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. 

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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

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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

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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

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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?  

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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? 

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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?

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One of the great parts about Green Building Law Update is interacting with astute readers. One recent comment has forced me to rethink the proposed Department of Defense Reauthorization Bill ban on LEED certification.

In the comments to last week’s post, reader R. David Chambers asked an important question:

Chris -
your quoted section says '... LEED Gold or Platinum certification ...', which appears to NOT preclude LEED certification at a Certified or Silver Level - I have not read the bill, but it appears from your snippet that if the funds required to achieve Certified or Silver 'backed into' Gold or Platinum there would be '... no additional cost to DOD.'
am i missing something?

No, David, you are not missing anything. And your comment raises an important issue about the policy underlying this bill.

There are two primary reasons why I can see a politician opposing government spending on LEED certification:

1. LEED certification is primarily a marketing tool for green buildings. The federal government does not need to advertise its green buildings. I have always considered this a legitimate policy argument.

2. The government should not be investing in green buildings, period. To me, this argument has less merit. Many studies now find that a green building can be built for the same costs as a non-green building. And green buildings should result in cost-savings in energy and water useage.

If the drafters of the DoD reauthorization bill were concerned with the first policy issue -- the costs of certification -- then presumably they would have banned spending on all LEED certifications.

However, the DoD reauthorization bill only prohibits funding for LEED Gold or Platinum. Buildings that obtain LEED Gold or Platinum certification generally cost more than buildings that obtain Silver or Certified certification. It appears that the DoD reauthorization bill ban on LEED Gold or Platinum certification is based on the policy that the federal government should not be investing in advanced green buildings.

How do you interpret the DOD reauthorization bill ban on LEED Gold or Platinum certification?  Do you think the ban has merit? 

Photo credit: David Reeves

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It is not looking pretty for federal green building policy.

Earlier in the year, I speculated that Congress might target green building certification as an unnecessary cost.  Well, it happened.  From the ASHRAE Government Affairs Update: 

House Passes National Defense Authorization Act for FY 2012 – Would Require Cost-Benefit Analysis & Long-Term Payback for DoD Adopting ASHRAE Standard 189.1

The U.S. House of Representatives passed the National Defense Authorization Act for Fiscal Year 2012 (H.R. 1540) by a vote of 322-96. . . .

The bill would also require a cost-benefit analysis and return on investment for energy efficiency attributes and sustainable design achieved through DoD funds used to receive a Leadership in Energy and Environmental Design (LEED) Gold or Platinum certification.

But here's the real kicker in the legislation: 

The bill would prohibit FY 2012 DoD funds from being used to achieve a LEED Gold or Platinum certification, however these certifications could be obtained if they impose no additional cost to DoD.

As I understand it, LEED certification will always impose an additional cost on the DoD simply because administration fees have to be paid to the US Green Building Council in order to get the certification.  It appears that this legislation, if passed in this form, would bar the DoD from pursuing LEED certification. 

According the ASHRAE update, the Senate will propose its own bill.  It will be interesting to see how the LEED certification funding issue is dealt with in the Senate and in conference committee.

I have often wondered why federal buildings should pursue LEED certification.  I always viewed certification as a marketing tool to demonstrate that a building was green.  But a green building policy wonk recently made an interesting point to me:  by pursuing LEED certification, the federal government receives third-party confirmation that it is getting the green building it contracted for.  

Is this the beginning of the end for federal policy that supports LEED? Should federal buildings pursue LEED certification in the first place? 

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The following post is written by Kirk Dryer, a law student at the University of Missouri.  Kirk is also the first Green Building Law Update intern.  His assistance researching the Destiny USA matter was priceless.  Below, Kirk explains the tax implications of an adverse ruling in the Destiny USA dispute.  If you want to read more on the Destiny USA dispute, please read my short e-book on the subject.  

While Destiny USA stands to lose $122 million in financing costs if the IRS strips the project of it’s green bond tax exemption, an adverse ruling will also result in a significant investment income loss for individual bondholders.  In total, these bondholders purchased $228,085,000 in green bonds for Destiny USA and would owe taxes they were not expecting to pay which would significantly cut into their investment gains.  The tax exemption itself and not green building promises is the means through which the developer was able to offer an interest rate lower than the market rate and remain a competitive investment. Most (if not all) of the individual investors would have chosen an investment with a higher return if the gain had been taxable.  

It is easy to assume that most individual investors with enough income to hold a significant sized investment in the Destiny USA bonds would be in one of the two highest federal income tax brackets which means that any additional income for 2010 would be taxed at either 33% or 35% depending on the investor’s taxable income.  This means that if the IRS takes away Destiny USA’s green bond tax exemption, any gain collected on a bondholder’s investment would be taxed and would cut his/her investment gain by at least a third.

For example: We’ll say an investor, Bob, had an adjusted gross income of $250,000 for 2010 and he held a $50,000 bond in Destiny USA.  The Destiny USA Green Bond interest rate is 4.420% meaning that Bob would have a gain on his bond investment of $2,210.  With the tax exemption, he would not have to pay any income tax on that bond income.  However, if the tax exemption is stripped from the Destiny USA project, Bob would owe 33% of that gain or $729.30 in federal income tax.   If Bob bought his bond at issuance in 2006 he would owe a total of $3,646 in back taxes for his investment gain for the five years (2006-2010) he took the tax exemption.  He would then no longer have the exemption for the next 25 years until the bond matures on January 1, 2036.  Over the life of the bond Bob would pay $21,879 in income taxes he would not have owed if Destiny USA fulfilled its obligations for the Green Bond program.

Ultimately, bondholders like Bob would have legal recourse, but the filing of a lawsuit to recover the money lost on a bond investment is sure to create a domino effect of filings resulting in lengthy legal battles.  If the tax exemption is revoked due to Destiny USA’s noncompliance with IRS Green Bond requirements, the bondholders can sue the Syracuse Industrial Development Agency and Citigroup as the bond issuers.  The bond issuers may then recover their losses from their bond insurer who may then recover its losses from the Destiny USA.  

Overall, Bob is simply an example of a bondholder who purchased one $50,000 bond out of the $228 million.  For simplicity’s sake, if all bondholders were in the same tax bracket as Bob, the bondholders would pay $99,805,434.30 in income taxes over the 30 years of the bond. While the bondholders may ultimately recover their losses, the IRS ruling nonetheless has a large impact on the financial gains of their investment.

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Last night I had dinner with a long-time reader of Green Building Law Update.  I was frank with him, and I will be frank with you.  I will be doing two things this year with the blog: 

1.  I am going to stop talking about LEEDigation as much.
2.  I am going to talk more about the green building codes, and the challenges to those codes that are occurring throughout the country.

A trend seems to be developing across the country in the green building world.  Traditional builders and manufacturers are fighting against green building codes and programs.  You can expect an increase in these types of challenges in 2011. 

One of the first reported legal challenges to a green building code occurred in New Mexico with the case Air Conditioning, Heating, and Refrigeration Institute (ACHRI) v. City of Albuquerque.  The case focused on the Albuquerque Energy Conservation Code passed by the city on September 17, 2007.  The goal of the code essentially was to create greater energy efficiency in buildings and products.  As often happens with new regulations, numerous parties were unhappy with the Code.  Three trade associations representing HVAC product manufacturers, distributors and installers challenged the Code, and the case was ultimately decided on September 30, 2010 by Judge Martha Vazquez of the U.S. District Court for the District of New Mexico. 

While the legal challenge focused on many portions of the Code, I am focusing on Volume I, which included requirements for commercial buildings and multi-family buildings. 

In order to comply with Volume I of the code, a building had to satisfy one of three paths:

1. The building must achieve LEED certification;
2. The proposed building must be 30 percent more energy efficient than a baseline building; or
3. The Heating, Ventilation, and Air Conditioning (HVAC) system and equipment must comply with minimum energy efficiency standards.

There is a key difference between the first two compliance paths and the last.  The first two paths can be described as performance-based because the building must perform in a particular manner.  The last path is a prescriptive compliance path, which means it focuses on the products that go into a building. 

Judge Vazquez relied on the legal theory of federal preemption to strike down the code's prescriptive compliance path:

"The Court concludes that the prescriptive provisions of Volume I requiring the use of heating, ventilation, or air conditioning products or water heaters with energy efficiency standards more stringent than federal standards are regulations that concern the energy efficiency of covered products and, therefore, are preempted as a matter of law."

