Green Building Law Update : Green Building & Construction LEED AP, Lawyer & Attorney Chris Cheatham : Washington DC, Virginia, New York City

Someone recently asked me why I was baffled about the Department of Defense's decision to use both LEED and a green building code.  Here are two reasons: 

1.  The policy is a waste of taxpayer money.

2.  The policy unnecessarily increases risks for government contractors.

LEED + Green Building Code = Duplicative Costs

This concept is so logical to me that I have had trouble articulating it. 

The Department of Defense has proposed a green building code in order to streamline the process of applying for LEED certification. However, obtaining certification and complying with an overlapping green building code will result in duplicative costs, particularly on the administrative side. 

First, a contractor will have to review the green building code, ensure that it is complying with the code, and then submit documentation to the contracting officer to show compliance. 

Second, the contractor will have to review the LEED rating system, ensure that it is complying, and then submit separate documentation to the Green Building Certification Institute (GBCI) to apply for certification.  

Let's assume the best case scenario -- the green building code and LEED rating system requirements completely overlap (this will never happen).  The contractor will still have to compile separate documentation for a contracting officer and a GBCI reviewing authority.  And because the contracting officer and GBCI reviewing authority work independently, each individual will have separate questions, requests for clarifications and interpretations. 

Because the contractor will be working through two separate entities and submitting two sets of paperwork, the contractor will be completing twice as much work.  Twice as much work means the project will get more expensive. 

Two Interpretations Will Lead to Conflicts

It's human nature for two people to interpret the same clause two different ways.  This happens with LEED credits all the time.  When these differing interpretations occur, solutions can be worked out internally with GBCI.

But differing interpretations becomes a more risky proposition if the DoD simultaneously incorporates a green building code and LEED certification requirements in the same contract. 

On a typical DoD construction project, there is one contracting officer responsible for delivering a project on time, according to the contract and specifications.  The contracting officer has final authority to interpret and enforce the plans and specifications. 

Once the DoD institutes its green building code, a contracting officer will be responsible for interpreting and enforcing it. 

Simultaneously, a contractor working on a green building will also have to submit for LEED certification to the GBCI. 

You probably know where I am going with this.  The following scenarios will likely arise: 

• Example A - Government Contractor is hired to construct a building that complies with both LEED and the DoD green building code.  Both LEED and the code require installation of a particular bike rack.  The contractor installs a bike rack and submits for a LEED credit related during the design phase.  GBCI approves the credit.  At the end of the project, the contracting officer finds the contractor did not install the specified bike rack.  Does the Contractor lose its certification?  Can the Contractor point to the approval of the LEED credit to overrule the contracting officer?  Does the GBCI have inherent authority to interpret a government contract specification? 

Or worse: 

• Example B - Contractor completes a project that had to comply with the DoD green building code and get LEED certification.  A contracting officer finds the project was completed in accordance with all green building codes, including the installation of a bike rack.  Months later, GBCI finds that the contractor did not install the proper bike rack for LEED certification.  LEED certification is denied.  Who is right?  Did the Contractor breach its contract by not achieving LEED certification even though the contracting officer approved the bike rack?   

I don't know the answer to these questions.  Government contractors will face more risk if they have to comply with both a green building code and overlapping LEED certification.  There will be conflicting interpretations when contracting officers and GBCI reviewing authorities interpret the same requirements.

In short, this could get very messy. 

• Email This
• Print
• Comments (4)
• Trackbacks
• Share Link

In last week's post, I stated that the Army was abandoning LEED certification in lieu of a green building code based on ASHRAE 189.1.  But it is now clear to me that I misinterpreted the testimony of Dr. Dorothy Robyn, Deputy Under Secretary of Defense.

Instead, the Department of Defense is going to simultaneously require compliance with its green building code and with LEED certification. 

Confused?  So am I! 

First here's the statement from the DoD that suggested to me that LEED was being abandoned:

In the past, all new construction projects were required to meet the LEED Silver or an equivalent standard and/or to comply with the five principles of High Performance Sustainable Buildings. This year my office will issue a new construction code for high-performance, sustainable buildings, which will govern all new construction, major renovations and leased space acquisition. This new code, based heavily on ASHRAE 189.1, will accelerate DoD’s move toward efficient, sustainable facilities that cost less to own and operate, leave a smaller environmental footprint and improve employee productivity.

I assumed that this statement meant LEED certification was "in the past" and the new construction code would be used in the future. 

