Green Building Law Blog : Green Building Lawyer & Attorney : Shari Shapiro: Calliope Communications, LLC

The great people over at Treehugger had some great additional thoughts on Friday's Waxman-Markey post.

Particularly interesting was Lloyd Alter's insight from his dealing with uniform building codes:

When I practiced architecture, I had to work with a building code that covered a territory that ranged from temperate at the south to arctic at the north, and quite capably handled it with maps and tables that adjusted requirements for degree-days, snow loads and other climactic differences, it's not that difficult.
 

Appendix writers, sharpen your pencils.  Alternatively, the building code could be a performance based code, which sets the standard and allows states and local governments to meet it in different ways. 

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[Many thanks to Chris Cheatham for collaborating with me on this post]

Today, the Waxman-Markey bill, otherwise known as the American Clean Energy and Security Act (H.R. 2454) is set to be voted on in the House of Representatives. The very fact that the vote is occurring means this bill will pass in the House. This monumental bill would establish a cap-and-trade program to cut global warming pollution. Of course, a cap-and-trade program faces an even more difficult path in the Senate.

So what is a cap-and-trade program exactly (PDF)?

The cap: Each large-scale emitter, or company, will have a limit on the amount of greenhouse gas that it can emit. The firm must have an “emissions permit” for every ton of carbon dioxide it releases into the atmosphere. These permits set an enforceable limit, or cap, on the amount of greenhouse gas pollution that the company is allowed to emit. Over time, the limits become stricter, allowing less and less pollution, until the ultimate reduction goal is met.

The trade: It will be relatively cheaper or easier for some companies to reduce their emissions below their required limit than others. These more efficient companies, who emit less than their allowance, can sell their extra permits to companies that are not able to make reductions as easily.

Companies will be required to purchase the emissions permits from the federal government, which in turn results in a sizeable revenue stream to the federal government. Much of the back room politicking that has occurred over the last few weeks regarding the Waxman-Markey bill has involved how this revenue stream will be allocated to government programs.

In addition to establishing an overall Cap-and-Trade program for carbon emissions, the Waxman-Markey bill contains several provisions which involve green building, and many green building and energy efficiency programs will be funded by the cap-and-trade revenue. Below is a summary of some of the major provisions regarding green building contained in the Waxman-Markey bill.

Section 201: National Energy Efficiency Building Codes

Section 201 of the Waxman-Markey Act calls for the development and adoption by state and local governments of a national energy efficiency code. A summary of the main provisions are as follows:

1. Establishes a “national energy efficiency building code” for residential and commercial buildings, sufficient to meet each of the national building code energy efficiency targets.

2. Sets energy efficiency targets for the national building code: “on the date of enactment of the American Clean Energy and Security Act of 2009, 30 percent reduction in energy use relative to a comparable building constructed in compliance with the baseline code…effective January 1, 2014, for residential buildings, and January 1, 2015, for commercial buildings, 50 percent reduction in energy use relative to the baseline code; and…January 1, 2017, for residential buildings, and January 1, 2018, for commercial buildings, and every 3 years thereafter, respectively, through January 1, 2029, and January 1, 2030, 5 percent additional reduction in energy use relative to the baseline code.”

3. If consensus based codes provides for greater reduction in energy use than is required under the ACESA, the overall percentage reduction in energy use provided by that successor code shall be the national building code energy efficiency target.

4. Requires that states and local governments comply with or exceed the national energy efficiency building code, and provides for enforcement mechanisms for states which are out of compliance.

The federalization of building codes has the potential to save consumers large amounts of money on their energy bills by enhancing the energy efficiency of buildings nationwide, as well as addressing the 38% of carbon emissions generated by buildings in a comprehensive manner. On the other hand, it represents a major shift in the balance of power over building and land use regulation. Traditionally, building codes, like almost all land use regulation in the United States has been a local (in some cases, state) issue. This makes for a patchwork of different codes across the nation. Indeed, thirteen states have no statewide commercial building codes, and fourteen states have no statewide residential building code.

