I'm Not Dead Yet: Is coal doomed regardless of whether EPA regulates carbon emissions?

 I want to pass along three interesting articles I have read over the past day or so about coal's decline (or alleged decline) in the United States totally unrelated to EPA's recent proposed rule on carbon emissions from existing power plants. Here are the takeaways:

  1. From former Sierra Club CEO Carl Pope at EcoWatch:  Hundreds of years of mining existing coal seams has made coal harder and more expensive to extract.
  2. From Berkeley Professor Meredith Fowley at The Energy Collective: The low price of natural gas and limited opportunities for exports (at least not yet) has made it economically attractive to switch fuel sources. This article has some very nice graphs about the decline of coal as a fuel source. 
  3. From Rebecca Leber at the New Republic:  Retrospective of pro-coal ads shows that coal has been predicting its own demise for over 40 years. I especially love the 1976 Coal Ad about the OPEC energy embargo. 

Reading these articles reminds me a bit of the scene in Monty Python's Holy Grail about the bubonic plague.  Coal may be dying, but its not dead yet. 

 

Does The EPA Have A Thing Against Building Energy Codes?

What if there was a technology that had a 20 year track record of saving 4.8 quads of energy and 41 million tons of carbon, while saving consumers more than $44 billion over the past 20 years, and was anticipated to save consumers up to $230 billion on their utility bills, 53 quads of energy and 3,995 million tons of carbon from 2012-2040? 

What if the return on that technology was $400:$1--for every $1 of government program money spent, the return in cost savings was $400?

You would think that the EPA would have that technology at the top of its list of ways for states to reduce energy use and carbon emissions to comply with its new Clean Power Plan regulations. Instead, the EPA's response was "meh:"  

[Building energy codes*] might have substantial impact[], and the EPA does not want to discourage their implementation in state plans, but they might require development of appropriate quantification, monitoring, and verification protocols. The EPA and its federal partners intend to discuss the development of appropriate EM&V protocols for such measures with states in the coming years.

Federal Register, Vol. 79, No. 117, Wednesday, June 18, 2014 at 34921.

I don't know why the EPA seems to have a thing against energy codes.  Perhaps it is that energy codes do not require cool new technology like carbon capture.  They do not require states to implement new programs or hire new personnel, because all 50 states already have building codes in place, either at the state or municipal level.  Or maybe it is because when you go to a cocktail party and start to talk about building energy codes, people feel compelled to refill their plate of cheez-its.       

But what I do know is that the EPA's concerns about building energy codes seem to run contrary to recent scholarship and state experience with building energy code programs.  

Two recent publications—one from the Pacific Northwest National Laboratory and a joint study by the Northeast Energy Efficiency Partnerships, the Edison Foundation and the Institute for Market Transformation—have protocols for measuring and verifying building energy code program savings.  In addition, over 10 states have included building energy code programs in their utility energy efficiency programs, many of which include M&V protocols.  

Even if the EPA is correct that there is some uncertainty and variability in M&V of building energy codes, the evidence of energy and carbon reductions for other compliance pathways that EPA supports, like carbon capture and storage, are much, much less certain.  

You have until October 16, 2014 to submit a comment on the proposed rule, letting EPA know that building energy codes should be at the top of its list of compliance paths, not the bottom.  

* Building energy codes are  minimum  standards for energy efficient design and construction for new and renovated buildings.  Like all construction codes, building energy codes are adopted as law by states and municipalities, and enforced by building code officials.          

Greater Energy Efficiency Could Be An Unlikely Outcome of the Ukrainian Crisis

It seems like an odd “butterfly effect”—a plane shot down over Ukraine could boost energy efficiency?  But it is not as far-fetched as it seems. 

“Fuel switching”—changing power plants over to natural gas from coal—is one of the compliance paths for achieving the carbon emission reductions in the EPA’s proposed existing power plant carbon emissions reduction rule.  Fuel switching is expected to be a popular compliance path because power companies are already taking advantage of the economic attractiveness of cheap natural gas (vs. coal) to convert their power plants.  Natural gas conversions have been a significant contributor to the 15% decrease in carbon emissions since 2005.  

