Green Building Law Update Service

On April 30, 2012, the New York City Council unanimously approved Zone Green, New York City’s proposed zoning amendments that remove various hurdles for developers and building owners to incorporate green elements such as solar energy systems, thicker walls for insulation and rooftop gardens into their properties.  A previous blog  post detailing these amendments is available here.

On March 28, the City Planning Commission approved the amendments with various modifications and clarifications, including the following:

Require that applications for certification for a rooftop greenhouse be delivered to the affected Community Board when filed

Clarify that the maximum height for a rooftop greenhouse receiving floor area or height waivers is 25 feet, measured from the level of the roof to the highest point of the greenhouse.

Where the text sets forth the energy efficiency standards that would entitle new buildings to deduct up to eight inches of exterior wall thickness from floor area, modify references to the NYC Energy Conservation Code (NYCECC) to reflect the potential for future modifications to the NYCECC.

When a new building deducts up to eight inches of wall thickness from floor area, require this to be noted on the Certificate of Occupancy.

Add skylights to the list of permitted obstructions on a rooftop within a court.

Clarify that sun control devices, if not accessible, do not count toward floor area.

Clarify that wind turbines are allowed to exceed a height limit as set forth in this proposal on top of portions of a building that are at least 100 feet in height, but not on lower portions of a building, where a different portion of the building is at least 100 feet in height.

A report that was submitted by the Commission on March 28 is available here.

In March, The Rockefeller Foundation and DB Climate Change Advisors released a research paper entitled United States Building Energy Efficiency Retrofits: Market Sizing and Financing Models.

Among other things, the report makes the following findings with respect to energy efficiency retrofits in terms of energy savings, greenhouses gases, and job creation.

Energy Savings:  The report states that scaling building energy efficiency retrofits in the United States offers a $279 billion dollar investment opportunity.  The energy savings over 10 years could total more than $1 trillion.

Greenhouse Gases:  The report finds that scaling building retrofits could eliminate more than 600 million metric tons of CO₂ per year, approximately 10% of U.S. emissions in 2010.

Job Creation:  The report concludes that increased building retrofits could create more than 3.3 million new direct and indirect jobs.

The report also addresses several financing options for retrofits, including Energy Service Agreements (ESAs), Property Assessed Clean Energy (PACE), and on-bill-finance options, all of which have the potential to address historical barriers and achieve scale across different market segments.  The report states that PACE has potential as a model for all segments, but it requires significant regulatory support and acceptance from the mortgage industry, neither of which currently exists.  On-bill finance could be utilized with enabling regulation or used as a mechanism to enhance other financing models across the three building market segments.

The report concludes that the ESA structure has the potential to scale quickly and meet the needs of both real estate owners and capital providers in the commercial and institutional market, without requiring regulations or subsidies.

Recently, the Preservation Green Lab of the National Trust for Historic Preservation issued a report that confirms the environmental benefit of building reuse.  The report concludes, among other things, that it can take between 10 to 80 years for a new energy efficient building to overcome the climate change impacts created by its construction.  The study finds that the majority of building types in different climates will take between 20-30 years to compensate for the initial carbon impacts from construction.  Thus, the study confirms that reusing and retrofitting existing buildings with an average level of energy performance almost always offers environmental savings over demolition and energy efficient new construction.

The report examines four environmental impact categories — climate change, human health, ecosystem quality, and resource depletion — and six building types:  single-family residential, multifamily residential, commercial office, urban village mixed-use building, elementary school, and warehouse conversion. The report used four cities — Portland, Phoenix, Chicago, and Atlanta – to represent different climate zones.

While the savings may be small on a building-by-building basis, they can be substantial when scaled across an entire metropolitan area.  For example, the report finds that if Portland were to retrofit single-family homes and commercial office buildings that it is otherwise likely to demolish over the next 10 years, the potential CO₂ reduction would total approximately 231,000 metric tons, approximately 15% of their county’s total CO₂ reduction targets over the next decade.

While there seems to be a preference for new energy efficient buildings as a way to reduce energy use, this report shows that the greenest building may be the one that is already built.

On January 25, 2012, a federal district court in New Mexico issued a permanent injunction prohibiting Albuquerque, New Mexico from enacting a municipal energy code that required new buildings to achieve a high level of energy efficiency.  The decision, unless overturned on appeal, effectively requires the city to go back to the drawing board and craft an energy code that does not run afoul of federal law.

First, a little background on the case. In 2008, the Air Conditioning, Heating and Refrigeration Institute (AHRI), a trade association, challenged Albuquerque’s energy code, which the city had adopted in 2007, in federal court, alleging that the code was preempted by the federal Energy Policy and Conservation Act (EPCA), which regulates the energy efficiency of certain large appliances such as air conditioners and water heaters.  EPCA sets federal efficiency standards for these appliances and preempts more stringent state or municipal regulations.