Apparently the DoD intends to use both the green building code and LEED certification simultaneously.  Paula Melton reported that according to (Dave) Foster in the Pentagon's Media Relations Division, the Army "will continue to seek LEED certification for our buildings built to that standard and expect to get LEED Silver or better at no additional cost."

I Don't Understand the Difference Between a Code and a Rating System

Before the DoD's announcement, I thought I understood the difference between a green building code and green building certification.  I understood a green building code to be a minimum standard that applied to 100 percent of buildings.  Green building certification, to me, was an aspirational standard that was beyond code and only applied to a subset of buildings. 

But the DoD's use of a green building code to achieve LEED certification is different.  The code will inform the contractor of how to get LEED certification; the certification then confirms the building was built to code.  The USGBC's Lane Burt explained the distinction like this: 

"The code tells you what to do, and LEED tells you how well you did and communicates that to the rest of the world." For building owners, LEED provides third-party validation that "you got what you paid for."

Going forward, federal contractors working with the DoD will have to ensure compliance with both a green building code and then apply for LEED certification. 

I would like to leave with you with a question.  What makes more sense?  

A.  A federal agency adopting a green building code to ensure that its projects are sustainable.

B.  A federal agency adopting a green building code to simplify the process of obtaining a third-party certification to ensure that its projects are sustainable. 

I am baffled. 

Photo Credit:  kalavinka

• Email This
• Print
• Comments (8)
• Trackbacks
• Share Link

Correction:  It is now clear to me that I misinterpreted the testimony of Dr. Dorothy Robyn, Deputy Under Secretary of Defense.  Instead, the Department of Defense is going to simultaneously require compliance with its green building code and with LEED certification.

Read more here:  Defense Department to Adopt Green Code and LEED

We have entered a new era of green building policy.  The Army is abandoning LEED certification.

On February 28, 2012, I reported, via a BuildingGreen article, that the Army had reiterated its commitment to LEED certification despite DoD re-authorization legislation that banned LEED Gold and Platinum certification.

Less than one month later, the Army has announced it is abandoning LEED certification. The Army is launching its own building code modeled off of ASHRAE 189.1 in lieu of pursuing LEED certification.

On March 7, 2012, Dr. Dorothy Robyn, Deputy Under Secretary of Defense (Installations and Environment) made the following statements to the House Appropriations Committee (PDF) Subcommittee on Military Construction, Veterans Affairs and Related Agencies:

In addition to retrofitting existing buildings, we are taking advantage of new construction to incorporate more energy-efficient designs, material and equipment into our inventory. In the past, all new construction projects were required to meet the LEED Silver or an equivalent standard and/or to comply with the five principles of High Performance Sustainable Buildings. This year my office will issue a new construction code for high-performance, sustainable buildings, which will govern all new construction, major renovations and leased space acquisition. This new code, based heavily on ASHRAE 189.1, will accelerate DoD’s move toward efficient, sustainable facilities that cost less to own and operate, leave a smaller environmental footprint and improve employee productivity.

The repercussions of this announcement will be widespread. 

For federal contractors, this is a game changer.  The LEED AP credential will be less valuable.  Past performance highlighting LEED certification will be less valuable, if not totally irrelevant.  Construction firms will have to learn to build to ASHRAE 189.1 instead.  

For federal agencies, this signals the beginning of the end for certifying federal buildings.  It's obvious that the Army is taking the DoD legislative LEED ban seriously. I can all but guarantee that the Navy and Air Force follow the Army's lead in some fashion.

Federal agencies have long been one of the most important supporters of LEED certification. The Navy was the first agency to adopt the certification. After the Army, Navy and Air Force stop pursuing LEED certification, how do you think other federal agencies will respond?

For the US Green Building Council, this could be a devastating blow.  Can the USGBC and LEED survive without the support of the federal government?  Because that is the new reality of green building policy.

Photo Credit:  Defence Images

• Email This
• Print
• Comments (20)
• Trackbacks
• Share Link

I apologize for the recent hiatus here at Green Building Law Update.  If you want to see what I have been up to, check out ClaimKit (www.claimkit.com). 

Now, on to green building legal news.

You may recall that in 2011, I published many, many articles on the Destiny USA project.  Here's a quick summary of the Destiny USA story: 

In 2007, the developer of a large-scale mall project received $228 million from a federal Green Bonds program in exchange for installing green building and renewable energy technologies.  The developer recently revealed the many of the green technologies will not be incorporated as promised. 