When the Ukrainian crisis first emerged this spring, discussions in Washington turned to accelerating natural gas exports in the event that Russia was either unable (due to sanctions) or unwilling to sell its NG to Europe.  The Energy Information Agency predicts that increased exports of natural gas will lead to lead to increased prices for natural gas domestically.  (See page 6 of the report).  

If the cost of natural gas increases, the comparative economic attractiveness of fuel-switching versus energy efficiency will change as well.  Energy efficiency applications that were previously not cost effective or more costly than fuel switching become more attractive.  As a result, states are likely incorporate more energy efficiency into their compliance plans than relying exclusively or largely on natural gas applications to achieve their emission reduction goals. 

Shari Founds Calliope Communications; Restarts GBLB

I have received a lot of requests for me to re-activate GBLB, which I am excited to do as part of my new venture, Calliope Communications.  

After 14 years in the corporate world, I founded Calliope to focus my work on research, policy development and cause marketing.  My practice will be largely dedicated to energy, environmental and construction issues, but my experience in these fields is also applicable to other highly technical areas involving complex regulatory environments.   

I look forward to (re)connecting with all of you and keeping you updated on the rapidly changing world of buildings and the environment.  

You can find out more about the consultancy at my website or contact me directly at shari@calliope-communications.com.  

Very best regards,

Shari

Mind Your Administrative P's & Q's When Rejecting Energy Code Changes

The Court of Appeals of the State of New Mexico handed down a limited win for energy code advocates, holding that adopting changes to building codes that removed energy conservation provisions without any justification violated administrative procedure. The decision is available here.

Between 2006 and 2012, the construction and energy codes adopted in many jurisdictions have incorporated provisions increasing the energy efficiency of buildings built to code by 30% (15% from the 2006 to the 2009 codes, and an additional 15% from 2009 to 2012). 

As I have posted about previously, there is a trend nationwide to resist adoption of the 2012 codes, in part based on the increased energy conservation requirements. In the case of New Mexico, the state had adopted codes which had energy conservation requirements beyond those in the 2009 energy codes. 

The New Mexico Construction Industries Commission (the "Commission") sought to adopt changes that would have removed any energy conservation provisions from the New Mexico codes that exceeded the 2009 International Energy Conservation Code (IECC).

The Commission held several public meetings and solicited public comments on the code changes.  Then, at a June 2, 2011 meeting, after a brief and (frankly) confusing statement by the Chair of the Commission, the Commission voted to adopt the code changes without further discussion.

Several groups including the Southwest Energy Efficiency Project, Environment New Mexico, several green builders, the Sierra Club and other sued to overturn the Commission's decision for (among other arguments) being "arbitrary and capricious" due to the Commission's lack of discussion and justification for the decision. 

The Court of Appeals held that the Court could not even determine whether the Commission's decision was valid because the Commission failed to provide "what facts and circumstances were considered and the weight given to those facts and circumstances."  Southwest Energy Efficiency Project v. New Mexico Construction Industries Comm'n, No. 313838, April 4, 2013 (N.M. Ct. Appeals) at 10.  The Court remanded the Codes to the Commission for reconsideration, with a justification of its reasons for its decision. 

The reason why I characterize the decision as a "limited win" is that, assuming that the Commissioners are the same, there is no reason why the decision on the code adoption will change. If the code revisions are again adopted, with justification, the Plaintiffs will have to institute another legal action, and demonstrate that the justification provided by the Commission is arbitrary and capricious. 

However there may be value to the plaintiffs simply by filing the suit and making the Commissioners justify to the citizens of New Mexico in writing why the homes they live in should not be energy efficient. 

Pennsylvania Executes one of the First Residential Energy Efficiency Loan Bundling Transactions

After long and diligent work, my own Commonwealth of Pennsylvania announced last week that it had successfully bundled 4,700 residential energy efficiency loans, and obtained $23 million in cash and $8.3 million in deferred payments, for a projected total of $31.3 million.  The press release is available here.

This is a holy grail of sorts.  People have been saying for years that energy efficiency loans should be able to be bundled and sold, a la mortgages and credit card loans. In theory, bundling the loans would allow private capital to invest in pools of energy efficiency loans, as opposed to individual projects, injecting more capital into the market for energy efficiency upgrades and lowering the interest rates.