Proponents of local control of regulatory authority argue that local government can more appropriately respond to local conditions and can experiment more freely with different types of regulations than would be possible at the federal level. On the other hand, federal control of building codes provide uniformity across the country for a problem which does not respect state and local borders, prevents local challenges to individual energy efficiency efforts (like AHRI v. City of Albuquerque) and, given the large number of states which do not have a current building code at all, provides more effective regulation of this important source of carbon emissions.

Section 131, 132: SEED funds

According to analysis completed by the American Council for an Energy-Efficient Economy,

allocations detailed in Section 782g direct 9.5% of allowances in 2012 (and decreasing amounts thereafter) to go into a State Energy and Environmental Development (SEED) account to be used by state and local governments for efficiency and renewables projects.

The allocation of SEED money will be at the discretion of local and state authorities.

One of the programs that can be funded by these allocation are Property Assessed Clean Energy (“PACE”) Bonds. PACE bonds involve loans to commercial and residential property owners to finance energy retrofits. Through the interest generated on these bonds, a revolving fund is established to allow for even more retrofits to occur. Already, California and Missouri have announced plans to use funding from the Department of Energy State Energy Program to establish PACE bond programs. Look for more states to jump on the PACE bond bandwagon and use cap-and-trade revenue to fund similar programs.

Section 202: REEP Program

With the American Recovery and Reinvestment Act, the Department of Energy’s State Energy Program received billons of dollars. Under the Waxman-Markey bill, the State Energy Program will again receive billions of dollars for more energy efficiency retrofits. From the Pew Center on Climate Change (PDF):

This section requires the Secretary of Energy to develop a Retrofit for Energy and Environmental Performance (REEP) program to facilitate building retrofit programs for energy efficiency and efficient water use. Funding will be made available through REEP to the State Energy Programs for state and local efforts, including audits, incentives, technical assistance, and training. States are permitted to choose funding mechanisms, with options including credit support, such as interest rate subsidies or credit enhancement, providing initial capital, and allocating funds for utility programs.

The REEP program has not been created yet so it is unclear what the program will look like. Based on the DOE’s previous support for PACE bond programs when allocating ARRA funds, don’t be surprised to see even more of these programs established through REEP.

Green Act: H.R. 2336—Amendment to Waxman-Markey

On May 7, 2009, Rep. Ed Perlmutter (D-Colorado) introduced H.R. 2336, the Green Resources for Energy Efficient Neighborhoods Act of 2009 (“GREEN ACT”). According to Perlmutter’s office, “The GREEN Act provides incentives to lenders and financial institutions to provide lower interest loans and other benefits to consumers, who build, buy or remodel their homes and businesses to improve their energy efficiency and use of alternative energy.”

In essence, the Act:

1. Encourages energy efficiency in HUD housing by offering block grants and credit for energy improvements in the underwriting of mortgages;

2. Provides that Fannie Mae and Freddie Mac will have a duty to serve very low, low and moderate income communities while developing underwriting standards to facilitate a secondary market for energy-efficient and location efficient mortgages;

3. Requires federal banking regulators to establish incentives for the development and maintenance of “green banking centers” for the purpose of providing information to customers seeking information about acquiring green mortgages.

Interestingly, Perlmutter’s GREEN Act passed the full House of Representatives as part of HR 6899, the Comprehensive Energy Security and Consumer Protection Act in September 2008, but the Senate failed to take action on this legislation. The GREEN ACT was added this morning to the manager's amendment to the Waxman-Markey bill.
 

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According to the SF Examiner, LEED "now includes an energy reduction component called Sustainable Food."