As reported by Rick Moriarty, the Internal Revenue Service (IRS) notified the Syracuse Industrial Development Agency on March 17 (2011) that it would be auditing the Green Bonds issued by the Agency to the Destiny USA developer. . . .

If the IRS were to determine that non-compliance occurred, then the Destiny USA project could have lost hundreds of millions of dollars in estimated tax breaks.  

One year later, the IRS has come out with a ruling on the Destiny USA's compliance with the Green Bonds program: 

The IRS notified the Syracuse Industrial Development Agency Thursday that it has closed its audit of the bonds “with no change to the position that interest received by the beneficial owners of the bonds is excludible from gross income” under federal tax code.

In other words, income received on the bonds will continue to be exempt from federal income taxes.

The ruling also permits the release of $2.3 million that the developer had been required to hold in reserve. If the IRS had found the project out of compliance with the terms of the green bond program, it could have seized the $2.3 million as a penalty.

The IRS ruling fascinates me.  By finding the Destiny USA project complied with the Green Bond requirements, the IRS essentially conceded that the Destiny USA project simply had to promise to deliver green technologies in exchange for the Green Bond financing.  In a February 2011 letter to the IRS, the Destiny USA developer argued that the legislation simply required a promise to deliver the technology:

On February 21, 2010, Syracuse Post-Dispatch reporter Rick Moriarty published a story that disclosed the contents of a draft letter addressed to the IRS by the Syracuse Industrial Development Agency.  In the letter, the Agency and developer first divulge that many of the green building and renewable energy features that were promised as part of the Green Bonds program will not be included in the completed project.  The letter blames the economy for changes to the project. 

...

The letter then moves to the crux of the compliance argument.  The Agency and developer assert that actual installation of renewable energy systems was not required.  Instead, the letter claims the developer was only required to make promises related to renewable energy and LEED certification in order to qualify for the bonds. They conclude that the financial benefits of the Green Bonds program and the forfeiture of the Reserve Account do not depend on actual achievement of the green building and renewable energy goals.

I think it's fair to say the Green Bonds legislation was fundamentally flawed.  I can't imagine that the legislators would have been satisfied with a simple "promise" to deliver green technology in exchange for hundreds of millions of dollars in tax breaks.  

And so ends the Destiny USA debacle. 

Photo Credit:  Ben Sheperd

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

I had been hearing whispers that the Army planned to ignore the recently-enacted LEED ban, and now we have proof.

Back in December 2011, GBLU reported on legislation that banned the Department of Defense from pursuing LEED Gold or Platinum certification.  As reported by BuildingGreen, despite the new law, the Army is reiterating its commitment to LEED certification: 

In a call with reporters yesterday, [Katherine Hammack, assistant secretary], reiterated the Army's commitment to net-zero and LEED and gave an update about some of the progress that's already been made. "We're finding it does not cost more to design and construct to LEED" standards, Hammack said.

How can the Army continue to build to LEED Gold and Platinum? 

The BuildingGreen article does a great job explaining the loophole included in the legislation: 

The legislation in question does have a loophole for LEED Gold and Platinum projects as long as they don't cost more. As we reported at the time, "Exceptions may also be made without a special waiver if achieving Gold or Platinum 'imposes no additional cost'."

That loophole is big enough to blithely drive a tank through without bothering to show ID at the checkpoint. You apparently don't have to prove that it didn't cost more--or the Army is interpreting it that way, at any rate, while working closely with Secretary of Defense Leon Panetta on "educating" Congress.

After giving a green building legal presentation at the American Society of Military Engineers in Fort Leonard Wood last month, I had a chance to talk to contractors about the LEED ban.  They indicated they have been told to simply submit bids that indicate LEED Gold or Platinum costs the same as LEED Silver.  

Is this the end of the LEED ban?  The politics behind the LEED ban have nothing to do with fiscal issues, and everything to do with wood certification, at least according to one Congressman who voted for the legislation.  Do you think Congress will be receptive to the Army's use of the LEED loophole?  

• Email This
• Print
• Comments
• Trackbacks
• Share Link

It has been a rough year for Congress.  The Republican and Democrats, the House and Senate -- no one can seem to agree. 

Unless we are talking about green buildings. 