Although it seemed like a workable idea, few before the Pennsylvania Treasury had accomplished it.  Energy efficiency loans were considered too weird, too complicated, too risky, etc. to be bundled.  Most critically, financial institutions mostly considered energy efficiency loans to be too risky because there was an insufficient amount of data on energy efficiency loan defaults.

In light of these issues, the Pennsylvania transaction still does not really recognize energy efficiency loans as a unique asset class.  By this I mean that the stream of income from the saved energy is not being recognized as part of the transaction.  As far as the investors are concerned, the loans could be for HVAC equipment or Manolo Blahniks, they are all just unsecured consumer loans.  In addition, Treasury still had to put up significant credit enhancements to make the loan pool desirable. 

In addition, the transaction took a long time and had high transaction costs.  A private entity probably would not have had the resources or perservernce needed to cross the finish line.  Future transactions will need to be more standardized, both with in terms of assets and documentation.

Nonetheless, the Pennsylvania transaction and the many lessons its staff learned along the way may be a very important step in accessing greater pools of capital for energy efficiency.   

 

Join me at the PA/NJ Sustainability Symposium on March 12

For all my Pennsylvania and New Jersey fans, I will be speaking at the third annual PA/NJ Sustainability Forum on March 12, 2013.  To get more information and register click here.

The half-day forum will bring together over 600 industry, education and community leaders to share best practices, address challenging issues and provide cutting edge information about sustainability in the Delaware Valley. 

My panel will cover:

Codes and Disclosure Mandates: The key to market transformation?

The other members of my panel are: 

• Katherine Gajewski: Director, Mayor’s Office of Sustainability, City of Philadelphia
• Cliff Majersik: Executive Director, Institute for Market Transformation
• Priscilla Richards: Program Manager, New Construction, NYSERDA

In addition, Mayor Michael Nutter and Rob Powelson, Chairman of The Pennsylvania Public Utility Commission will be keynote speakers.

The details are as follows:

Tuesday, March 12th, 2013
7:45 AM - 1:30 PM

Temple University
Performing Arts Center
1837 North Broad Street
Philadelphia, PA 19122

Hurricane Sandy Relief Bill "Blows In" Opportunity for States to Adopt Better Building Codes

The fifty billion dollar (yes, that's $50,000,000,000) Hurricane Sandy Relief Bill (the "Relief Bill") is headed to President Obama's desk for his signature. The Full Text of the bill is available here http://www.gpo.gov/fdsys/pkg/BILLS-113hr152rds/pdf/BILLS-113hr152rds.pdf 

The Relief Bill provides several different opportunities for the Federal government to encourage states to adopt up-to-date building codes by tying distribution of the funds to commitments from the states to adopt the most up-to-date building codes. 

 According to studies by the Multi-Hazard Mitigation Council, for every dollar invested in building code adoption and enforcement, four dollars are saved in recovery costs.  As a result, FEMA has been very public about the critical role building codes play in reducing building damage from natural disasters. 

David Miller, the Associate Administrator for Federal Insurance and Mitigation Administration at FEMA, testified before the House Committee on Transportation and Infrastructure last year on this issue, concluding:

Post-disaster assessments of many communities have shown a direct relationship between building failures, the codes adopted, the resources directed toward implementation and enforcement, and the services available to support those codes.

Tying emergency relief funds to code adoption would not be new.  Department of Energy state energy block grants from the American Reinvestment and Recovery Act (ARRA) were tied to governors' commitments to adopt the 2009 version of the International Energy Conservation Code (IECC) and ASHRAE 90.1-2007, as I posted in greater detail here http://www.greenbuildinglawblog.com/2013/01/articles/codes-1/2009-energy-code-adoptions-required-by-arrawhere-are-they-now/

Two allocations which could logically be tied to building code adoption commitments are the $5.4b allocated to the Federal Emergency Management Agency (FEMA) for the Disaster Relief Fund and the $16b allocated to the Department of Housing and Urban Development (HUD) for "necessary expenses related to disaster relief, long-term recovery, restoration of infrastructure and housing, and economic revitalization..." (Bill at 74)(emphasis added).