Judge Vazquez pointed to the National Appliance Energy Conservation Act, which expressly preempted product energy efficiency standards: 

"A standard prescribed or established under section 6313(a) of this title shall, beginning on the effective date of such standard, supersede any State or local regulation concerning the energy efficiency or energy use of a product for which a standard is prescribed or established pursuant to such section."

Judge Vazquez went on to uphold performance path one and two because the plaintiffs presented a "cursory argument" and "very few material facts" in support. 

The question remains whether a court could find federal preemption of a LEED-based code if properly argued by a plaintiff. 

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Many months ago, I promised a two-part series on public-private partnerships.  Part one was previously published and today I wrap up the series with post two.  As we head in to 2011, public-private partnerships will play a vital role in replacing the non-existent state funds for necessary public works projects.  Here is part two on public-private partnerships: 

We have already revealed Secret No. 1 about public-private partnerships: there is bi-partisan support for PPPs.  I promised to reveal Secret No. 2 about PPPs.  In hindsight, I should have probably not labeled this a secret as it is more an observation verging on opinion.  Some of you that do not support public-private partnerships will not agree with this observation. 

Secret No. 2:  There appears to be no viable alternative to public-private partnerships. 

If you work in the construction industry, you probably know that the U.S. infrastructure is in dire need of renovation and repair.  According the American Society of Civil Engineers (ASCE), the U.S. infrastructure is in absolute disrepair based on its 2009 U.S. infrastructure grade card:

2009 Grades
Aviation D
Bridges C
Dams D
Drinking Water D-
Energy D+
Hazardous Waste D
Inland Waterways D-
Levees D-
Public Parks and Recreation C-
Rail C-
Roads D-
Schools D
Solid Waste C+
Transit D
Wastewater D-

America's Infrastructure GPA: D

Further, the ASCE has concluded that an investment of $2.2 trillion would be required over the next five years to improve our infrastructure.  Assuming the ASCE is correct, repairs to our infrastructure will require substantial investments by the states charged with infrastructure upkeep. 

But states have no money. 

Check out the grim outlook for state budget shortfalls from the Center on Budget and Policy Priorities:

The worst recession since the 1930s has caused the steepest decline in state tax receipts on record. State tax revenues were 8.4 percent lower in the 2009 fiscal year than in 2008, and an additional 3.1 percent lower in 2010, while the need for state-funded services did not decline. As a result, even after making very deep spending cuts over the last two years, states continue to face large budget gaps. At least 46 states struggled to close shortfalls when adopting budgets for the current fiscal year (FY 2011, which began July 1 in most states). These came on top of the large shortfalls that 48 states faced in fiscal years 2009 and 2010. States will continue to struggle to find the revenue needed to support critical public services for a number of years, threatening hundreds of thousands of jobs.

From my vantage point, I see an extreme need for infrastructure upgrades and I see public bodies that do not have the financial ability to fund the upgrades. 

If the public sector cannot fund infrastructure improvement, isn't the only other solution private sector investment through public-private partnerships? 

Photo credit:  Barbour

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Today I am interviewing Karen Bates Kress, President of the Yellowstone Park Foundation.  Yellowstone National Park just completed construction of a LEED Gold Old Faithful Visitors Center. The Foundation played an important role in raising funds for the green and educational aspects of the project

.  While this is not a traditional public-private partnership, it is an interesting example of the private sector paying for certification on a public project.

Chris:  Thank you for your time today.  The Old Faithful Visitor Center was recently built in Yellowstone National Park and is both LEED Gold and touted as a public-private partnership. Is the Visitor Center a public-private partnership in the traditional sense? 

Karen: The Yellowstone Park Foundation is the official fundraising partner of Yellowstone National Park. As with other “friends groups,” like friends of your local library, we fund projects and programs that go above and beyond what is possible through the base budget of our government partner.  After covering our own operating expenses, all of the funds we raise are granted to Yellowstone. Since we are a non-profit, we don’t directly profit from the arrangement, other than to re-invest revenue back into protecting, preserving and enhancing Yellowstone.

Chris:  As a National Park Service project, what were your concerns in pursuing a public-private partnership?  Was there resistance to the idea of using the public-private partnership model?  How did you overcome any resistance?

Karen: Concerns from some people always occur in the sense that they believe that a facility like a visitor center should be paid for totally by the government. However, to achieve the margin of excellence with a LEED standard and high quality educational exhibits that exist with the Old Faithful Visitor Education Center, private funding would have to be part of the equation.

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I just finished up a presentation to the Construction User's Roundtable (i.e. users of construction services) regarding public private partnerships (P3s). P3s are defined by the National Council of Public Private Partnerships as:

"a contractual agreement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility."

In the course of preparing for my speech, I learned two very important secrets about public private partnerships that I want to share with you.

Secret No. 1. P3s have bipartisan support.

One of the first areas I researched for my presentation was the effect the recently-completed election would have on P3s. You may have noticed that the House of Representatives will now be controlled by Republicans, many of which ran on a platform of fiscal austerity. As a result, the new Congress is likely to be less supportive of expensive public works projects. At the same time, our infrastructure - including old buildings - needs significant upgrades. For example, take a look at the abysmal grades given to the U.S. infrastructure in 2009 by the American Society of Civil Engineers (ASCE).

My research uncovered secret number one: support for public private partnerships is bi-partisan. Many politicians on both sides of the aisle have indicated their support for P3s as a means to fix our infrastructure problem. Here are some quotes I used during my presentation:

“That means maintaining strong support for public-private partnerships like NREL. . . . ”

- Rep. John Boehner, presumptive House Majority Leader

“Innovative public-private partnerships are appearing around the country, bringing much-needed capital to the table. It is important to ensure that the public interest is well-served in public-private partnerships, since they are here to stay and likely grow in importance.”

- Rep. Nancy Pelosi, Speaker of the House

And probably most important, Rep. John Mica, the presumptive Chairman of the House Transportation & Infrastructure Committee recently indicated he supports P3s, at least in one instance. In response to questions about the future of an American Recovery and Reinvestment Act high-speed rail project in Florida, Rep. Mica suggested that a public-private partnership should be used to get the project done:

"I want private dollars involved in this," Mica said. "If someone in the private sector puts up $500 million and that's $100 million short – I'm in an excellent position to assist. But I don't want the private sector to see this as a gravy train.”

Along with the Congress, President Barack Obama is strongly supportive of P3s and is pushing a National Infrastructure Bank to support P3 development.

While bi-partisan issues are few and far between these days, public private partnerships appear to have support of both Republicans and Democrats. With growing infrastructure needs and bi-partisan support, P3s may gain in popularity over the next few years.

I will reveal secret number two on Monday.

Photo credit:  Photo Phiend

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Across the country, government officials are scrambling to award and spend American Recovery and Reinvestment Act (ARRA) funding before upcoming deadlines.  If you are a contractor or subcontractor lucky enough to work on one of these projects, congratulations! 

Now comes the tough part. 

Working on a federal or state-funded project brings a myriad of regulatory issues that must be resolved.  One of those issues is Davis-Bacon compliance.  As you sort out compliance issues, here are some questions to think about: 

• Is the project a federal project subject to federal labor laws? 
• Is the project a state project subject to state labor laws?
• Is the project both a federal and state project subject to both federal and state labor laws?

Is your head spinning yet?  In some circumstances, depending on the government agencies involved and the source of funding, you may actually be subject to both federal and state labor laws.  I have assisted clients with these confusing issues, so please contact me if you have questions (chris@cheathamconsulting.com). 

Photo Credit:  NIOSH

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The likelihood that some American Recovery and Reinvestment Act (ARRA) green building projects would fail should not come as a surprise to Green Building Law Update readers.  Back in February 2009, I wrote about the the difficulties of administering the stimulus funds at state, county and municipal levels.  In January 2010, I highlighted initial problems with the Illinois weatherization program, which was being funded by Department of Energy ARRA funds. 

But the rampant problems with the Illinois weatherization program have not improved. 

