “compliance instruments” to meet the state’s emission goals. The rules also allow for alternative compliance by the purchase of “community climate investment credits,” which would fund environmental and community climate groups. 

So, let’s see what’s ahead for 2022:

  • Oregonians can expect to pay more for gasoline, diesel, propane, and natural gas, essential fuels used for travel, operating heavy equipment, and heating homes and businesses.
  • Prices for everyday goods and services will continue to increase, adding to the growing problem of runaway inflation in the economy.
  • Key Oregon industries, such as agriculture and manufacturing, will be less competitive in regional and global markets.

And for what? Oregonians will see almost nothing in the way of meaningful or measurable climate outcomes.

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Anthony K. Smith is Oregon state director for the National Federation of Independent Business.

NFIB Oregon thanks the Salem Business Journal for giving small business the opportunity to express its issues.

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