In June, I reported on the Department of Defense Reauthorization bill that passed the House of Representatives.  In the legislation, the Department of Defense was banned from pursuing LEED Gold or Platinum certification. 

But would the Senate agree to a similar LEED ban?  

As reported by Lloyd Alter at Treehugger, the Senate passed the House bill with an Amendment that did not mention LEED.  Thus, the Senate passed the House's LEED ban for DoD projects.  You can review the messy details at Thomas.gov.   

Here is the actual text of the LEED ban: 

What is the intent behind the LEED ban?  Is Congress concerned about the financial outlay for LEED certification?  Or is Congress trying to reign in the design and construction of plush government buildings? 

In fact, the intent of the LEED ban stems from a much more contested issue -- the wood wars.   One member of Congress explained that he supported the DoD LEED ban because he believes LEED inaccurately evaluates wood products: 

Sen. Roger Wicker, R-Miss., helped lead the effort to place the language into the appropriations bill on grounds that the Pentagon needed to think more about building products' green qualities over the course of their entire life--from the moment a product's raw materials are extracted from the earth to when that product's components are tossed out or, even better, recycled. This notion, called "life-cycle analysis," has been gaining much momentum in the green building community. And on this front, some groups--including the Green Building Initiative program, a rival to USGBC's LEED--have embraced life-cycle analysis.

"As the Department of Defense works to improve energy efficiency, it is important that its building standards be based on sound science and incorporate due process in their development and implementation," Wicker said in a statement. "Standards should take into consideration the full life cycle of wood products, including the environmental benefits provided by our domestic reforestation programs. After completing this study, the Department of Defense should use credible standards that more accurately assess U.S. wood products."

After reading that quote, I couldn't help but think of the fateful vote this past year when USGBC members shot down a LEED credit that would have recognized alternative wood certifications.  Under the existing LEED rating system, points are only allocated for wood products certified by the Forest Stewardship Council (FSC).  

I don't think I can overstate how important this LEED ban is for future green building policy.  For example, the Navy was the first federal agency to adopt LEED certification when it did so in 2000.  The Navy will have to rewrite its current LEED policies (or submit waivers for every project): 

The Navy continues to aggressively pursue sustainable development; in May 2011, the Secretary of the Navy announced that all Department of the Navy Military Construction (MILCON) projects will be built to LEED Gold standards. For FY11 and FY12, applicable MILCON projects shall achieve sustainable design and construction equivalent to or above LEED Gold, with certain exceptions. For FY 13 and later, applicable MILCON projects will be required to achieve sustainable design and construction equivalent to, or above, LEED Gold.

The DoD could certainly decide to continue pursuing LEED Gold and Platinum certifications.  But will DoD officials fight for LEED certification while other military programs are facing substantial cuts?  This legislation will likely have a chilling effect not only on DoD green building projects but also on other federal agencies.  Congress has clearly expressed an intent to not support LEED Gold and Platinum projects.  Don't be surprised to see agencies adopting the International Green Construction Code (IgCC) in lieu of LEED certification. 

Do you think federal officials will be willing to ask for LEED waivers? 

• Email This
• Print
• Comments (6)
• Trackbacks
• Share Link

For much of 2011, my focus has been the Destiny USA project.  This should not come as a surprise to readers who waded through my thirteen posts on the topic.  I had planned to not write about the Destiny USA project again.  But then I came across a press release while I was at Greenbuild: 

Destiny USA in Syracuse Aims to be America's Largest LEED® Gold Certified Commercial Retail Project; More than 100 Tenant Retail Spaces to Also be Certified

As you may recall, the Destiny USA project received over $200 million in tax-free financing through the federal government's Green Bonds program.  In exchange for the financing, the developer of the project promised, among other things, to get LEED certification and rely on massive amounts of renewable energy. The IRS is now investigating the project because it appears the renewable energy systems were never installed.

I think it's safe to say the Green Bonds program was a failure.  But there is another policy issue that bothered me that I have not previously touched on. 

Did the US Green Building Council act appropriately in assisting the Destiny USA project? 

As I was reading the Destiny USA press release, one passage caught my eye: 

"This project is important to me and to USGBC," said Rick Fedrizzi, President, CEO & Founding Chair, U.S. Green Building Council.  "Not only is it in my backyard but it will also be a showcase in the community for what can be done with green building and LEED.  The visitors who walk through the Destiny USA doors every day will learn about the importance of green building and be able to see today's latest green building strategies in action."