The Department of Energy Office of Inspector General recently published a follow up report on the Illinois weatherization program.  The report focuses on 15 homes that were audited.  The conclusions of the report speak for themselves:

Poor Workmanship: At 12 of the homes, CEDA inspectors found substandard work that could have, in some cases, resulted in significant property damage or injury to the homeowners. In one home, 11 of the 14 items that the contractor should have installed or repaired to improve energy efficiency failed inspection. In another instance, while accompanying inspectors, we found that a contractor had not corrected, as required by the home's work order, improperly installed kitchen exhaust ductwork, a potential fire hazard. Although CEDA and certain State officials disagreed that the ductwork problem posed a fire hazard, State building code officials we consulted confirmed the concern. Further, we observed a furnace intake vent pipe that had been improperly installed and found that five of the six tune-ups to heating systems had not been properly performed, allowing the heating systems to either improperly fire or emit carbon monoxide at higher than acceptable levels. Further, CEDA's own inspectors cited contractors for improper insulation of attics, band joists, and walls. In all, 8 of the 10 contractors that had weatherized homes included in our evaluation were cited for poor workmanship.
...

Inadequate Initial Assessments: At eight of the homes, CEDA inspectors found that assessors from within its organization had either called for inappropriate measures or had overlooked key weatherization measures needed to make the homes more energy efficient. In one home, for example, an inspection report noted that an assessor had inappropriately called for attic insulation when sizeable leaks in the roof would have reduced the effectiveness of the insulation. In addition, we found homes where inspectors cited assessors for failing to identify an open sump pump, leaking water lines, and a skylight that had not been properly insulated. CEDA acknowledged that, due to hiring nearly 60 new field personnel who were needed for the increased level of weatherization work funded by the Recovery Act, it had experienced "an inevitable level of inadequate assessments that were not corrected or were incompletely reviewed before the jobs were assigned to contractors."
...

Erroneous Billing: At 10 of the 15 homes we visited, CEDA inspectors found that contractors had billed a total of about $3,300 for labor and materials that had not been installed. For example, a contractor had installed a 125,000 BTU boiler, but had billed CEDA for a 200,000 BTU boiler costing an estimated $1,000 more. Additionally, a contractor had installed one carbon monoxide detector, but had billed CEDA for 3; another contractor had installed 12 light bulbs, but had billed CEDA for 20; and, yet another had failed to install a gas shut-off valve, but had billed for the work. In addition, a contractor had billed for almost four times the amount of drywall actually installed. Billing issues appeared to be pervasive, since 7 of the 10 contractors in our sample were cited by CEDA for erroneous invoicing.

Keep in mind that the DOE and Illinois were already on notice that the program was suffering from severe deficiencies back in January 2010. 

I have absolutely no doubt that this report will be picked up in the press and by politicians in order to cite a failure of the stimulus program.  I have no doubt that Illinois is not the only state that is failing to properly administer the DOE weatherization program.  I have no doubt that other green building stimulus programs are also facing similar issues. 

But as I look at this from a legal standpoint, I see an enormous wave of green building litigation.  I see homeowners filing lawsuits against contractors, engineers, and architects.  And I am advising my clients to be very careful as they proceed with ARRA projects. 

This could get very messy. 

Photo:  BostonBill

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I first met Daniel Moring as an aide to D.C. Council Member Mary Cheh when we discussed the D.C. Green Building Act.  We recently met up to discuss the General Services Administration's proposal to require greenhouse gas emissions reporting and I asked him to write a post on the topic.  Enjoy and have a great weekend.  

By: Daniel Moring

Although a climate bill lies in shambles at the foot of Capitol Hill as the summer recess approaches, a new approach to evaluating federal contracts by the General Services Administration could go a long way to realizing at least some of the goals of the failed legislation.  GSA won’t stop judging based on what vendors are offering and for how much, but they will give extra consideration for the greenhouse gas footprint of offerings.

Or, to put it more simply: The feds are going Wal-Mart. 

Wal-Mart, recognized across the retail industry for its masterful supply chain management and razor-thin margins, decided in 2007 to use its sheer buying power to move the market.  Wal-Mart committed to reduce 20 million metric tons of CO2 from its business operations, targeting the product lines with the highest ‘embedded emissions,’ a measure of environmental impacts across its lifecycle of manufacture, distribution, and disposal. 

To tackle this wide-ranging objective, Wal-Mart enlisted its over 60,000 suppliers to help investigating and implementing improvement of firms’ environmental footprint, starting with energy and climate impact—or risk being dropped as a vendor. 

The Wal-Mart approach does not go as far as federal actions contemplated, but simply creating an awareness of the greenhouse gas footprint implicit in the supply chain can have a transformative impact on the market, particularly as government remains an attractive [if not the best] client due to persistent sluggishness.  The GSA rules only encompass direct emissions from operations and, while not yet mandatory, could garner additional preference in procurement decisions. 

Although environmental footprinting for your firm may seem like just another government mandate, taking into account your business’ environmental impact and associated costs also presents opportunities to identify inefficiencies, prioritize investments, manage risk, and improve performance while gaining a strategic advantage with a very significant market actor.  As the oft-cited saying goes, “you cannot manage what you do not measure,” so it begins with taking stock, taking aim, and taking action on your company’s environmental impact, starting with vehicle and building energy use. 

The standards and requirements are still developing, but the handwriting is on the wall, and smart companies are beginning to understand the language of environmental management so they can read it and take advantage. 

Daniel Moring is Program Manager for the Washington, DC office of IBC Engineering Services, a sustainable engineering firm that specializes in identifying and reducing energy-related environmental impacts for business and government clients.

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The green building industry has been besieged the last few years with stories about buildings not performing as anticipated.  It appears the federal government has taken notice, and is pushing reforms to green building certification, based on comments by one high-ranking General Services Administration official:  

“'One of the things that I tease the USGBC about is that they really need to re-brand from ‘Leadership in Energy and Environmental Design’ to ‘Leadership in Energy and Environmental Performance,’ and they are picking up on that,' Kampschroer said. 'The GSA is as well, with the idea of continually improving the maintenance of existing buildings.'”

I was surprised to read this comment from a high-profile GSA official.  The GSA relies on the Leadership in Energy and Environmental Design (LEED) rating system to demonstrate that its new construction is green.  Now the GSA is apparently pushing the USGBC to reform its LEED rating system to account for building performance.  

In the article, the Vice President of Autodesk took it a step further and suggested that the federal government needs to completely overhaul the procurement system to ensure improved building energy performance:

"In order to demand more energy-efficient government buildings, he said, federal officials must change their procurement model from the typical system of outlining what they want built, setting an estimated price and awarding a contract to the lowest bidder.

'You have to blow that to smithereens,' said Bernstein, who believes federal officials must start setting broader energy-efficiency guidelines and rethink their incentive structure. 'The government should say, ‘I want this schedule, this LEED rating, this operational efficiency and these design-quality standards,’ and all the profit is a measure of achieving those things.'"

I have no doubt that the USGBC will be revising the LEED rating system in the next few years to include re-certification for new buildings based on energy performance.  The government has been dabbling with performance contracting - contractors that get paid based on reducing energy bills - for some time.   But would the federal government blow up the existing procurement process and require actual energy performance as part of new construction contracts? 

I wouldn't put it past the GSA.  

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It's an understatement to say environmentalists were disheartened by Senator Reid's announcement last week that a comprehensive cap-and-trade bill would be tabled for the year.  But, fear not, environmentalists - and, be fearful, unprepared federal contractors - because the federal government will be regulating greenhouse gas emissions in other ways.  

Back in October 2009, we talked about the groundbreaking Executive Order 13514, which set advanced sustainability requirements for the federal government.  One of the most important parts of the Order is Section 13, which asks the General Services Administration to look into the feasibility of requiring  vendors and contractors to report greenhouse gas emissions. 

The GSA recently released its report, which concludes that it is feasible to implement a "phased approach, for the Federal Government to track and reduce its scope 3 supply chain emissions through coordination with suppliers and other stakeholders."  In short, a greenhouse gas emissions reporting requirement will be phased in, and eventually mandated for federal contracts.

For federal contractors - and eventually state and local contractors - tracking, reporting, and reducing emissions will become an important strategy for winning government contracts. 

While much of the focus of Green Building Law Update has been on green building certification, I plan to shift gears in the coming months and focus more on greenhouse gas emissions reporting requirements for federal contractors.  Why?  

My concern is that construction contractors are not prepared to report greenhouse gas emissions.  

Are you prepared to report your greenhouse gas emissions?    