In an October 2008 decision, the district court granted AHRA’s request for a preliminary injunction, preventing the code from taking effect.  Plaintiffs, seeking a permanent injunction, subsequently filed a motion for summary judgment.  In a September 2010 ruling, the court found the code’s prescriptive provisions, which require that building HVAC systems and other equipment comply with certain minimum efficiency standards, were preempted as a matter of law because the standards were more stringent than those required by EPCA.  However, it denied the motion with respect to the code’s performance-based provisions, noting that AHRI did not show facts demonstrating that these provisions (which include, among other things, meeting a certain level of LEED certification) are within EPCA’s preemptive scope.  The motion was denied without prejudice, leaving the opportunity for a renewed motion at a later date.

That, as it turns out, is precisely what AHRI did.  It renewed its motion, arguing that the performance-based provisions were also preempted.  The court agreed, holding that it was impossible to sever the prescriptive and performance paths from each other and pointing to a stipulation filed by the city that stated this very this fact.  As a result, the court held that all provisions of the code relating to HVAC and water heating equipment were invalid and unenforceable.

Unfortunately, the court did not reach whether the performance-based provisions were preempted in and of themselves.  AHRI and other industry groups had argued in this and a similar case filed in Washington state that it was impossible meet the performance-based provisions without exceeding federal efficiency requirements.  Not ruling on this issue means that Albuquerque must draft a new code without guidance on whether a performance-based code would survive legal challenge.

In January 2012, Deutsche Bank announced the release of a report that examined 230 affordable multifamily housing projects in New York City that had undergone energy efficiency retrofits.  The goal of the study was to examine energy savings in these buildings and to see if energy savings projections could be included in underwriting practices for retrofits.  The study addressed a key issue for private capital concerning retrofits–a lack of confidence in projecting energy savings against which lenders can underwrite loans.  As a result, these projects have largely relied on public subsidies rather than private capital.  Access to private capital could prove transformational in scaling up the industry while reducing greenhouse gas emissions and creating jobs.

The report, entitled “Recognizing the Benefits of Energy Efficiency in Multifamily Underwriting,” analyzed these buildings to assess total savings achieved and savings as a percentage of projections.  The report’s findings provide a rationale and methodology for underwriting against fuel savings projections.

The report found that energy savings across the buildings examined were real, and that the fuel savings (19% across the portfolio) were more predictable and of greater magnitude than electricity savings.  The report also concluded that for half the projects examined, savings alone were sufficient to fully support loans for energy efficiency capital improvements.  The study also provides an underwriting methodology that would allow lenders to compare an energy auditor’s savings projections for a particular building with empirical data from past retrofits, to assess whether the auditor’s projections should be discounted when making an energy efficiency loan.

Upon the study’s release, Living Cities, a philanthropic cooperative, announced a grant to the New York City Energy Efficiency Corporation to develop a multifamily mortgage enhancement product that would put the concept into action.

In November 2011, New York City released its first Energy Benchmarking Report for NYC municipal buildings.  Besides giving the raw numbers, the report highlights the benchmarking results for libraries, fire stations, police stations, warehouses, medical offices, K-12 schools, courthouses and office buildings.

First, a little background.  In 2009, Mayor Michael Bloomberg signed the Greener, Greater Buildings Plan, a package of four laws that seek to improve the energy efficiency of existing buildings in New York City.  One of these laws, Local Law 84, requires facility owners of public buildings over 10,000 square feet and private buildings over 50,000 square feet to benchmark their energy use each year.  The idea behind this law, apart from making this information public, is to encourage owners to use the benchmarking data to prioritize energy audits, retrofits, improved operations and maintenance, and retro-commissioning activities.

Since the law was enacted, New York City has benchmarked 2,730 municipal buildings using EPA’s Energy Star Portfolio Manager tool, which rates building energy performance on a scale of 1–100 relative to similar buildings nationwide.  A score of 50 means that the building’s energy performance is in the 50^th percentile for similar buildings.

So what do the scores show?  According to the report, New York City K-12 schools, courthouses, medical offices, warehouses, and offices performed near national averages. The 1,162 public schools had an average benchmark score of 53.  Courthouses and City offices had average benchmark scores of 54 of 59 respectively.  However, medical offices and warehouses both had scores of 43, well below the national average.

There were 673 building types that are considered “non-ratable,” which means that they are included in facility categories that are not currently eligible for receiving benchmark scores using Portfolio Manager.  These include City libraries, fire and police stations, etc.  The City’s 108 libraries’ average energy use intensity was 22% better than the national average.  However, fire and police stations were 18% and 8% worse than the national average respectively.

On December 27, 2011, New York City Mayor Michael Bloomberg signed into law three bills that enacted recommendations of the New York City Green Codes Task Force.  The bills are aimed at carrying out long-term municipal plans to reduce carbon emissions, improve air and water quality, and limit waste.

The first bill (Intro. No. 576-A) seeks to improve protection of water and sewer systems by requiring construction sites to collect concrete washout water for proper disposal.

The second bill (Intro. No. 578-A) requires that new asphalt used in the city have a minimum of 30 percent recycled content.  According to the city, this requirement will save about $2.3 million per year by reducing dumping fees and avoiding costs of new asphalt and will keep more than 66,000 tons of asphalt out of landfills.

