Project Report:
Fossil Fuel Risk Bonds - From Vision to Reality
Fossil Fuel Risk Bonds Published At Brookings
Thanks to the continued support of the Walker Foundation, CSE's Fossil Fuel Risk Bond Program got a big boost early in 2024 with publication of our implementation guidance for local governments on their national website.

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As a result of Walker Foundation’s sustained investment in CSE’s Fossil Fuel Risk Bond (FFRB) program we have three separate rulemaking processes underway in Oregon and Washington to implement the policy concept on the ground. The first involves protecting frontline communities living near Portland’s Critical Energy Infrastructure Hub from catastrophic explosions and massive oil spills likely to occur in the event of a worst-case earthquake disaster. The second involves strengthening financial assurance rules that have been on the books but never enforced for oil tankers and oil facilities along Puget Sound. The third is seeing King County Washington’s adoption of the FFRB concept to the finish line through an ordinance fully protecting taxpayers from the risks and costs of fossil fuel infrastructure, including its eventual abandonment. Our request in 2023 is to concentrate efforts on these three processes and, in the meantime, build a replicable model for counties across the nation.


Project update 3-1-24

Brookings Institution has now published CSE's Fossil Fuel Risk Bond (FFRB) implementation guidance for local governments on its national website. This report provides a step by step description of what state and local governments need to do to take fossil fuel risk bond programs from vision to reality. It also includes a few mathematical examples of how adaptation expenditures anticipated in the future - such as for new stormwater systems or seawalls necessitated by climate change - can be paid for through the FFRB surcharge approach. Publication at Brookings gives us a significant boost in our ability to attract new jurisdictions to work with us to get geographically tailored FFRB programs up and running.

Project update 12-23-23

2023 has been a very busy and productive year for CSE's Fossil Fuel Risk Bond work. Here is a mid-term update on accomplishments between June and December:

While CSE is working at the national level and in six states with NGOs and elected officials to promote FFRB programs, the most promising developments come from the Pacific Northwest where three separate processes have been kicked off by the organizing work of CSE and its partners. Here, advocates have been promoting a model of FFRB implementation that unfolds in three distinct phases:

• Phase I – enabling legislation. While authority for implementing FFRB programs may already exist in a given jurisdiction, it is helpful to solidify that authority through enabling legislation. As recommended by CSE and its partners, that legislation should include findings connecting the dots between fossil fuel infrastructure, public health and safety risks, and allocation of funds for an economic risk assessment to establish the legal basis for subsequent regulation.

• Phase II – risk assessment. Once commissioned, the risk assessment quantifies the anticipated public financial costs associated with worst-case accident and disaster scenarios for fossil fuel infrastructure as well as the anticipated costs of climate change, mitigation, and adaptation. A gap analysis looking at the adequacy of financial assurance and adaptation funding is also conducted during this phase as well as recommendations for policy interventions to close this gap.

• Phase III – program implementation. Through rulemaking or ordinance, a jurisdiction adopts new financial assurance requirements for fossil fuel facilities based on the gap analysis and a surcharge for fossil fuel transactions to offset anticipated public financial costs.

The general three-phased approach is common to many forms of regulation (i.e. an initial resolution calling attention to the problem, a study to document the magnitude of local risks, and a rulemaking phase for implementation of recommendations). While a more streamlined approach could be to simply go right to the rulemaking phase – in this case, imposition of financial assurance and FFRTF surcharges – skipping the quantification of actual financial and economic risks on the ground would undermine the credibility, and potential legal footing, of the final regulatory requirements.

Three case studies demonstrate how FFRB initiatives are moving forward in the Pacific Northwest. They include Multnomah County, Oregon, King County, Washington, and the State of Washington with respect to oil spill liabilities.

Multnomah County, OR – Rulemaking for the CEI Hub well under way

In 2019, the Multnomah County Commission adopted a Phase I resolution opposing new fossil fuel infrastructure and initiating work on a FFRB program to “require the fossil fuel industry to bear the full cost of damages potentially caused by transporting and storing fossil fuels.” The resolution included findings that made a clear link between the storage, refining, transport, trade and combustion of fossil fuels and a wide range of local health, safety, environmental and economic risks. It is important to make these findings in order to ward off legal challenges based on federal or state preemption (i.e. Interstate Commerce Clause) and keep FFRB program initiatives firmly grounded in a local jurisdiction’s police powers.

The resolution initiated a Phase II analysis of economic risks associated with a worst-case scenario at the Critical Energy Infrastructure (CEI) Hub in Portland along the banks of the Willamette River as a first step towards internalizing those risks through various financial assurance mechanisms or requirements for risk mitigation. The CEI Hub contains 630 tanks of petroleum-based liquids distributed over 220 acres, and stores over 90% of Oregon’s liquid fuels.