Photo credit: melancholic optimist

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Despite my previous suggestion that the USGBC's Greening the Codes could have done without the history of building codes, I do think it offers an interesting history lesson.  This paragraph caught my attention:   

The energy crisis of the 1970s brought yet another topic to the national stage. The soaring costs of energy and a growing concern about pollution and natural resource conservation caused Congress to pass the Energy Policy and Conservation Act that in 1978 would require states receiving federal funds to initiate energy conservation standards for new buildings. That same year, the State of California led the nation by adopting the California Energy Code, recognizing that energy consumption gone unchecked yields societal costs to consumers, to the economy, to the environment and ultimately to public health. It would take a number of compounding factors in the 1990s to revive this interest in building energy efficiency that ended up otherwise largely lost to other priorities in the 1980s.

The more recent surge in support for green building looks eerily similar to the 1970s.  
I have always thought that the most recent green building trend really took hold in 2008, just as gas prices skyrocketed.

Congress then included billions of dollars for the green building and renewable energy industries in the American Recovery and Reinvestment Act that passed in February 2009.  In order to receive some of the stimulus funds, Governors had to make promises to improve state building codes.  At the state level, California became the first state to adopt a mandatory, state-wide green building code in January 2010.

History teaches us that this combination - the federal government and then California push green building codes forward - tends to repeat itself. 

If history repeats itself, what lessons can we learn from the last cycle of green building support?  The 1970s saw a wave of sick building syndrome cases.  After building envelopes were tightened -- but ventilation remained the same -- the occupants grew ill from the indoor environment.  Concerns are already starting to emerge about indoor air quality in this cycle's green buildings.  

Any other lessons I missed?

Photo Credit: Stuck In Customs

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What Is a "Zero Environmental Footprint"? 

This is an important question for government contractors because the General Services Administration (GSA) recently proposed that the federal government move to a zero environmental footprint.

Unfortunately, I'm not sure anyone has defined this apparently new term.  The GSA's announcement doesn't define "zero environmental footprint."  None of the articles highlighting GSA's proposal defined the term.  The numerous websites that provide greenhouse gas and carbon footprint accounting services do not define zero environmental footprint.  I also couldn't locate a definition through my Twitter, Facebook and LinkedIn friends.  

In the end, I had to rely on a Canadian children's website for a definition.  

The Canadian website Zerofootprint Kids Calculator defines an environmental footprint based on five categories:

(1) Transporation
(2) What you eat
(3) Home & School
(4) What You Use; and
(5) What You Throw Away

If you change "Home & School" to "Home & Work," you actually have a fairly comprehensive list of categories to calculate an adult's environmental footprint.*  

However, contractors will need a better definition of "zero environmental footprint."  The federal government might want to consider defining this important phrase.

*I actually took the YourFootprint quiz and was surprised at my carbon results.  Keep in mind, I live in Washington, DC, I do not own a car, and I live with a environmentally-conscious wife.  Here are my stats:

Carbon Footprint:  Me - 10.4; U.S. average - 9.8
Land:  Me - 1.8; U.S. average - 2.2
Trees:  Me - .3; U.S. average - 4.2
Water:  Me - 1743.2; U.S. average - 1877.9

Photo Credit: isolano

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Executive Order (EO) 13514 continues to have enormous implications for the green building industry.  As you'll recall, EO 13514 requires that federal agencies comply with a number of green building stipulations, including 95% of all applicable contracts meet sustainability requirements.  While the American Recovery and Reinvestment Act (ARRA) invested over $25 billion in green building projects, the Order will have a more long-lasting impact on the industry. 

Why do I say this?  General Services Administration (GSA) Adminstrator Martha N. Johnson's recent statement regarding the GSA's zero environmental footprint goal suggest how far agencies may go to implement the Order:

"Citing the president’s Executive Order 13514, Johnson highlighted the agency’s mission to assist other federal agencies to make greater strides in sustainability, excel at greening initiatives, and increase federal building performance. Johnson proposed that the federal government move to a zero environmental footprint, and she stressed that GSA is setting its sights on 'eliminating the impact of the federal government on our natural environment. . . .'

Johnson outlined a number of areas in which GSA could take the lead toward greening the government. These include cultivating green-centered public/private partnerships, aiming for only green products on the federal supply schedules, and using the federal building portfolio as a green proving-ground for new sustainable building and design technologies. . . ."

Administrator Johnson's statements are a signal of what is to come from GSA and other federal agencies.  Under the Executive Order (pdf), the GSA has broad authority to make recommendations to "green" federal contracting:

"Within 180 days of the date of this order, the General Services Administration . . . shall review and provide recommendations ... regarding the feasibility of working with the Federal vendor and contractor community to provide information that will assist Federal agencies in tracking and reducing scope 3 greenhouse gas emissions related to the supply of products and services to the Government." 

Additionally, under Section 13 of the Order, the GSA has been asked to provide recommendations regarding "using Federal Government purchasing preferences or other incentives for products manufactured using processes that minimize greenhouse gas emissions. . . ."

The GSA is preparing to overhaul the way the federal government purchases services and supplies.  But what exactly is a zero environmental footprint? 

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From time to time, I like to step outside the green building industry and look at construction of renewable energy projects.  While windmill construction is nothing new, countries are looking for new opportunities to develop wind energy.  One new type of development has certainly caught my attention from a risk management standpoint. 

"By offering generous incentives, the U.K. already has built more offshore wind power than any other nation.  Now it is planning a wave of vast new wind farms, in some of Europe's stormiest waters." 

"Some dismiss the windmills as quixotic. . . . And many more challenges await, judging from those the project at Kent faced, ranging from the need to protect marine worms to a design flaw that causes turbines to sink into their foundations."

"Owners of a Dutch wind farm found their turbines had shifted a few inches, the result of a design flaw in equipment connecting the towers to their foundations.  RenewableUK, a trade association, said most of the 336 turbines operating in the U.K. waters could have the same fault, and would cost about $250,000 each to fix."  

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My first legal case involved "fly ash."  I had no idea what fly ash was so I looked it up in the dictionary.  Fly ash is a "coal-combustion by-product" (CCB) that is often used in concrete as a replacement for portland cement.  When used in massive concrete structures, like dam construction, fly ash can result in a significant cost savings.  

Despite all of my work with fly ash, I had never read or heard anyone mention that fly ash could be the "new asbestos."  That was, until I read an ENR article titled "Fly Ash Looms as the 'New Asbestos":

"Concrete groups are on tenterhooks, waiting for the U.S. Environmental Protection Agency to publish a proposed rule that aims to designate fly ash and other coal-combustion by-products as hazardous waste. The concrete sector is concerned even about the ramifications of a 'hybrid' rule that would allow beneficial uses of CCBs to continue."

"[T]he USGBC has issued a credit interpretation that allows for an innovation credit if 40% less cement is used than in typical construction, or if 40% of the cement in concrete is replaced with slag cement, fly ash, or both."

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On Thursday, I had the honor of presenting on green building legal issues to the Texas Young Lawyers Association.  I graduated from the University of Texas School of Law, so it was surreal to be invited back for the opportunity to speak on the law. 

Whenever I speak, I leave time for questions and this time I received a new question, something no one had ever asked me.  During my presentations, I often review the government trend in support of green building regulations.  Thanks to the United States Green Building Council for providing these helpful statistics:

"Various LEED initiatives including legislation, executive orders, resolutions, ordinances, policies, and initiatives are found in 45 states, including 202 localities (138 cities, 36 counties, and 28 towns), 34 state governments (including the Commonwealth of Puerto Rico), 14 federal agencies or departments, 17 public school jurisdictions, and 41 institutions of higher education across the United States."

"While the government seems to be driving energy efficiency initiatives in public buildings, local developers and companies are lagging behind. However, multinational companies have taken the lead to promote green buildings in China by pursuing more stringent LEED certification. . . . In fact, multinational companies, driven by their global corporate responsibility policies, have built eight of the total 15 LEED certified buildings in China so far. . . .

'At this point, the Chinese companies don’t feel the same sort of pressure to demonstrate corporate social responsibility that the multinational companies feel,' says Geoffrey Lewis, a Fulbright Fellow at Tsinghua University’s Department of Building Sciences who closely monitors China’s green building progress." 

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For many in the green building industry, federal projects have provided an opportunity for much needed work as private development has stalled.  However, contractors should be aware of a significant change to federal construction contracts coming down the pike.