However, in tying emergency fund allocations to code adoption, FEMA and HUD should incorporate some lessons learned through the ARRA commitments.  First, the ARRA commitments only related to a one-time adoption of the 2009 energy-related code provisions.  Second, there was no reporting required from the states on their progress with adoption and enforcement of the codes.  Finally, as I posted here (http://www.greenbuildinglawblog.com/2013/01/articles/codes-1/2009-energy-code-adoptions-required-by-arrawhere-are-they-now/), enforcement of the commitments has been weak.  To be effective, any code-related commitments must require regular code updates, and a mechanism for reporting and recapture of funds for failure to fulfill the code commitments.

Hurricane Andrew ushered in a new era of code adoption on the Gulf Coast.  With some encouragement by the Federal government, Hurricane Sandy could have the same effect. 

 

2009 Energy Code Adoptions Required by ARRA--Where are They Now?

A long time ago in a first term far away, there was the American Recovery and Reinvestment Act (ARRA), a.k.a the Stimulus. 

As explained by the DOE, The ARRA section on State Energy Program funding included a statutory provision (Section 410) linking SEP funding to building energy code adoption and enforcement. As a condition of accepting the ARRA funding, the states provided assurances through governor’s letters indicating their state would comply with the terms of Section 410.

All 50 states took ARRA SEP money, and all 50 governors provided commitment letters commiting to do three things relating to building energy codes:

Adopt a building energy code for residential buildings that meets or exceeds the 2009 International Energy Conservation Code (IECC),

Adopt a building energy code for commercial buildings and high rise residential that meets or exceeds the ANSI/ASHRAE/IESNA Standard 90.1-2007, and;

 Develop and implement a plan, including active training and enforcement provisions, to achieve 90% compliance with the target codes by 2017, including measuring current compliance each year. 

In the four years since ARRA, eighteen states still have no energy code at all or have residential codes that do meet the ARRA requirements, and fifteen states still have no energy code at all or have commercial codes that do not meet the ARRA requirements. A map of the status of every state's energy codes is available here.

 

I have not been able to find state annual compliance reports or a report by the DOE Office of the Inspector General on the building code commitment aspect of the ARRA funding.   So, there is little, if any, data on when or whether states will comply with their ARRA commitments. [NOTE: I would welcome being proven wrong in this area.  If you have data, please send me a link and put it in the comment section].

 

Given the vast research that building energy codes are an inexpensive way to acheive energy efficiency, it was a really good idea to tie the ARRA finding to energy code adoption.  Unfortunately, lack of enforcement of ARRA commitments appears to be a missed opportunity to move the country forward in this area.

The Green False Claim Most Companies Are Making Without Realizing It

You are a good green company.  You have dutifully installed a solar array on your facility, and use the energy it produces to power your manufacturing process. 

You proudly proclaim on your website, in your SEC filing or on your product packaging that you "use renewable energy."  You calculate your Carbon Footprint and deduct the emissions that would have been generated using conventional fuel.  

If, like most companies, you have sold the renewable energy credits (RECs) attributable to the renewable energy, you will potentially be in violation of Section 5 of the FTC Act (15 U.S.C. Sec. 45) (“Section 5”), which prohibits “deceptive acts or practices in or affecting commerce.” 

The Federal Trade Commission released the long-awaited fourth edition of the "Green Guides" on October 11, 2012. The purpose of the Guides is to provide a framework for companies to truthfully and non-deceptively market environmental and “green” products, packages, and services. A copy of the Guides is available here.

The Guides address green marketing in general and specific applications, including renewable energy (Section 260.15).  In one of the more controversial aspects of the Guides, the FTC advises that:

If a marketer generates renewable electricity but sells the renewable energy certificates for all of that electricity, it would be deceptive for the marketer to represent, directly or by implication, that it uses renewable energy.

Guides at § 260.15(d).

The FTC has concluded that renewable energy stripped of its carbon reduction and other environmental benefits is just energy. Thus, even if a company has a renewable energy installation on its facility, and uses the energy from that facility to power its manufacturing process, if it sells the renewable energy credits, it still would not be able to represent that it used renewable energy. In addition, any carbon offsets or emissions reductions could not be included in the company's calculation of its environmental impact.