For those looking for an argument that LEED should never be used in regulations or law, I present to you Exhibit A: 

• The Destiny USA project has to get LEED certification as a condition of a federal law.
• The USGBC is a non-profit entity responsible for the LEED rating system.
• The USGBC CEO states the project is important to him and his company because it is located in his hometown of Syracuse, New York.

If a federal official displayed this type of favoritism for a project, he would be removed.  Litigation would certainly ensue challenging the procurement process.

If LEED is going to be used in law, whether it be through incentives or mandates, then the USGBC and its CEO should not get to play favorites with projects.

Of course, this is not what is happening.  And this type of conflict of interest and favoritism could undermine the credibility of the LEED rating system and of the green building movement.  

• Email This
• Print
• Comments (4)
• Trackbacks
• Share Link

Over the past year, I've been lucky enough to get to know Jeremy Sigmon at the US Green Building Council. Jeremy works to educate the public and government officials about building codes. It has been a busy year for him with the introduction of the International Green Construction Code (IGCC). When Jeremy invited me to sit on a panel at Greenbuild in Toronto, I jumped at the opportunity.

Now you can listen to the audio of our Greenbuild panel.  The audio is available at the USGBC Knowledge Exchange and is the first option ("Greenbuild 2011 Specialty"). 

The panel created a moment of clarity for me and I went on a bit of a rant. Hope you enjoy the podcast and let me know if you any thoughts or questions.

I will also be participating in an upcoming green building legal webinar with the ABA Fidelity and Surety Law Committee. Surety bonds are often misunderstood within the green building industry. Hopefully we can provide some clarity on how surety bonds and green building projects intersect: 

The live audio webinar will take place next Thursday, December 8, 2011 from 1:00 pm - 2:30 pm Eastern. Entitled Keys to Managing Green Construction Risks, Liability and Litigation, this program will focus on the key concerns and solutions to the ever changing green construction culture. With the emergence of new green building codes, updates in green ratings systems, and new legal issues, green construction has become one of the newest areas of risk, liability and litigation for the construction industry. Our esteemed panel brings a wealth of practical experience in managing these risks in contracts, insurance and surety bond issues, including actual case studies from the field of failed green construction.

For more information on this program, click here.

I hope to hear from you on the webinar. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

I try to keep announcement posts to a minimum.  This is an announcement post because I have lots of announcements. 

Green Building Law Update has moved

My family and I have re-located to Kansas City, Kansas.  My entire family lives in Kansas City.  My business partners live in Kansas City.  The move was a no-brainer and we are loving it here.

My new contact information: 

Chris Cheatham, Esq., LEED AP

email: chris@cheathamconsulting.com

phone: 202-553-3181

What am I doing now? 

Over the last year, I have been working through two companies -- Cheatham Consulting, LLC and The Law Office of Christopher W. Cheatham, LLP.  During this time, I have also learned that to create a successful business you have to have laser focus and ignore distractions.  Ultimately, I realized that I needed to focus on one entity.  

Going forward, I am working through Cheatham Consulting, LLC.  We have an incredible new service called Surety e-Claims™ that allows sureties to collect, organize and identify construction documents in a more efficient manner.  I have been told that Surety e-Claims™ could start a revolution for the surety claims industry, which is keeping me both busy and excited.  

If you are interested in Surety e-Claims™, send me an email at chris@cheathamconsulting.com and I will send you our new white paper, Leveraging Technology for Surety Claims.  

Upcoming Posting Schedule

Due to my recent move, my new boy, and my new service, I have not been as active on Green Building Law Update.  And frankly, there is not as much going on in the industry because commercial construction is stagnant. 

In the coming weeks, I will be covering the following topics: 

• An update on Destiny USA 
• An update on the EPA headquarters protest
• A GAO report on Energy Star that may have implications for LEED
• An update on the Chesapeake Bay trial
• A review of the FTC Green Guides and how they apply to green buildings

What else are you interested in reading about?  

Photo credit: planetschwa

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

One of the very first green building legal conundrums may be resolved. 

The Washington Business Journal reported on October 31 that legislation will be introduced in Washington D.C. that will create an alternative to the much maligned LEED bond requirement in the D.C. Green Building Act of 2006. 