The third bill (Intro. No. 592-A), requires all new heating, ventilation, and air conditioning units installed within the city to have filters that can keep out particles of 2.5 microns or more.  According to the city, the bill is aimed at keeping soot from trucks and buses from entering indoor home and work environments, where people spend an estimated 90 percent of their time.

On December 2, 2011, President Barack Obama directed federal agencies to enter into at least $2 billion worth of contracts over the next two years to improve government buildings’ energy efficiency.  According to a Presidential Memorandum, the contracts should be performance based, meaning that the upfront costs will be paid over time by the energy savings.  The memorandum said that agencies should prioritize energy conservation measures with the best return on investment, and specified that conservation measures that have a 10 year or less payback period should be implemented.  The Memorandum  requires that federal agencies submit a planned implementation schedule to the Department of Energy’s Federal Energy Management Program, the Office of Management and Budget, and the Council on Environmental Quality by January 31, 2012.

In addition, as part of the President’s Better Building Initiative, the White House reported that 60 chief executive officers, mayors, university presidents, and labor leaders have committed to invest nearly $2 billion of private capital in energy-efficiency projects and to upgrade energy performance by a minimum of 20% by 2020 in 1.6 billion square feet of buildings.  The Initiative calls for an increase energy efficiency for commercial buildings by 20% by 2020.

Zoning laws can sometimes make it more difficult for building owners to construct new green buildings or make existing ones more energy efficient.  The New York City Department of City Planning has attempted to address this issue by introducing Zone Green, a set of zoning proposals designed to remove some of these impediments and make it easier for owners to make their buildings more energy efficient and sustainable.  The Department estimates that if all of these proposals are implemented, buildings in New York City could collectively save as much as $800 million in energy costs per year.

If enacted, Zone Green would do the following:

External insulation for new buildings:  The proposal would exempt external insulation from floor area and yard requirements for existing buildings, which would enable existing buildings to add external insulation within their property line and potentially reduce energy consumption by as much as half.  Installing external insulation typically adds about four inches of wall thickness, but up to eight inches would be allowed to encourage highly efficient retrofits.

Allow thicker walls for new buildings:  For new buildings whose walls are substantially more efficient than required by New York City Energy Conservation Code, the proposal would allow up to eight inches of additional wall thickness to be exempted from floor area, encouraging high-performance buildings without changing the amount of usable space in the building.  This provision would be based on a minimum standard for the thermal performance of exterior walls, which would be incorporated into the NYCECC through legislation.

Allow solar panels to exceed height limits on buildings:  The proposal would enable solar panels to be added on top of any building roof by allowing them as a “permitted obstruction” even if they exceed a building’s height limit.  The proposal would allow solar panels on flat roofs anywhere below the parapet, regardless of building height.  Portions of taller solar installations that are higher than 4 feet would be subject to limits on roof coverage and height. On sloping roofs, panels would be allowed to be flat-mounted as long as they are less than 18 inches high.

Allow shades to project from building facades:  The proposal would allow sun control devices such as vertical or horizontal shades or screens to project from building facades over open areas.  These horizontal or vertical projections can help reduce air-conditioning needs and lighting bills by providing glare-free natural light.  The current zoning code does not allow sun control devices to project over required open areas in some instances.

Allow rooftop equipment:  The proposal would allow more flexibility to accommodate a wide range of rooftop features, such as green roofs, stormwater management equipment, boilers or cogeneration facilities, recreational decks, and stair and elevator bulkheads that provide rooftop access.  Specifically, the proposal would allow low-lying features such as green roofs, recreational decks, other stormwater detention systems and skylights anywhere below the parapet, regardless of building height.  A guardrail no more than 30% opaque would be allowed up to 3’6” above the top surface of the roof.  Greater volume, similar to what is already allowed in many special districts, would be allowed above the maximum building height to accommodate modern bulkheads, with requirements for setback and screening of equipment.

Allow greenhouses on non-residential buildings:  The proposal would foster local food production by encouraging rooftop greenhouses by allowing a waiver of floor area and height limits for greenhouses on top of buildings without residences or sleeping accommodations.  These greenhouses must not exceed 25 feet in height, must set back six feet from the roof edge, and must include practical measures to limit water consumption.

Encourage wind energy:  The proposal would allow wind turbines to exceed height limits on taller buildings and in locations near the waterfront (except low-density residential neighborhoods) where winds are most conducive to power generation.  On buildings taller than 100 feet, a wind turbine assembly may rise up to 55 feet above the rooftop (including the pole and rotor), provided it is set back at least 10 feet from any property line.  On waterfront blocks in medium- or higher-density residential districts, commercial or manufacturing districts, all buildings could install rooftop turbines up to half the height of the building or 55 feet, whichever is less.  Free-standing turbines would be allowed in commercial and manufacturing areas on waterfront blocks.  All wind installations would have to comply with requirements set forth by the Department of Buildings.

The Zone Green text amendment is currently undergoing a public review process, which includes referral to all 59 community boards in the city, the five borough presidents, and review by the City Planning Commission and the City Council.  The review process is expected to take six months.