This counter-intuitive result was roundly criticized in comments on the Guides:

Most commenters agreed that it would be deceptive for a marketer to represent that it uses renewable energy if it sold all the renewable attributes of the energy it uses. Most who addressed this issue, however, disagreed with the Commission’s proposed guidance. They argued that, even when a firm sells RECs, it should be able to market its role in generating renewable energy.

The FTC, in its response, defended its position regarding RECs, but said that a company hosting a renewable energy facility and selling the RECs would not be violating the FTC Act if it describes fully and accurately its role in the transaction.  Most companies, however, are not doing this. 

There is some evidence that the FTC is increasing its enforcement of false environmental claims. The FTC brought claims against four national retailers, including Amazon, Macy’s and Sears, that were allegedly selling textiles as made of bamboo when they were actually made of rayon. The companies settled with the FTC on or about January 3, 2013, paying a total of $1.26 million in penalties for the false advertising.

The FTC brought claims against Sherwin Williams and PPG for deceptively marketed their paints as free from volatile organic compounds (VOCs). According to the FTC, the base paints were VOC free, but tinted paint (which most customers buy) contained VOCs. The FTC settled the claims in October, 2012, and the companies were forced to change their marketing practices.

Given the frequency with which the Renewable Energy/REC rule is broken, it would be impossible for the FTC to police all of the violators.  However, In the context of other green marketing claims, the FTC may scrutinize a companies' representations about renewable energy and greenhouse gas reductions.  For companies that make public disclosures in Securities and Exchange Commission filings, this could be of even greater concern.

Fiscal Cliff Bill Extends Home Energy Efficiency Tax Credits for Businesses and Homeowners

     On January 1, 2013, the U.S. Congress passed last minute legislation known as the American Taxpayer Relief Act of 2012 to avoid automatic increases in income taxes for millions of Americans, as well as draconian cuts to the budget of the federal government, that many feared would plunge the nation’s economy back into recession. 

        Also included in this eleventh-hour legislative compromise were reinstatements of two business and personal tax credits applicable to energy efficient residences and appliances that had expired on December 31, 2011. The Act extended the tax credits through December 31, 2013, and made them retroactive to December 31, 2011, meaning that the credits are now available for both 2012 and 2013 projects

 

26 U.S.C. §45L Business Tax Credit for New and Renovated Energy Efficient Residences

 

            The Act reinstated and extended the 26 U.S.C. §45L business tax credit of up to $2000 for contractors or developers that construct or significantly renovate “dwelling units” (apartments, condos or single-family homes) that meet certain energy efficiency standards.

 

Importantly, the credit is calculated based on the “dwelling unit,” not the building. IRS guidance on the credit defines “dwelling unit” as “a single unit providing complete independent living facilities for one or more persons, including permanent provisions for living, sleeping, eating, cooking, and sanitation, within a building that is not more than three stories above grade in height.” Therefore, contractors and developers of low-rise multi-family properties can claim a credit for each individual unit, and attached townhomes each qualify for an independent credit.

 

            In addition, the credit had previously applied only to residences acquired before December 31, 2011. The credit is now available for homes built and acquired from December 31, 2011 through December 31, 2013, which includes those built and acquired either in 2012 or 2013.

 

            In addition to extending the credit, the Act changed the baseline of energy efficiency required to qualify. Previously, §45L required a 50% reduction in energy usage as compared to the 2003 edition of the International Energy Conservation Code (IECC). The Act amended the baseline energy standard to reference the 2006 edition. 

 

            The 2006 edition of the IECC contains several structural changes to make the code easier to apply, and adjusted some of the technical requirements. However, as determined by the Oak Ridge National Laboratory, the revisions did not change significantly the level of energy efficiency from the 2003 edition.  Therefore, although it is important to be aware of the technical changes, properties that would have qualified for the prior version of the §45L credit will likely meet the energy efficiency requirements of the new standard.  This will disappoint many critics of the §45L tax credit, who have argued that it is not stringent enough from an energy efficiency perspective.

 

            The Act also freezes the credit to the standard “in effect on January 1, 2006,” the 2006 edition of the IECC. Updating the baseline energy efficiency standard to more current editions of the IECC, which are up to 30% more energy efficient than the 2006 edition, will require further legislative amendment, and is therefore unlikely to occur in the near future.