Under the Act, as currently written, as of January 1, 2012, all new construction greater than 50,000 square feet must obtain LEED certification.  Under the proposed legislation, developers will be permitted to make a binding "pledge" that LEED certification will be attained: 

Under the pledge route, if a new building fails to be certified LEED within two years of receiving its certificate of occupancy, the developer would be penalized $7.50 per square foot for buildings under 100,000 square feet, and $10 per square foot for buildings larger than 100,000 square feet.

Notably, the D.C. Council proposed to create an alternative enforcement mechanism instead of correcting the D.C. Green Building Act's many flaws.  Two prominent surety associations outlined these flaws in a white paper for the D.C. Government.  The associations suggested that LEED bonds would be made available if the legislation were to be corrected. 

For design professionals and contractors working in Washington D.C., the LEED Pledge will mean more onerous contract terms.  If developers can be penalized up to $3 million for not achieving LEED certification, these same developers will require guarantees of LEED certification from design professionals and contractors.  Don't be surprised to see penalty provisions in contracts that mirror the LEED pledge penalty. 

What do you think of the LEED Pledge?  

Photo credit: missrivs

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

I have spent just over a year thinking about the International Green Construction Code (IgCC).  I know it has been one year because I received my first copy of the code at Greenbuild 2010.  My conclusion today about the code is no different than it was one year ago: 

The IgCC is unnecessarily confusing. 

Take, for instance, the IgCC's basic setup -- it's two codes in one.  Apparently, trying to figure out one set of building codes is not enough.  Within the IgCC, jurisdictions have the option of adopting either the IgCC code or ASHRAE 189.1.  Yes, I know that that sentence does not make sense, but it is correct. 

Other aspects of the IgCC create more confusion.  Not only does it include mandatory code provisions, but it also contains electives that can be selected by a jurisdiction and a project team.  Why would the code writers have included electives in a mandatory building code?  One theory I have heard is that the code writers wanted to mimic the elective credits in the LEED rating system.

I support the creation of a green building code.  Too many jurisdictions were mandating the LEED rating system as a de facto building code.  The IgCC was an attempt to fill that void with a system more appropriately suited to a building code.  However, the current version of the IgCC will create unnecessary confusion that will result in the following: 

• Building inspectors will struggle to learn to enforce a complicated building code that changes with each project depending on the electives selected.  This will result in inconsistent building code rulings.
• Design and construction professionals will have to comply with different building codes depending on the jurisdiction.  This means that professionals may have to learn more than one building code to do work in two adjacent communities. 
• Insurance and surety companies will struggle to ensure the risks associated with confusing green building codes.  I have already heard one large insurance company state that the adoption of green building codes will change the standard of care for design professionals going forward. 

What do you think of the International Green Construction Code?  

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

This year, the US Green Building Council hosted the 2nd Annual Legal Forum at Greenbuild 2011.  The fact that lawyers are now allowed to congregate and make presentations at the Greenbuild conference is an achievement.  The green building community seems to understand that green buildings do present new risks that must be managed and attorneys can help.

Attorney Dan Sheridan provided a thorough recap of the Legal Forum on his blog, Legally Green.  There were two presentations that I found most interesting: 

• Stephen Del Percio, of Green Real Estate Law Journal, reviewed the Federal Trade Commission's Green Guides, which regulate environmental claims.  Del Percio's presentation left me wondering how the Green Guides might apply to LEED plaques. 
• The always entertaining Stuart Kaplow provided a list of ways to generate work as a green building attorney.  We will be discussing both of these presentations in future posts. 

It may surprise you to learn that I attended many non-legal presentations at Greenbuild as well.  If you would like to read more about some of these presentations and topics, please head over to Sustainable Cities Collective, where I published the following posts: 

• Finally, a Private Funding Solution for Green Buildings
• Building Metrics Take Center Stage
• Public Support for Green Declining

The last post highlights a CBRE study, Dollars and Sense 2011, that will soon be released.  The report discloses that support for "green" waned among CBRE customers in 2011.  How will companies like CBRE shift gears if demand for green buildings decreases?  It should be an interesting topic for next year's Greenbuild in San Francisco.  

During his Greenbuild opening plenary, New York Times columnist Thomas Friedman stated that we would know a green revolution had occurred when the word "green" went away.  But I don't think that's what we are seeing with the CBRE study.  

What is happening to "green"?  

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

Of course it could -- it already has.  But first lets recap the Solyndra saga. 