In early 2021, the Phase II risk analysis was completed by the firms ECONorthwest, Salus Resilience, and Enduring Econometrics. The study found that in the event of magnitude 8 or 9 Cascadia Subduction Zone (CSZ) quake – long overdue for the Pacific Northwest – a massive release of 95 – 194 million gallons of fuel would likely occur, some of which would catch fire and potentially result in a one or more catastrophic explosions. At the high end, such a spill would be larger than the Deepwater Horizon disaster (~134 million gallons), making it the largest marine spill in US history. In terms of economic damages, the study considered a broad range of both market and non-market effects and assigned monetary values to seven. Depending on the size of the spill, failure rate for storage tanks, and utilized capacity at the time of the quake, damages could range from a low of $359 million to a high of $2.6 billion.

With this tally of potential damage in hand, decision makers are now considering options for Phase III in order to shift these financial and economic risks back onto infrastructure owners. One scenario involves assessment of seismic related risks by individual companies (there are about 10 in the CEI), mitigation planning to harden this infrastructure, and (potentially) bonding against mitigation plans. Bonding for decommissioning is also on the table since in the event of a catastrophic quake, abandonment without post-catastrophe clean up and repair is a distinct possibility. In the spring of 2022, the Oregon Legislature passed SB 1567A to jumpstart this process. The state’s Department of Environmental Quality has begun a rulemaking initiative, and the initial round of facility assessments are expected to be completed by June 1st, 2024 as the legislature intended. After this, discussions over bonding against mitigation plans and decommissioning will begin in earnest.

An alternative, more direct pathway to Phase III regulations would require the Multnomah County Commission to enact financial assurance requirements and FFRTF surcharges on a track separate from the seismic risk assessments since SB 1567A does not explicitly call for either. CSE has taken the EcoNorthwest analysis and calculated the basis for per gallon surcharges to offset potential public liabilities associated with a worst case CSZ quake. So there are no real barriers to moving ahead with some form of a levy at this point. CSE and its partners will be pursuing this approach while continuing to monitor implementation of SB 1567A writ large.

King County, WA – Final Phase III regulations now in place

In July of 2020, the King County Council enacted a Phase I ordinance in the form of amendments to its 2019 Comprehensive Plan establishing a new permitting system for fossil fuel facilities and a fossil fuel risk bond evaluation to lay the groundwork for new financial assurance requirements. As with Multnomah County, King County found that “the operation of fossil fuel facilities carries risk of explosion, leaks, spills and pollution of air and water,” which, in turn, subject nearby communities to a litany of health and safety risks. King County is an interesting case study for FFRB programs because there are no active permits or applications for fossil fuel facilities at this time in the unincorporated portions of the Seattle metropolitan area where the Council has jurisdiction. So enacting a FFRB program here is largely a deterrent strategy against new or expanded facilities.

King County’s Phase II risk assessment was completed in June of 2022. The risk assessment concluded that three types of fossil fuel facilities could present public financial risks to the county in the form of costs related to health, safety, and infrastructure abandonment. These include thermal (gas) electric power plants, liquefied natural gas (LNG) plants and oil terminals. The assessment found sufficient evidence of past high-cost incidents to propose requiring proof of adequate financial coverage for explosions from any of the three types of facilities. It also recommended that self-bonding not be accepted as a financial assurance mechanism to cover financial risks associated with potential explosions or site contamination and that advance planning around potential onsite hazards and facility decommissioning be required along with financial assurances against these potential public liabilities. Both of these recommendations are well justified based on the financial assurance gaps and issues identified in CSE’s 2016 report.

A draft ordinance was subsequently prepared to enact these recommendations, and in May of 2023 the King County Council adopted a final Phase III ordinance putting these FFRB program recommendations in place. With this, King County has become the first US county to enact a full policy “trifecta” on the FFRB program concept. The Phase I, II, and III materials provide an excellent template to guide development of FFRB programs in jurisdictions across the US with or without significant concentrations of fossil fuel infrastructure.

State of Washington – New financial assurance rules for oil vessels and onshore facilities are being developed

Led by Representative Mia Gregerson (D-33) the Washington legislature passed HB 1691 in the spring of 2022 as a first step towards implementing fossil fuel risk bond programs at the state level. HB 1691 requires the owners or operators of any covered oil vessel or oil facility to obtain a certificate of financial responsibility from the Department of Ecology (DOE) that guarantees such owners fully cover the costs of a worst-case spill. Acceptable forms of financial assurance include insurance, surety bonds, corporate guarantees, letters of credit, certificates of deposit, or protection and indemnity club membership. The legislation does not prohibit, but instead puts conditions on self-insurance as an option. Oil spills of all sizes are frequent visitors to Washington’s waters, and HB 1691 was seen as a way to start shifting the significant cost burden of monitoring and responding to these spills to fossil fuel infrastructure owners. For the largest oil tankers, financial assurances of at least $1 billion are now required.