On April 13, President Barack Obama issued an Executive Order that will result in new requirements for project labor agreements:

"The Obama administration is set to issue a rule Tuesday that will allow federal agencies to require that contractors on large-scale public construction projects agree to union representation for workers. . . . The rule doesn't mandate that federal agencies require contractors to bargain with unions on all jobs, but it clears the path for government agencies to make such agreements a requirement for contractors on jobs costing $25 million or more."

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On Saturday, I was having a leisurely breakfast with my wife when I foolishly flipped on my blackberry, opened my email and stared at the following headline:

Comox Rec Centre not LEED anymore. 

Breakfast was essentially over.  Never before had I seen the potential for LEEDigation stated so clearly in a headline.  

The Comox Recreation Centre is located in Comox, Canada.  According to the story at Canada.com, the project was originally pitched to receive LEED Platinum certification: 

"The expansion of the main entrance area and the older multi-purpose was expected to be built to the highest level of LEED certification, or LEED Platinum when it was awarded $950,000 in federal grants last fall.

But Comox Mayor Paul Ives says that certification was never realistic given the project's smaller budget and that the retrofit had to be built on the existing footprint.

'If we'd gone through LEED, we were going to be hard pressed to get LEED Silver, probably not Gold and definitely not Platinum because of the rating scale,' said Ives."

"Town council held in camera meetings March 23 and resolved to build 'an environmentally responsible and as energy efficient building as the budget allows', a downgrade of an earlier resolution that called for LEED platinum 'or a similar standard with financial limits.'"

Los Angeles Times Assails Weatherization Program (GBLU)

Photo credit:  Antony Pranata

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"If your company owns or leases commercial buildings and you have constructed or retrofitted the property to be more energy efficient, you may be eligible for an accelerated deduction for part or all of the costs associated with the property. Incentives are available for:

• Interior lighting systems

• Heating, ventilating and air conditioning (HVAC) and hot water systems

• Building envelope

• Interior lighting systems

• Heating, ventilating and air conditioning (HVAC) and hot water systems

• Building envelope"

"In the case of energy efficient commercial building property installed on or in a property owned by a Federal, State or local government entity, an allocation of the deduction can be made to the person primarily responsible for designing the property in lieu of the owner of such property. This designer could be an architect, engineer, contractor, environmental consultant or an energy services provider who created the technical specifications for making the building energy efficient."

You should consult with an attorney or tax consultant to ensure that you comply with all requirements. But the tax incentive provides a tremendous opportunity to capitalize on green building components that are incorporated into federal green building projects.

Related Links: 

Improving Cash Flow With the Energy Efficiency Deduction (RSM McGladrey)(.pdf)

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A nation-wide Property-Assessed Clean-Energy (PACE) bond program has been proposed, but not without its critics.  

As you may recall, PACE bonds are a new financing mechanism that can be used to retrofit homes and commercial buildings, or install renewable energy:

"PACE is a bond where the proceeds are lent to commercial and residential property owners to finance energy retrofits (efficiency measures and small renewable energy systems).  OWNERS then repay their loans over 20 years via an annual assessment on their property tax bill. PACE bonds can be issued by municipal financing districts or finance companies and the proceeds can be used to retrofit both commercial and residential properties."

The White House is now pushing its own PACE bond program:

"Under the program, homeowners would borrow money from their local government to pay for energy improvements—from high-efficiency furnaces that cost a few thousand dollars, to solar-panel systems that can cost more than $30,000. They would then repay the loan over 15 to 20 years through a special assessment added to their property-tax bills. Local governments would get the funding by selling municipal bonds to investors

This debt would be senior to existing mortgage debt, so if the homeowner defaults or goes into foreclosure, it would be repaid before the mortgage lender gets any money. While property-tax assessments are usually senior to existing property debt, cities have traditionally used their assessment authority for community-wide improvements like sewers and roads—not for upgrades that homeowners elect to make on their own homes."  

As with any new governmental program, there are critics of the PACE program.  The critics of the White House's PACE program are opposed to the first-lien rights:  

"Alfred Pollard, general counsel for the mortgage companies' regulator, the Federal Housing Finance Agency, said he was worried about the problems that a first-lien, or first-in-line, loan could create. 'The goal of enhancing energy efficiency, which we share, should not overcome the need for prudent underwriting,' he said."

There appears to be no easy solution to appease the PACE bond critics.  Government agencies are comfortable pushing PACE bond programs for the same reason that banks and mortgage companies are uncomfortable with the programs:  the agencies take first-lien rights.  

Do you see a resolution?

PACE NOW (PACEnow.org)

Fannie and Freddie Resist Loans for Energy Efficiency (WSJ)

Photo: afagen

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I have previously written about informal complaints regarding the Environmental Protection Agency (EPA) and Department of Energy's (DOE) Energy Star Program for appliances.  Based on recent findings of a Government Accountability Office report, it seems much larger systemic problems exist within the Program:

"In a nine-month study, four fictitious companies invented by the accountability office also sought EnergyStar status for some conventional devices like dehumidifiers and heat pump models that existed only on paper. The fake companies submitted data indicating that the models consumed 20 percent less energy than even the most efficient ones on the market. Yet those applications were mostly approved without a challenge or even questions, the report said."

"Did you know that a building or manufacturing plant can earn the ENERGY STAR label just like your refrigerator?" 

"Commercial buildings achieving a score of 75 or higher using Portfolio Manager and verified by a professional engineer are eligible to apply for the ENERGY STAR. To get started, enter the required data into Portfolio Manager. The tool will tell you if your building may qualify for the ENERGY STAR. If it does, your next step is to complete the verification process and submit your application." 

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On Monday, I discussed conflicts between military construction and green building certification.  Green building certification was originally created for commercial office buildings, which can create some odd applications in military construction.  While we have have already discussed energy efficiency, bicycle racks and HVAC systems, there is one component of military construction that conflicts directly with many green building components:  anti-terrorism.  

I never imagined someone had completed a study of these conflicts:

The LEED®-DoD Antiterrorism Standards Tool addresses the security implications of strategies used to achieve each LEED credit with regard to their inter-relationship (i.e., potential conflicts and synergies), from the Department of Defense (DoD) perspective. Information is presented within a color-coded matrix based on the U.S. Green Building Council's Leadership in Energy and Environmental Design Green Building Rating System (LEED-NC Version 2.1) cross-referenced with the applicable standards in Unified Facilities Criteria (UFC) 4-010-01, DoD Minimum Antiterrorism Standards for Buildings. As such, critical areas are easily identified, prompting the project team to work collaboratively, using a 'whole building' approach, to develop successful, efficient solutions for a high performance, secure building.

For a government contracts attorney focused on green building legal and regulatory developments, the Standards Tool is a remarkable discovery.  My eye was immediately drawn to the "conflicting requirements" in the Standards Tool.  According to the Standards Tool, the following LEED credits are in direct conflict with Anti-terrorism Standards: 

•    SS-2 Development Density
•    SS-5.2 Reduced Site Disturbance, Development Footprint
•    SS-6.1 Stormwater Management, Rate and Quantity

In future posts, I will be exploring the conflicts between these LEED credits and the Anti-terrorism Standards Tool.  Have any of you worked with a building trying to comply with both LEED certification and the Department of Defense Anti-Terrorism Standards? 

Related Links:

LEED DoD Antiterrorism Standards Tool (WBDG)

Conflicts Arise Between Military Construction and Green Building (GBLU)

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Douglas Reiser, who publishes at the Builders Counsel Blog, recently posted an interesting question regarding Davis-Bacon wage determinations for green building projects:

"What do you think about Davis-Bacon worker/payment classifications for 'green building' specialists or professionals? Should there be a classification for your project's LEED AP? How about for any independent raters?  I am thinking that there might be a debate about HVAC, electrical, and plumbing workers who are trained in sustainable practices - do they require higher wages than your normal subcontractors?"

• Weatherization worker
• Doors & windows replacement worker
• HVAC, furnace, heating & cooling repair, installation and replacement worker
• Carpenter
• Electrician
• Plumber

Virginia Residential Weatherization Wage Determination

(DOL)(PDF)

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I had never quite understood why federal agencies were so focused on green building certification.  That was, until I read this:

"U.S. agencies are required to have 15 percent of their existing building inventory incorporate sustainable elements by 2015 under Executive Order 13423, signed by George W. Bush in 2007.  