Solyndra is the solar panel manufacturer in California that qualified for a $535 million federally-backed loan.  Since receiving the loan, the price of solar panels has plummeted - good news - which has squeezed the margins of manufacturers like Solyndra.  The result:  two weeks ago, Solyndra announced bankruptcy.  And taxpayers are now responsible for repaying a half billion dollars. 

As I started thinking about the broader implications of the Solyndra collapse, I could not help but draw parallels to a similar federally-funded green project that has not panned out as expected:  Destiny USA.

Destiny USA was a proposed $20 billion mega-mall that was supposed "to be not only the biggest man-made structure on the planet but also the most environmentally friendly."  To support the project, the developer applied for a $2 billion Green Bonds program that Congress passed in 2004.  In 2007, the Destiny USA project qualified for $238 million in tax-free financing through the Green Bonds program.  In exchange, Destiny USA promised to redevelop a brownfield site, use massive amounts of renewable energy, and get LEED certification for 75 percent of the project. 

However, from the outset, there were groups questioning whether Destiny USA could satisfy the Green Bond requirements: 

[Ashok Gupta, senior energy economist at National Resources Defense Council] said he was impressed by the DestiNY team's enthusiasm for the strict guidelines, but wasn't sure the mall builders knew what they were in for. "I have a hard time believing that the DestiNY executives can deliver on their green promise," he said. "These are not developers who have ever attempted a green project, and it's not clear to me that they understand the extent of their commitment, financially and practically." Even developers who have worked on multiple green buildings would find a project of this scale to be extraordinarily challenging, he said.

It appears Gupta was right.  In February 2011, Rick Moriarty reported that the Destiny USA project would not deliver on its renewable energy promises.  Furthermore, it appears that the building itself will not be obtaining LEED certification.  Instead, the USGBC and Destiny USA developers announced that all retail units inside the mega-mall would seek LEED certification: 

“It’s never been done before,” said [USGBC CEO Rick] Fedrizzi as [Destiny USA developers] sat nearby. “When a major, major mall puts together a program creating leases requiring —requiring —tenants to be LEED-certified, it’s a major, monumental event.”

Coming back to our original question, the answer is yes, a Solyndra-type failure could happen to green building policy.  It already has.  And if the Green Bonds that funded the Destiny USA project were part of the American Recovery and Reinvestment Act, I can promise you it would be splashed on the front page of many newspapers.  

What do you think?

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

Three weeks ago, Washington DC was hit by both an earthquake and a hurricane. But this was not the most shocking development during the week -- at least for me.  

Here's what shocked me the most: I learned there is a chance that LEED bonds could be available in our nation's capital.

On Wednesday, August 24, I attended a meeting of the DC Green Building Codes working group. The topic to be discussed was the DC Green Building Act's LEED bond requirement. For the uninitiated, the DC Green Building Act requires that all new construction in D.C. greater than 50,000 square feet be LEED certified starting January 1, 2012. Project developers have to post a bond guaranteeing the certification. The bonds range from 1 to 3 percent of a project's total cost, and can be as much as $3 million. 

I have been writing about the LEED bond requirement since the first week of this blog. I once compared LEED bonds to unicorns because they only existed in a fantasy world. 

LEED bonds do now exist and have been underwritten to support projects applying for the Arlington County, Virginia bonus density program. But it is unlikely that LEED bonds were going to be underwritten in Washington DC due to problems with the Green Building Act.  At the working group meeting, the SFAA and NASBP issued a white paper (PDF) summarizing the Act's many problem, including:

• "The regulations should state the developer must furnish the bond"
• "The regulations should provide for claims less than the full bond amount." 
• "Consider the relationship between the bond amount and the financial thresholds required by the surety. . . . We suggest that the regulation should set the maximum amount at a lower level that is sufficient to provide the necessary financial protection to the District." 
• "The regulations should set forth the appeals process by which a developer can appeal a USGBC determination.  Notice of appeal should be provided to surety." 

The last issue is of most interest to me.  The D.C. Department of the Environment (DDOE) has indicated that a party other than the US Green Building Council could determine compliance with LEED certification.  Whether these third-parties would be in the form of a government agency or a for-profit company remains to be seen.  But it would certainly be interesting to have another entity looking over the shoulder of the US Green Building Council. 

The DC government has less than four months to revise the Green Building Act to reflect the suggested changes in the SFAA and NASBP white paper.

Will DC make the necessary changes to the Green Building Act by January 1, 2012?

Photo credit: Cape Town Craig

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link