Initially, Rep. Gregerson drafted a more comprehensive statewide Phase I bill that would have expanded the Department of Ecology’s existing financial assurance requirements for hazardous facilities to include fossil fuel infrastructure. The first step in this statewide approach would have been a Phase II DOE report to the legislature evaluating the financial and economic costs and risks associated with fossil fuels and climate change, a gap analysis of existing financial assurance requirements, and recommendations to the legislature of how to close those gaps. DOE reviewed the legislative proposal and concluded that the analysis would cost about $1 million to complete – a price tag a bit too high to fly under the radar screen and avoid political pushback. Of course, investing $1 million to avoid potentially billions of dollars of economic costs is a great deal for public finance, but in a political climate of fiscal austerity such a price tag for the Phase II study was enough to derail the more comprehensive approach. As an alternative, HB 1691 is viewed as an incremental, but important step forward.

The law is a bit complex, and DOE is now charged with initiating a host of new rules to comply. These include (a) a rule governing the effective date for owners and operators of covered vessels or facilities to obtain the required certificates of financial responsibility; (b) a rule limiting use of a self-insurance option provided that such a rule must require the applicant to thoroughly demonstrate the security of the applicant’s financial position; (c) a rule governing the suspension, revocation, and re-issuance of certificates of financial responsibility; (d) a rule to evaluate whether an applicant for a financial responsibility certificate for an onshore or offshore facility has demonstrated an ability to compensate the state and other governmental entities for damages that might occur during a worst case oil spill, and, optionally (d) a rule to update the hazardous substances currently covered by the state’s existing financial responsibility requirements to maintain consistency with the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).

CSE and its partners are participating in this rule making process as it evolves. For example, just last week, CSE and six other regional NGOs sent detailed input to Department of Ecology asking for the initial financial assurance unit cost of $27,700 per barrel be significantly raised to reflect worst case outcomes as well as a host of other issues that would have weakened the effectiveness of the new financial assurance rules. In response to our comments, DOE is now considering a significant increase in the per-barrel amount and other changes we have requested – such as closing loopholes on the time delay between financial assurance acquisition and their effect on the ground, or other issues related to transparency and public records.

In addition to participating in these policy processes, CSE has published a new report that provides guidance to local governments seeking to enact fossil fuel risk bond programs in their jurisdictions. Entitled “Fossil Fuel Risk Bond Programs – Implementation Guidance for Local Government,” the report is now available on our website. The report provides a broad overview of FFRB programs, an explanation of how these programs are rooted in existing policy mechanisms, a demonstration of how they can be used to generate funding for climate adaptation, and an update on all the progress that has been made in the Pacific Northwest. Brookings Institution has agreed to publish the report on its website as well and has completed a peer review process for that. We expect it to be up on the Brookings site soon.


In 2016 Center for Sustainable Economy proposed a commonsense solution for addressing the market failures associated with fossil fuel infrastructure – fossil fuel risk bond (FFRB) programs. Climate change is one, a market failure of breathtaking proportions. Add to that the market failures associated with fossil fuel infrastructure itself – the vast network of coal mines, oil and gas wells, pipelines, refineries, oil trains, LNG trains and fossil fuel export terminals that cause expensive physical damages to land, air, water and frontline communities. Air pollution and climate change caused by fossil fuels generate externalized damages of $2.2 – $5.9 trillion per year in the US, and by 2100, the Network for Greening The Financial System predicts a hit in the order of 3 – 10% of GDP each year. Fossil fuel risk bond programs are tools that regulators can use to begin to address these staggering externalized costs.


The focus of our work in 2023 will be in Oregon and Washington, where we have successfully initiated rulemaking processes to adopt all or portions of the fossil fuel risk bond proposal in relation to oil tankers and onshore oil facilities in Washington, fossil fuel facilities in King County, and fossil fuel facilities in Portland’s Critical Energy Infrastructure Hub. However, we also intend to facilitate the spread of FFRB policies at the national level via work on model federal legislation and though publication and dissemination of a guide for counties to use to initiate the FFRB process anywhere in the US where fossil fuel facilities are concentrated.

Information Dissemination

Results and findings of our FFRB work have been disseminated via this website, the CSE website, and multiple emails to partners, allies, and decision makers interested in adopting FFRB programs in their jurisdictions.

Project Link

Amount Approved
$30,000.00 on 6/8/2023 (Check sent: 6/21/2023)

Fossil Fuel Risk Bonds Published At Brookings
Brookings Fossil Fuel Risk Bond Thumbnail

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Dr. John Talberth
President and Senior Economist, Center for Sustainable Economy

Posted 3/20/2023 4:04 PM
Updated   5/14/2024 9:07 PM

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Refinery Fire. CSE's Fossil Fuel Risk Bond program provides a market-based mechanism for helping state and local jurisdictions internalize the financial and economic costs associated with operation of fossil fuel infrastructure.

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