To comply with the order, the Department of Veterans Affairs aims to have 21 facilities reviewed and rated by third-party green building systems by the close of this year.

'Reaching the goal of 21 third-party certifications in 2010 will make VA a leading example of green achievement,' said Secretary of Veterans Affairs Eric K. Shinseki in a prepared statement. 'We will proudly reach and surpass the 15 percent requirement before 2015.'"

Photo credit: cisc1970

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During green building presentations that include legal views, I usually expect that someone in the crowd will not agree with my views of the green building industry.  Usually, the unhappy audience member cannot fathom that there are potential risks associated with green building.  Last week, though, I received a much different reaction when I presented to the National Research Council.  

A number of the federal agency employees in attendance voiced dismay that I focused exclusively on federal agencies' adoption of the United States Green Building Council's (USGBC) LEED rating system.  Some audience members expressed concern that federal agencies had wholesale adopted LEED certification in order to build green. 

These concerns reminded me of a recent news article highlighting alternative green building certification adopted by a federal agency:

"Fifteen Veterans Affairs Medical Centers in 10 states have received Green Globes green building ratings under the assessment system administered by the Green Building Initiative.

The GBI's third-party review system certifies buildings at four levels with ratings ranging from a single to four Green Globes.

All but two of the 15 VA medical centers that were recently certified received ratings of three Green Globes. The Los Angeles Ambulatory Care Center and the Durham VA Medical Center in North Carolina each received a rating of two Green Globes."

In describing the U.S. Department of Veterans Affairs' Green Globes buildings, Rob Watson, the Father of LEED, argued that Green Globes was continuing to "penetrate its mid-market target." 

The use of non-LEED rating systems is a new development in federal policy, and one that may continue to gain in popularity for different building markets.  On Thursday, we will look at why green building certification is so important to federal agencies.

Is it possible that two green building rating systems can live harmoniously in federal policy? 

Related Links:

15 Veterans Affairs Medical Centers Attain Green Globes Certification (GreenerBuildings)
 
Yogi Berra Was Right (GreenerBuildings)

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If you are working on a construction project funded by the American Recovery and Reinvestment Act (or you have any hint that you are), you need to be aware of your responsibility to pay Davis-Bacon wages.

"Notwithstanding any other provision of law and in a manner consistent with other provisions in this Act, all laborers and mechanics employed by contractors and sub contractors on projects funded directly by or assisted in whole or in part by and through the Federal Government pursuant to this Act shall be paid wages at rates not less than those prevailing on projects of a character similar in the locality as determined by the Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40, United States Code."

"Section 1606 of ARRA plainly indicates that the Davis-Bacon prevailing wage requirement broadly applies to ARRA-appropriated construction projects. . . . [The ARRA] also extends the prevailing wage requirements to projects 'assisted in whole or in part by and through the Federal Government pursuant to this Act' thus encompassing any assistance provided for ARRA projects through grants, loans, guarantees, and insurance."

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While preparing for my presentation "Legal Considerations When Building Green" for the National Research Council, I contemplated what proposals I wanted to make to the federal agency representatives that would be in attendance. 

The federal government is pushing federal investment in green buildings through $25 billion allocated from the American Recovery and Reinvestment Act and through the Executive Order 13514, which includes numerous building efficiency requirements. As federal agencies attempt to implement green building programs, it is important to facilitate and share green building knowledge across the numerous federal agencies.

As I contemplated making what I thought was a drastic proposal, the GSA released the following information:

"GSA has made significant changes that will strengthen its role in helping the Obama Administration make the federal government a leader in sustainability.

First, the Office of Federal High-Performance Green Buildings has been moved from PBS [Public Buildings Service] to the Office of Governmentwide Policy. . . .

As part of governmentwide policy, the Office of Federal High-Performance Green Buildings will expand its reach to provide federal agencies with measurement tools and policies to meet its sustainability mandates."

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Back in January 2010, I said this:  "Government officials and citizens are going to expect results form the significant investments in the green movement (particularly in an election year). In 2010, the nation will begin to decide if investments in the green building and renewable energy industries were worth it."

Not one month later, it appears that media critiques of American Recovery and Reinvestment Act(ARRA) green building programs have begun.  Last Thursday, the Los Angeles Times ran the following headline:  

"Obama's federal government can weatherize your home for only $57,362 each"

How did the Los Angeles Times come up with this number?  The Times did some very simple math to calculate how much money had been spent per home so far. 

"The Energy folks did tell ABC they've so far spent 522-million Recovery Act dollars on the program. So, let's see, about 9,100 homes divided into that chunk of stimulation change to believe in is -- gee! -- about $57,362 worth of very expensive weatherstripping for each home fixed up so far."

Of course there is more to the Times' blog post.  The Energy Department had to resolve Davis-Bacon wage determinations prior to starting the weatherization program.  At the end of the Los Angeles Times post, the Energy Department's response was included:  

"The GAO report cites figures from September 2009 -- almost five months out of date. Since then, we have resolved Davis-Bacon wage issues in all 50 states, clarified how states should handle historic preservation and worked with states to resolve any remaining barriers. As a result, by the end of 2009, our programs had weatherized about 124,000 homes in total, and we are on track to weatherize more than 250,000 this year. In fact, since September 2009, we have tripled the pace of Recovery Act funded home weatherization. The report also erroneously implies that our goal was to weatherize 593,000 homes in 2009. That is wrong. The goal has been to weatherize that number by March 2012, and we are on track to meet that goal."

The Los Angeles Times article suggests the media is going to comprehensively cover the progress and accounting of ARRA green building projects in 2010.  While this Los Angeles Times article may have relied on stale statistics, you can bet that the Department of Energy's weatherization program, and the contractors taking part in it, will be under additional scrutiny. 

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I often get the same question about the American Recovery and Reinvestment Act: where are the green jobs and projects?  A recent Wall Street Journal article sheds light on that question:

"The Obama administration's economic-stimulus program has delivered about a third of its total $787 billion budget during its first year, much of that to maintain social services and government jobs and to provide tax cuts for workers. Now, the pace and direction of stimulus spending are about to change.

Infrastructure spending is set to step up in the second year of the stimulus program, which should mean more money flowing to private-sector employers."

Infrastructure spending includes the green building projects that will be administered by the General Services Administration, the Department of Defense and the Department of Energy.  A large portion of the $180 billion set aside for infrastructure projects has not been spent: 

"During year one of the stimulus, only about $20 billion of money was handed out for infrastructure projects.

'I think we'll see a lot more stimulus money get into actual contracts and actual hiring in 2010 than we did in 2009,' said Kenneth Simonson, chief economist of the Associated General Contractors of America."  

If you are looking for ARRA green building projects, 2010 appears to be the year.  

Photo:  vividbreeze

Related Links:

Bulk of Stimulus Spending Still to Come (WSJ)

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What would you tell the federal government about green building law if you had the opportunity?

This past weekend, I contemplated this question as I prepared for a presentation that two colleagues - Catherine Kunz and Stephen McBrady - and I will be giving to the National Research Council and 15 federal agencies that will be in attendance.  While preparing for the presentation, I came across new information and resources that I will share with you over the coming weeks.  

While my presentations often focus on legal pitfalls facing the green building industry, I like to start each presentation on a positive note, by pointing out the benefits of the green building industry.  For the presentation to the National Research Council, I will begin with this headline:



What is the ENERGY STAR Leaders Program and why has it worked? 

"Owning a building that achieves top energy performance is a sign of good management, but owning a portfolio of buildings that achieves continuous improvement in energy performance demonstrates superior management and environmental leadership. Those ENERGY STAR partners who demonstrate continuous improvement organization-wide, not just in individual buildings, qualify for recognition as ENERGY STAR Leaders. . . .

An ENERGY STAR Leaders designation helps you leverage your management success, as organizations with strong energy management often outperform their competitors by as much as 10%. Associations, financial analysts, and other stakeholders can use the Leaders designation as an objective way to distinguish leading organizations from their peers. In addition, with more than 68% of U.S. households recognizing ENERGY STAR as the national symbol for protecting the environment through energy efficiency, ENERGY STAR Leaders can promote their energy efficiency improvements to customers and clients."

While I have concerns about other federal green building programs and regulations, the ENERGY STAR Leaders program is successfully promoting energy efficiency in the nation's building stock. 

What other governmental green building programs would you deem a success? 