 

26 U.S.C. §25C Individual Tax Credit for Energy Efficient Residential Improvements and Appliances

 

            The Act also reinstated the 26 U.S.C. §25C individual tax credit of 10% (up to $500) of the cost of certain energy efficient existing property improvements, like insulation, windows and door, and energy efficient heating, cooling and water heating appliances. 

 

            As with the §45L credit, the §25C credit, the Act extended the availability of the credit to improvements placed in service between December 31, 2011 and December 31, 2013, meaning that improvements placed in service in either 2012 and 2013 are now eligible.

Even After Installing Extra Insulation, the FHFA Proposed Rule on PACE Leaves Homeowners Out in the Cold

 Property Assessed Clean Energy (PACE) is a property assessment used to finance the upfront costs of energy efficiency upgrades.  A local government provides funding, and the assessment is paid back as a line item on a property’s tax bill.

PACE became a controversial issue in 2010, when the Federal Home Finance Authority (FHFA), the regulator of Freddie Mac and Fannie Mae, issued an order prohibiting Freddie Mac and Fannie Mae from purchasing mortgages with PACE assessments on them. The concern was that, as property tax assessments, the PACE loans would have priority over the Freddie Mac and Fannie Mae-backed mortgages, so the PACE loans would get repaid first out of any foreclosure sale proceeds.

FHFA proposed a rule on PACE financing on June 15, and is available for download here. The FHFA has not changed its position, and the proposed rule is a blanket prohibition on purchasing mortgages on PACE encumbered properties, and from consenting to PACE liens on properties with existing Fannie Mae and Freddie Mac backed mortgages. The argument is that the threat of default is immeasurable, and the environmental benefits difficult to calculate, so it is not worth the risk.  If the FHFA rule becomes final, PACE is dead. Comments on the rule are open until the end of July. 

If the FHFA rule goes into effect, what happens to the homeowners who already took PACE loans?  Many communities have had PACE programs in place for some time.  The FHFA rule will certainly prevent Fannie Mae and Freddie Mac from backing loans when those homes are sold unless the PACE loan is paid off.  Likewise, the PACE loan will have to be paid off if the home is refinanced. This will be an ugly surprise for those homeowners that took a PACE loan specifically because it was transferable with the property. 

More concerning is whether the FHFA rule could be read to require Fannie Mae and Freddie Mac to call the mortgages on properties with a PACE assessment.  The proposed rule states that Freddie Mac and Fannie Mae are required to:

immediately  take such actions as are necessary to secure and/or preserve their right to make immediately due the full amount of any obligation secured by a mortgage that becomes, without the consent of the mortgage holder, subject to a first lien PACE obligation.

In other words, if you take on a PACE loan, you have to pay off your mortgage. 

The rule doesn't specifically address retroactive application of the rule, but the phrase "becomes...subject to a...PACE obligation" seems to be proactive, as opposed to retroactive. With a hammer as big as calling a mortgage, however,  the final FHFA should specifically state that it does not apply to existing PACE loans. 

Decision in BIA v. Washington does not clarify when energy efficient codes are preempted by Federal law

On June 26, 2012, the United States Court of Appeals for the Ninth Circuit decided the BIA v. State of Washington case. The opinion can be downloaded here.

 In its decision, the Ninth Circuit held that the Washington State energy efficient building code was not preempted by Federal law.  This ruling was contrary to the ruling in a companion case, AHRI v. City of Albequerque, which was before the Federal District Court for the District of New Mexico. In the Albuquerque case, the court held that the code was preempted. 

Because there was a split, the interesting question is whether the cases, when read together, create a clear legal framework for ensuring that local energy efficient building codes are not preempted. In my opinion, the Washington court did not articulate a clear rule that can be used to guide local governments through the preemption waters. 

Both Albuquerque and the State of Washington passed building codes requiring that new buildings acheive certain levels of energy efficiency. In their suits, the trade associations alleged that the codes were invalid because they were preempted by Federal law.  Specifically, the trade associations alleged that the codes mandated the use of heating, ventilation and air conditioning systems that exceeded the energy efficiency standards set by the Energy Policy and Conservation Act of 1975 ("EPCA"), 42 U.S.C. Sec. 6295, et seq.