Building owners and managers can now gain credit towards LEED certification by using sustainably harvested foods certified by pre-approved organizations including USDA Certified Organic, Food Alliance Certified, Protected Harvest Certified, The Rainforest Alliance, Fair Trade, and the Marine Stewardship Council's Blue Eco Label, and/or by acquiring food from within a 100-mile radius for food service and catering functions at the building. The threshold for achieving this credit is for 25 percent of all food and beverages to meet one or more of these sustainability criteria. Double points are awarded if the food is both certified and locally harvested.

Is this a good idea? It's true, all buildings will serve food at some point, but I am not sure that integrating an operations component like sustainable food is a good idea for a green building standard.  For example, if a municipality incorporates the LEED standard, and a building owner chooses to adopt the sustainable food credit, will the municipality have to police whether 25% of their food purchases are local and organic? 

Now using this argument, there should be no operations related credits in the LEED program.  This, of course, is not reasonable either.  The question becomes, to my mind, what operations credits are integral to the creation of a green building, and what items are merely good sustainable practices for everybody.  Once LEED enlarges its mantle to include every sustainable practice, it dilutes its legitimacy as a rigorous standard.  There is enough work to be done in managing the

• 72% of electricity consumption,
• 39% of energy use,
•  38% of all carbon dioxide (CO₂) emissions,
•  40% of raw materials use,
•  30% of waste output (136 million tons annually), and
• 14% of potable water consumption

that come from buildings directly without frittering away efforts on peripheral matters.

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Marsh issued a report today on finding from a survey of 55 construction industry participants in different geographical locations on the risks associated with green building.  The survey can be downloaded here. 

Some interesting findings:

1. Financial risks and standard of care/legal risks ranked highest in terms of threats to green building projects. p. 7

2. The insurance industry continues a "wait and see" approach to covering green risk. p. 15

3. Firms involved in one or more aspects of green building shouold seek the services of an attornet with experience in green risks. p. 15

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Yesterday, the Obama Administration released a study analyzing the potential impact of climate change in the United States. It read like the Ten Plagues at my family's annual seder:

heavy downpours, rising temperature and sea level, rapidly retreating glaciers, thawing permafrost, lengthening growing seasons, lengthening ice-free seasons in the ocean and on lakes and rivers, earlier snowmelt, and alterations in river flows

And if that wasn't enough...

heat stress, waterborne diseases, poor air quality, extreme weather events, and diseases transmitted by insects and rodents

That's right, all that is missing is slaying of the first born. 

This study is very positive in that it is a frank assessment in relatively plain language of what we will have to address in terms of the impact of climate change.  Hopefully, now that the issues have been named, we will be able to be more proactive about enacting market-based and regulatory amelioration, and ideally, solutions. 

The current amelioration mechanism on the table--Waxman-Markey--seems to be in trouble.  First, the bill has not been very effectively communicated or sold to the American public.  Second, it seems to be subsumed beneath the health care media juggernaut.  Finally, agrobusiness interests have been successfully gaining a foothold in tying up the process. 

We need to get on with it.  Cap-and-trade or carbon tax, regulation of GHG under the Clean Air Act, green building market and regulatory programs.  Either that, or be prepared to host a giant tropical cockroach at your next seder.

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Diane Mastrull, the Environmental Reporter for the Philadelphia Inquirer did a Q & A today with me.  Thanks Diane!

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Today on CNN.com, there was a little piece on the non-acceptance of aerated concrete material pursuant to the California Building Code. 

According to CNN:

AAC is a mixture of sand, water, lime, portland cement and aluminum powder that is formed into blocks and cured in an autoclave, a sort of industrial pressure cooker. It has been used in Europe, where it was invented, for more than 70 years.

Besides being fire-resistant, AAC also deadens sound, is energy efficient, is impervious to termites, is bulletproof and waterproof, generates no waste in its creation, and can be recycled, its fans say.
 

We all know how important it is to live in a green, not to mention bullet-proof, structure, so one would think that a progressive state like California would allow for the use of this material.  Not so, says CNN.com, because AAC has not been tested for its seismic resistance.