Related Links:

Become an ENERGY STAR Leader (EPA)

EPA's ENERGY STAR Leaders Quadruple Energy Savings in One Year (EPA)

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When you think of green energy projects, what sort of results do you anticipate?  New energy sources?  Reduced energy costs?  Green jobs? 

What about earthquakes?

Geothermal energy, a widely-touted green energy source, involves drilling miles-deep wells into underground reservoirs in order to tap steam and hot water that can be used for energy applications.  I have previously referenced a geothermal energy project that was shut down by the Swiss government for allegedly causing earthquakes in 2006 and 2007. 

Apparently, the potential for earthquakes triggered by geothermal energy projects is also a concern for the U.S. Department of Energy, as detailed in a December 30 DOE letter: 

"The United States Energy Department, concerned about earthquake risk, will impose new safeguards on geothermal energy projects that drill deep into the Earth’s crust.  The new policy is being instituted after a project in California that used the new technology was shut down by technical problems and encountered community opposition, federal documents indicate.

The project, by Seattle-based AltaRock Energy, would have fractured bedrock and extracted heat by digging more than two miles beneath the surface at a spot called the Geysers, about 100 miles north of San Francisco. The company ran into serious problems with its drilling and faced accusations from scientists and local residents that it had not been forthcoming enough about the earthquake risk. AltaRock denied those accusations."

"In a second document dated Sept. 11, 2009, but not previously disclosed, the department concluded that earthquakes that would have been set off by the AltaRock project would 'not have a significant impact on the human environment.'”

Just another example of how new, green technologies will result in unintended consequences.  How can you extrapolate this example to the green building industry?

Photo Credit:  peripathetic

Related Links:

Green Energy Project Causes Earthquakes? (GBLU)

Geothermal Basics (DOE)

Geothermal Drilling Safeguards Imposed (NYT)

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[Please join us on January 20 for the next Green Professionals Happy Hour.  See details in the attached flyer.]

Many federal agencies are applying the LEED rating system to buildings in the United States, but one agencies unique use of the system recently caught my attention.  The Army Corps of Engineers is attempting to modify the LEED rating system for international application: 

"Translating the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) Silver certification into a standard for all international construction—which the U.S. Army Corps of Engineers has pledged to do—may be impossible.

Creating high-performance facilities is not the issue, but holding to a LEED rating is problematic. “LEED is a very U.S.-based standard, and trying to take that and apply it overseas is difficult. But the Army mandate is ‘do it,’” says Jeanette Fiess, who represented the Corps’ LEED Sustainability Directorate of Expertise at a November 'LEED Awareness' workshop for Corps staffers in Oberammergau, Germany. The directorate, a virtual entity with experts in many Corps districts, is trying to figure out how to comply."

"Part of the problem is many countries in which the Corps builds have their own versions of LEED, and they don’t line up well enough in philosophy or detail to map from one to another. The Japanese have the Comprehensive Assessment System for Built Environment Efficiency (CASBEE), South Korea has its mandatory Green Building Certification Program, and Germany has the DGNB, or Deutsche Gesellschaft für nachhaltiges Bauen e.V, from the German Sustainable Building Council."

What do you think of the Corps of Engineers’ attempts to modify the USGBC’s LEED rating system for other countries?

Related Links:

Building To LEED-Silver May Not Survive First Encounter (ENR)

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A coalition of forest product companies ("the Coalition") has filed a complaint with the Federal Trade Commission (FTC) regarding, in part, the United States Green Building Council’s preference for Federal Stewardship Council-certified (FSC) wood products. The Coalition has asked the FTC Bureau of Competition to provide guidance to the USGBC and other rating systems regarding the endorsement of product certifications.

If the FTC decides to provide such guidance, the USGBC’s LEED rating system will obviously be affected.  I am particularly interested in the implications of FTC action for green building regulations that have incorporated the LEED rating system.

In its complaint, the Coalition takes a shot across the bow aimed at federal agencies that have adopted the LEED rating system:

“The favoritism shown FSC-certified products by USGBC is inconsistent with the American National Standards Institutes's (“ANSI”) due process requirements and OMB Circular No. A-119, which establishes the principles that voluntary, private sector standards must meet if federal agencies wish to use them, including openness, balance, due process, an appeals process, and consensus.”

In short, the Coalition is arguing that federal agencies are improperly requiring LEED certification for the design and construction of federal buildings. This allegation is not a new one.  Most green building regulations that require LEED certification also permit “an equivalent” certification in order to avoid antitrust issues like the ones raised by the Coalition’s complaint.

But many federal agencies exclusively require LEED certification for federal projects. The most obvious example is the General Services Administration, which builds and maintains a large percentage of federal buildings.  The GSA's website describes its LEED mandate:

“As a means of evaluating and measuring our green building achievements, all GSA new construction projects and substantial renovations must achieve Silver certification through the Leadership in Energy and Environmental Design (LEED®) Green Building Rating System of the U.S. Green Building Council.”

If the FTC were to find that the USGBC’s preference for FSC-certified wood products constitutes anti-competitive behavior, hundreds of green building regulations across the country and in Washington D.C. will have to be re-written.

The implications of the FTC action on the complaint are staggering.

What other implications do you see?

Related Links:

• USGBC Accused of Anti-competitive Practices (GBLU)
• FSC, USGBC Accused of Deception, Anti-Competitive Practices (Green Source)
• Letter:  Forest Certification and Law and Standards (Complaint)(pdf)
• GSA - Sustainable Design Program (GSA)

Photo:  Eighty734

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We may be settling into 2010, but one unresolved legal development in 2009 could have a broad impact on the future of the green building industry. On October 20, 2009, the Coalition for Fair Forest Certification ("the Coalition") filed a complaint with the Federal Trade Commission (pdf), alleging anti-competitive behavior by the Forest Stewardship Council (FSC) and the United States Green Building Council (USGBC):

"[T]he Coalition asks that the FTC investigate through the Bureau of Consumer Protection the deceptive and unfair trade practices arising out of FSC’s forest certification standards; investigate through the Bureau of Competition concerns about anticompetitive activities and monopolization arising out of USGBC’s LEED rating system and preference for FSC-certified products; and provide guidance to standard-setting organizations concerning behavioral standards for compliance with antitrust law."

My law firm represents many of the forest product companies involved in this complaint (another law firm submitted the letter), so I will not be discussing the allegations made against the FSC. Nor will I debate the merits of one wood certification versus another. But I will continue to keep you updated on the status of this complaint and I will be discussing allegations made against the USGBC and the potential impact of these allegations on green building regulations.

First, some background on the connection between USGBC, LEED and FSC:

"Under the LEED system, points can be awarded in five categories: sustainable sites, water efficiency, energy & atmosphere, materials & resources, indoor environmental quality, and innovation & design process. Credit 7 under the materials & resources category addresses the issue of certified wood, with the intent of encouraging environmentally responsible forest management. The requirements for the credit are:

'Use a minimum of 50% (based on cost) of wood-based materials and products, certified in accordance with the Forest Stewardship Council’s Principles and Criteria, for wood building components including, but not limited to, structural framing and general dimensional framing, flooring, finishes, furnishings, and non-rented temporary construction applications such as bracing, concrete form work and pedestrian barriers.'"

According to the Coalition’s complaint, forest product companies that do not supply FSC-certified wood can not contribute to LEED materials & resources Credit 7: "[T]he three standards most widely adopted by forest owners in the U.S. and Canada - SFI, the Canadian Standards Association ("CSA") Sustainable Forest Management Standard, and the American Tree Farm System - receive no points under LEED, creating a substantial disadvantage for American-sourced wood products."

Among other actions, the Coalition has asked the FTC's Bureau of Competition to investigate the USGBC’s preference for FSC-certified wood:

"The Coalition also believes that the exclusionary actions of USGBC and its exclusive endorsement of FSC-certified products . . . warrants investigation by the Bureau of Competition concerning issues of possible monopolization, attempt to monopolize and conspiracy to monopolize the fast-growing certification marketplace. In examining the issue, the Coalition invites the FTC to use USGBC as a case in point to provide specific guidance to USGBC and other standard setting organizations."

It’s this last sentence that has really caught my attention.  

How do you think the FTC should respond to the Coalition's complaint?