The Albuquerque code offered two paths--a prescriptive path, under which the installation of HVAC exceeding the Federal standard was required, and a performance path, under which a builder could choose how to acheive the required level of efficiency.  Early on, the Albequerque court held that the prescriptive path was preempted.  Ultimately, the court found that the performance path was not severable from the prescriptive path, and did not reach a verdict on the preemption of the performance path. 

The Washington code did not have a prescriptive path.  Rather, the Washington code had a point system, where different building techniques, including the installation of energy efficient HVAC systems, acheived different "scores."   

The Washington court differentiated the Washington and Albequerque codes based on the costs imposed on the builder for not using high efficiency HVAC equipment, not to the difference between a prescriptive and a performance standard.  The court reasoned:

Albuquerque’s ordinance imposed costs, as a matter of law, on builders who installed certain covered products meeting federal standards, by requiring the builder to install additional products that would compensate for not using a higher efficiency product. As the [Albequerque] court explained, “if products at the federal efficiency standard are used, a building owner must make other modifications to the home to increase its energy efficiency.” The Albuquerque ordinance thus effectively required use of higher efficiency products by imposing a penalty through the code itself.

Here, by contrast, the Washington Building Code itself imposes no additional costs on builders. The district court noted that there are “substantial differences” between the Washington Building Code and Albuquerque’s ordinance. It correctly rejected the Plaintiffs’ argument concerning subsection (B), explaining that the Washington Building Code created no penalties, and did not require higher efficiency products as the “only way to comply with the code.”

In the Washington code, however, it appears that the same costs are imposed on the builders.  If a builder chooses to use a standard HVAC system, the builder must make other changes to acheive the required points.  Later in the opinion, the Court acknowledged that the cost of adopting the other changes (and not installing more efficient HVAC equipment) could be higher. 

Unfortunately, I do not see how the Washington court's analysis works to differentiate the Albuquerque code from the Washington code.  As a result, it does not make clear what type of structure is "safe" for local governments to adopt, and not risk a preemption fight. 

 

Home Depot and Whirlpool Face Class Action for "Fraudulent" Energy Star Appliance

        A lawsuit was filed on Friday in the United States District Court for the Northern District of Ohio on behalf of nationwide and Ohio-only classes of consumers who purchased three models of Maytag Centennial washing machines whose ENERGY STAR status was later revoked. 

          The plaintiffs allege that Whirlpool and Home Depot are in violation of Ohio’s Consumer Sales Practices Act, Ohio’s Deceptive Trade Practices Act, unjust enrichment under Ohio law, Ohio common law fraud, and breach of contract because they paid more up front for an energy efficient appliance which turned out not to be energy efficient.  The complaint is available here.      

           In November 2009, Adam Savett purchased a Maytag Centennial washing machine from a Home Depot retail store in Ohio. The machine he chose bore the now-familiar ENERGY STAR label, which is issued under a program jointly administered by the Environmental Protection Agency and the Department of Energy. While ENERGY STAR-qualified washing machines typically demand higher retail prices than standard models, consumers are projected to come out ahead due to the long-term operating savings that result from the more efficient use of both water and energy. 

            However, less than 10 months after Savett purchased his machine, an independent laboratory completed a DOE efficiency test of that model, revealing that the unit did not meet ENERGY STAR standards. In order to qualify for the ENERGY STAR label, the Maytag machine would have had to have been at least 37% more energy efficient than the minimum energy efficiency standards mandated by law.

            Now, Whirlpool Corporation, which acquired Maytag in 2006 and continues to sell appliances under the Maytag name, and Home Depot, are facing a nationwide class action lawsuit for fraud.

           Many green legal prognosticators, including me, anticipated that a suit of this type would be forthcoming.  The increased interest in green and energy efficiency has also led to a rise in "greenwashing"--making claims of environmental friendliness or energy efficiency simply for marketing purposes.  This suit echoes the allegations in Henry Gifford's ill-fated lawsuit against the United States Green Building Council that their buildings were not as energy efficient as promised. 

         It remains to be seen whether actual fraud, which requires the intent to deceive, was committed in this case.  Nonetheless, it is significant that this type of suit has been filed. 

More analysis to come….