Agenda Packet 7-15-19 Public Hearing

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July 15, 2019, Public Hearing – Item 1 Natural Gas Greenhouse Gas Emissions and the State Legislature As City staff continue to work on the franchise renewal process, two bills before the State Legislature this year (Senate Bill 98 and House Bill 2020) could have implications for franchise negotiations and the delivery of natural gas in Oregon. After analyzing the bills, it was determined that—if passed—the new laws would have the potential for significant impacts on natural gas sourcing, emissions, costs for retail customers, and other market forces and regulations. At this time, SB 98 has been approved by the Legislature and will likely be signed into law by the Governor. SB 98 has been supported by the natural gas industry and it directs the Public Utility Commission to adopt by rule, a renewable natural gas program for both large and small utilities. RNG is produced from organic materials like livestock manure, forestry byproducts or municipal sewage. These biofuels are then stored and may be delivered by natural gas providers via the natural gas pipeline network that is in place. Through this process, RNG reduces GHG emissions from society’s waste streams. The law incentivizes investments in RNG by allowing the PUC to adopt ratemaking mechanisms that account for incurred costs by a utility company making qualified investments in RNG infrastructure and/or procurement of RNG. SB 98 would allow utilities to recapture the higher production and delivery costs from necessary RNG capital investments by adjusting the allowable rates charged to retail customers. This new law requires PUC to adopt the rule by July 31, 2020. The extent to which NWNG will participate in this new RNG program is unknown at this time. HB 2020, known as the cap and trade bill, stalled when the bill passed the House but did not receive a vote in the Senate. It is unknown if the bill will be reconsidered later this year or next. The bill makes sweeping changes to Oregon’s climate policies in a number of ways including the required cap on total Greenhouse Gas (GHG) emissions, the setting of allowance budgets and the creation of a market-based mechanism for covered entities to demonstrate compliance. The bill has a number of provisions relevant to large natural gas utilities like NWNG. If the bill is passed, the extent to which the natural gas industry and natural gas markets are impacted remains unclear for staff at this time. If this bill becomes law, more work may need to be completed by City staff to determine its impact on the franchise and other aspects of City operations. Given the upcoming expiration of the current franchise between the City and NWNG, as well as recently enacted and pending changes to State law, staff has drafted a proposed ordinance (Attachment B) to extend the franchise term of the current franchise. This ordinance would only extend the term of the franchise; all other current franchise terms and conditions would remain the same. PREVIOUS COUNCIL DIRECTION November 14, 2018, Work Session This work session provided the City Council with information regarding the review process for the right of way franchise agreement with Northwest Natural Gas and discuss options for including CAP2.0 in the negotiations.