Why the Colorado BPS lawsuit is irrelevant
Photo by Kait Herzog on Unsplash
Building performance and emissions standards are key regulatory tools in the fight against climate change. Yet, they are facing some legal challenges.
Lawsuits have been filed in several jurisdictions, including a recent lawsuit against Colorado’s state standard and the Energize Denver Building Performance Policy. And while this is not necessarily surprising, it is frustrating from a climate work perspective.
In this blog, we explain a few key considerations, why “waiting for the litigation” is a risky strategy, and what building owners (and tenants) should do next.
What is happening in Colorado:
Colorado and Denver are not the first jurisdictions to have their performance standards legally challenged. See our prior blog post on New York’s Local Law 97 (while that lawsuit was initially thrown out; unfortunately, it’s back on appeal, more on that in later posts).
Even though we are lawyers, we don’t always like to spill a bunch of (digital) ink for no reason, so we will refer to our friends at The Public Health Law Center at Mitchell Hamline School of Law. They published a comprehensive yet readable analysis of the lawsuit, Colorado Apartment Association v. Ryan (plus, we love a good Taylor Swift reference, so enjoy the title of that article). And, if you have several hours of free time, you can dig into the actual complaint, here.
What do you need to know?
As one of the few climate-focused law firms, we have a unique perspective. Given our experience and work in this quickly-evolving space, here’s what you need to know:
Building Performance and Emissions standards (BPS) are a brand new regulatory tool.
This is an aspect that often gets overlooked, yet is an important part of these conversations. The first performance standard was enacted in 2018 (Washington D.C.) with New York City and Washington State following in 2019. This means that the “oldest” BPS is only about six years old; this is a blink of an eye in terms of the law (which generally moves at a very tired snail’s pace, at best).
Because BPS are so new, there is little to no precedent to follow, that means that there will be some trial and error. With this in mind, a few points:
Are building performance standards perfect? No.
Are they an important step towards meaningful climate action? Absolutely.
Are they likely to be business as usual in many jurisdictions? Probably
BPS are new, but they are likely here to stay, so let’s all be patient.
Just because a lawsuit has been filed does not mean it has merit or will be “successful.”
The Colorado plaintiffs rely pretty heavily on what many folks know as “the Berkeley case,” or the “natural gas case.” However, there are at least two pretty significant flaws in the Colorado plaintiff’s reliance on the “Berkeley case” as explained in Hamline’s analysis:
“Many objected to the panel’s opinion [in Berkeley], including eleven Ninth Circuit judges, who ‘urge[d] any future court that interprets the Energy Policy and Conservation Act not to repeat the panel opinion’s mistakes,’ and the federal government itself, which argued that the first version of the panel opinion ‘destabilize[d] the long-settled understanding [of EPCA] shared by the Department [of Energy], the States, municipalities, and the courts.’ Because of this, and because courts outside the Ninth Circuit are not obligated to follow Ninth Circuit precedent, there’s reason to think that future court cases, potentially including Colorado Apartment Association, will reject the CRA v. Berkeley reading.”
So, will the lawsuit be “meritorious?” We will have to wait and see, but there are significant challenges with the legal theories.
Lawsuits are filed all the time, in courthouses all over the country. Assuming that every lawsuit will be “successful” is not a reason to “wait and see” how the litigation will shake out (we hear this all the time). Especially when real penalties are involved, compliance deadlines are not stayed, and the market will continue to demand more efficient buildings regardless of the regulatory scheme.
What BPS are trying to do is not what EPCA was designed to protect.
The reason that EPCA pre-empts states from regulating efficiency standards for certain major appliances makes sense; The practical impact is generally a good thing from a commerce perspective in that manufacturers of things like water heaters (for example) can sell their products in all states without having to create different models to meet each state’s individual efficiency requirements.
This means that the pre-emption provisions of EPCA that the Colorado plaintiffs are arguing relate to building performance standards were designed to do pretty specific things; things that BPS don’t do. Building Performance / Emissions Standards are, by their nature, performance-based, not prescriptive. They give building owners the flexibility to implement the strategies that work best for them; this flexibility generally helps to defeat arguments that rely on a prescriptive approach, which can be problematic under a variety of legal theories (more on EPCA from Columbia Law School’s Sabin Center for Climate Change Law, here).
Again, building performance standards are, at best, six years old; and there is a lot to be learned. Generally speaking, this type of legislation can be amended, so if there are challenges that have merit, it does not mean they cannot be resolved. And industry groups like the Institute for Market Transformation have developed resources that help state and local governments craft standards that avoid (or can stand up to) legal challenges (see a few examples here).
Finally, in perhaps a self-defeating prophecy for those who are filing these lawsuits, jurisdictions that have not yet implemented BPS will learn more about the challenges and ways to make sure BPS are not preempted or run afoul of other legal issues. So, in essence, thanks for showing us the potential flaws.
Because Performance / Emissions Standards mitigate climate change, they are key equity tools, and should be treated as such.
It is well established that the built environment, from operational and embodied carbon standpoint, is a significant contributor to climate emissions. It is also well established that the impacts of climate change are severely disproportionate: minority and marginalized communities are hit first and hardest (examples here and here).
Climate change is an equity issue and Building Performance and Emissions Standards are key tools to managing the significant climate emissions of existing buildings. Cities and states have recognized this. For example, in developing its Building Emissions Performance Standard (affectionately known as BEPS), the City of Seattle centered equity in the development of BEPS (read the Director’s Report, with numerous references to race and social equity, here). Other industry groups have also created resources,including this guidebook prepared for the American Cities Climate Challenge.
“Wait and see” is (almost always) a losing game.
Hoping for the best is not an effective risk management strategy, and there are many reasons to be proactive about not only compliance but also meeting the market demand for more efficient, healthy buildings that support owners’, tenants’, and investors’ values and ESG goals. A few points to keep in mind:
Compliance deadlines are, for the most part, not stayed and all Building Performance Standards have associated penalties.
Many BPS also require support from individuals or consultants with specific qualifications; those firms are already getting booked and if you “wait and see,” the support you need to comply may not be available.
As performance standards become the norm, out-of-compliance buildings face increasing risks of becoming stranded assets that cannot be leased, sold, mortgaged or insured, just to name a few.
The market (and tenants) will continue to demand high performing buildings.
High performing buildings support broader equity work and Environmental, Social and Governance (ESG) metrics.
If you want more information on building performance standards, the US Office of Energy Efficiency and Renewable Energy provides various resources, as does the Institute for Market Transformation (including this chart). And if you need specific support at the asset or portfolio level, email us - we would be happy to help!
Disclaimer / Warning: This is common sense, but bears repeating: this blog is intended for informational purposes and does not contain or convey legal advice. The law is inherently fact specific. General information, including this blog, should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.