"Autoclaved aerated concrete cannot be used to resist seismic forces because it has not been seismically tested," said David Walls, executive director of the California Building Standards Commission in Sacramento. The restriction is based on guidelines from the National Earthquake Hazards Reduction Program, he said.

The AAC issue is illustrative of the issues which accompany incorporating new materials into traditional building code structures. 

First, you have the issue of overlapping regulatory interests, like promoting energy efficiency and preventing buildings from crushing people during earthquakes.

On top of these regulatory interests, you have administrative considerations.  Most states adopt the International Building Code or some form of it on a regular schedule.  New materials and products may emerge as salient between upgrades to new code systems.  In addition, not all of the code may be adopted.  In this case, California adopted the 2006 IBC without the companion housing code which would have included acceptance of AAC in seismic areas, according to a CNN.com source. 

Finally, there are the political considerations.  From the AAC example, manufaturers of competing products may intrude with acceptance of the provisions of the building code which allow for new materials.  

Greening the building codes is not a simple task--competing administrative, regulatory and political forces must be managed and balanced.  Even with the best of attention to each of these considerations, there will always be examples like AAC which fall through the cracks. 

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Green Building Law Blog was listed on the E-Justice blog as one of the 50 best environmental blogs!

We appreciate the recognition!

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Stephen Del Percio does a great job of analyzing the current state of green litigation, or lack thereof, in response to my piece on the same subject from last week on the Green Real Estate Law Journal. 

He makes a particularly interesting point about the statute of limitations:

In my experience, plaintiffs will typically wait until they are up against the controlling statute of limitations before commencing a lawsuit. Here in New York, the applicable statutes of limitation for many of the causes of action under which green building liability may arise (such as negligence and breach of contract) range from three to six years. When you consider that LEED Version 2.2 only went live on January 1, 2006, many of the LEED-related green building claims that have been suggested to date remain well within the statute. This could be a significant reason why both LEED- and green building-related litigation will remain on the horizon for the near future.

Many thanks to Mr. Del Percio and Mr. Cheatham for their insightful thoughts sparked by my piece. 

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My friend Chris Cheatham over at Green Building Law Update has an interesting followup piece to my piece from last week on Whither The Green Building Litigation. He also has a picture of pinnochio. 

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CLARIFICATION:

I reworded my original post on this subject to clarify my intent. In my original post I noted that most of the conclusions of the Harvard study had previously been made by other commentators in the field. Similarly, the post noted that important sources appear not to have been considered by the authors of the study. I stand by those criticisms. My post also suggested, however, that the presentation of the study's conclusions seemed "to be nothing short of plagiarism." That was an unfortunate choice of words. I did not mean to impugn the academic honesty of the authors or their supervisors or the institution that published the study. To the extent that my words conveyed that impression, I apologize to each of them.

On May 29, 2009, Green, Inc., the New York Times' green blog announced a truly startling revelation--"Building green can open the door to plenty of legal pitfalls, a new study warns." 

To readers of this blog, this may seem to be...old news.  But not to the blogosphere and the Twitterverse.  News of the Harvard revelation spread fast and furious, as though Clarence Darrow himself had spoken on green building law from beyond the grave.

And what pearls of wisdom were revealed from the venerated halls of Cambridge? Frankly, nothing that had not been written about in hundreds of blog items and articles before. What was astounding, however, was that there was not a single reference to any of those articles or blog postings.  The Harvard piece was written as if the insights and conclusions were original.  This is not the case.

Here are a few examples:

AHRI v. City of Albuquerque

From the Harvard study at 5:

[AHRI v. City of Albuquerque] illustrates potential conflicts between municipal regulation of green building and green building efforts at the state and/or federal level. 

From my article on AHRI v. City of Albuquerque in July, 2008 at Greenerbuildings.com

 Local laws seeking to set higher green standards will be struck down if the federal government has exclusive authority to regulate energy efficiency.

Risks

From the Harvard study at 6:

Project Owners

Failure of project to achieve certification or an anticipated level of certification

Failure to qualify for tax credits

Failure to meet loan or incentive program requirements

Increased soft costs due to delays

Failure to meet anticipated or state claims in marketing or promotional materials

From Greenbuildinglawblog July 1, 2007

Finally, although the green building movement is in its halcyon days, new expectations will inevitably lead to conflict. A multimillion-dollar development project will fail to gain the LEED credits required to secure a government grant, and litigation will doubtless ensue.

From Custom Home Online February 15, 2008

Some mistakes to beware of committing in your marketing of green homes include overstatement of benefits or performance; misrepresentation, non-disclosure, or outright fraud (intentional or unintentional); and making vague, misleading claims or subjective, unverified statements.

From Construction Monthly, 2007

Suppose, for example, that an architect’s LEED Silver building, designed to such a level for the purpose of securing some type of state or local tax incentive, only received LEED Certified because of a credit rejection from USGBC due to insufficient documentation? It is not difficult to imagine the owner looking to the architect or engineer responsible for that particular part of the design for some sort of redress, particularly if documentation responsibilities were not clearly identified by contract.

From the Harvard study at 6:

Design Professionals

Higher standard of care resulting from participation in the building process as LEED Accredited Professionals

Design defects that result in failure to achieve certification or a specific level of LEED certification

Liability due to the failure of systems or components to perform adequately over the structure's lifecycle

Exclusion of warranties and services in the green building context from insurance policies or added insurance costs

From Greenbuildinglawblog, March 9, 2009:

However, the answer is not as clear for professionals who hold themselves out as a LEED Accredited Professional, or who provide additional green services, like commissioning and energy modeling. There is a credible argument to be made that a LEED AP should be compared with what a reasonable LEED AP would have done with respect to building a green building, not just what a reasonable architect or other design professional would have done under the circumstances. Further, it is not clear that a professional liability policy which covers specific design or contracting services covers negligence in providing additional green services like commissioning and energy modeling.

From Sustainable Land Development Today, December, 2008:

Accordingly, the contractual language in the design contract could provide the insurance company with ample opportunity to determine that the architect gave the owner a guarantee or warranty that the building would achieve a particular rating and to possibly deny coverage for claims arising out of the building’s failure to obtain such rating.

I could literally go through the entire publication demonstrating that each and every component has been said elsewhere before.  The Harvard team could have alleviated this situation with the liberal application of footnotes.  Instead, a compendium of a total of 15 articles are listed at the back of the publication, giving the impression that the article contains new insights into green law from Harvard. Shining a little light discovers the truth--the Harvard report is regurgitation from leading scholars in this field almost three years after we started discussing these issues in earnest.

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On May 27, Toronto adopted a mandatory green roof bylaw, requiring green roofs on commercial, residential and industrial property. In summary, the bylaw requires

Up to 50 per cent green roof coverage on multi-unit residential dwellings over six storeys, schools, non-profit housing, commercial and industrial buildings. Larger residential projects require greater green roof coverage, ranging anywhere from 20 to 50 per cent of the roof area.

The mandatory nature of Toronto's green roof law kicked up a storm of controversy, with many developers objecting to the increased costs.

According to the Globe and Mail

Steve Daniels, a development planner with the Tridel Group, said a green roof can cost $18 to $28 a square foot on a typical tall condominium building, meaning an extra $200,000 to $400,000, plus maintenance costs.

The question remains: how effective are green building mandates in improving environmental outcomes like improving energy efficiency, water use, etc. ? Are they better than incentives? Less effective? To date, there is no study available on the regulatory effectiveness of green building mandates.  Such analysis needs to be undertaken soon before more requirements--which may or may not be the most effective means of acheiving environmental goals--are enacted.

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