Related Links:

• FSC, USGBC Accused of Deception, Anti-Competitive Practices (Green Source)
• Letter:  Forest Certification and Law and Standards (SJ)(pdf)

Photo:  Travelin' Librarian

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Federal stimulus funding has provided $242 million to Illinois to weatherize more than 25,000 homes, but poor oversight of that work puts the funding at risk and in some cases puts the residents of poorly weatherized homes in danger, an audit report warns.

In an interim report released today, the Energy Department's Inspector General warned that oversight of the Illinois program is failing at many levels.

The inspector general report says the state of Illinois has failed to inspect any weatherized units completed by seven of the 35 local agencies carrying out the work. The state also lacks a system for tracking major findings of its inspections and has not inspected 5 percent of DOE-funded weatherized units, as required by DOE.

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The American Recovery and Reinvestment Act (ARRA) included $250 million for a "RAT" board (pdf) established to audit and investigate stimulus-funded programs and projects. In addition, states have established their own auditing programs.

California risks losing $226 million in federal stimulus funds for energy projects for failing to quickly spend the cash and establish a system to track its use, a state auditor said today.

Auditor Elaine Howle said a state commission created to spend money from the American Recovery and Reinvestment Act "has been slow in developing guidelines, issuing requests for proposals and implementing the internal controls needed to administer" the funds. . . . The $226 million was given to California as part of $3.1 billion made available under the stimulus law's State Energy Program."

The audit of the California State Energy Program concluded that the state has failed to create a system of internal controls adequate to ensure that those funds are used appropriately.

• State's handling of stimulus jeopardizes $226M in energy funds -- auditor (E&E News) (subscrip. req.)
• Stimulus Act Oversight (Crowell & Moring) (pdf)

Photo: Wikipedia

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The green building industry is entering an interesting period. In 2009, the green building movement was embraced as a solution to economic and environmental problems. "Green jobs" were touted as a way to improve the economy while reducing unemployment. Investment in renewable energy and energy efficiency measures was championed as a way to reduce greenhouse gas emissions and increase energy security.

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It's always amazing to me the unexpected consequences that result from apparently benign activities.  As new green building and energy innovations and materials are incorporated into projects, there is always the possibility of an unexpected consequence.  

Take for instance a geothermal energy project in California.  

Geothermal projects involve mile-or-more-deep wells drilled into underground reservoirs to tap steam and very hot water that can be brought to the surface for use in a variety of applications.  The Department of Energy is investing millions in geothermal projects.  But one of the DOE projects was recently halted:  

The project by the company, AltaRock Energy, was the Obama administration’s first major test of geothermal energy as a significant alternative to fossil fuels and the project was being financed with federal Department of Energy money at a site about 100 miles north of San Francisco called the Geysers.

But on Friday, the Energy Department said that AltaRock had given notice this week that “it will not be continuing work at the Geysers” as part of the agency’s geothermal development program.

The timing of the announcement coincides with another project recently shutdown due to earthquake concerns:  

"The project’s apparent collapse comes a day after Swiss government officials permanently shut down a similar project in Basel, because of the damaging earthquakes it produced in 2006 and 2007. . . .  [T]he type of geothermal energy explored in Basel and at the Geysers requires fracturing the bedrock then circulating water through the cracks to produce steam. By its nature, fracturing creates earthquakes, though most of them are small."

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On December 7, the Environmental Protection Agency (EPA) issued a finding that greenhouse gas emissions pose a danger to human health and environment.  The finding sets the stage to allow the EPA to regulate these emissions.  

What impact will this endangerment finding have on the green building industry?  

In my view, the endangerment finding will not immediately impact the green building industry.  Instead, greenhouse gas standards for automobiles will likely first be promulgated based on the endangerment finding:

Along with its final endangerment finding, the EPA also sent to OMB the agency's final finding on whether cars and trucks "cause or contribute to that pollution," [EPA Administrator Lisa] Jackson said.

Such a finding would allow the federal government to regulate tailpipe emissions by increasing vehicle mileage requirement[s].

Jackson said the government is facing a "hard deadline" of next March to let automakers know of any required increases in fuel economy standards that would affect vehicles built for the 2012 model year.

"In late September, the agency announced a proposed “tailoring rule” that limits regulation of climate-altering gases to large stationary sources like coal-burning power plants and cement kilns that produce 25,000 tons or more a year of carbon emissions."

"The administration has used the finding as a prod to Congress, saying that if lawmakers do not act to control greenhouse gas pollution it will use its rule-making power to do so. At the same time, the president and his top environmental aides have said that they prefer such a major step be taken through the legislative process."

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Sec. 13. Recommendations for Vendor and Contractor

 

Emissions. Within 180 days of the date of this order, the General Services Administration, in coordination with the Department of Defense, the Environmental Protection Agency, and other agencies as appropriate, shall review and provide recommendations to the CEQ Chair and the Administrator of OMB's Office of Federal Procurement Policy regarding the feasibility of working with the Federal vendor and contractor community to provide information that will assist Federal agencies in tracking and reducing scope 3 greenhouse gas emissions related to the supply of products and services to the Government. These recommendations should consider the potential impacts on the procurement process, and the Federal vendor and contractor community including small businesses and other socioeconomic procurement programs. Recommendations should also explore the feasibility of:

 

(a) requiring vendors and contractors to register with a voluntary registry or organization for reporting greenhouse gas

emissions;

 

(b) requiring contractors, as part of a new or revised registration under the Central Contractor Registration or other tracking system, to develop and make available its greenhouse gas inventory and description of efforts to mitigate greenhouse gas emissions;

 

(c) using Federal Government purchasing preferences or other incentives for products manufactured using processes that minimize greenhouse gas emissions; and

 

(d) other options for encouraging sustainable practices and reducing greenhouse gas emissions.

Related Links: 

President Obama signs an Executive Order (White House)

Energy Reductions in the Navy (GBLU)

Does Executive Order Signal Shift in Green Building Regulations (GBLU)

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My colleague Steve McBrady and I recently presented “Green Building in the 21st Century” at the national conference of the Construction Users Roundtable. Our slideshow is available below. Our primary message was that the federal government's investment of $25 billion in green building projects, through the American Recovery and Reinvestment Act will prop up the green building industry for the next few years.  Other presentations by government officials regarding federal construction projects further highlighted this message.

For example, during the first day, Vice Admiral Michael K. Loose, U.S. Navy, presented “How CURT and the Industry Help the U.S. Navy Deliver Fleet Readiness.” Throughout his presentation, the Vice Admiral emphasized that the Navy is focused on reducing its energy consumption through sustainability measures. The Navy intends to reduce its energy usage by using renewable energy sources, requiring LEED Silver certification for new construction and focusing on contractors’ life cycle costs and energy footprints, as required by a recent Department of Navy proclamation included in Vice Admiral Loose's presentation:

“Effective immediately, the Navy and Marine Corps will incorporate life cycle costs as an evaluation factor when awarding contracts. The Department will develop a methodology to evaluate energy efficiency and energy footprint.”

The evaluation of “life cycle costs” and “energy footprints” was a recurring theme throughout the conference and, to me, is a new development in government contracting.

How is your company going to measure its “life cycle costs” and “energy footprint"?  How will the government evaluate those factors?

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A major overhaul to the Energy Star program, which currently certifies and labels products that are energy efficient, is imminent. How this overhaul occurs remains to be seen.

On the one hand, the two current agencies responsible for the Energy Star program- the Environmental Protection Agency (EPA) and the Department of Energy (DOE) - are trying to revise the program internally. But it's not clear if the agencies' actions will be enough:

"In response to complaints, the Senate Committee on Energy and Natural Resources included provisions in its American Clean Energy Leadership Act of 2009, introduced in July, that would require improvements to the Energy Star program ... Senator Jeff Bingaman, the Democrat of New Mexico who introduced the clean energy legislation and is chairman of the Senate energy committee, says the changes are inadequate."

'There are questions about stakeholder involvement in this process and effects on D.O.E. and E.P.A. staffing and budget,' Mr. Bingaman said in a statement to Green Inc. 'I’m going to ask the agencies to go back and take into account the views of the Congress and external stakeholders.'"

A key difference between the two proposals is that the EPA and DOE proposed the EPA take over the products portion of Energy Star; Senator Bingaman has proposed that the DOE remain involved in Energy Star products and specifically oversee the solid state lighting portion of the program. Two questions immediately come to mind when reviewing the proposed overhaul plans to Energy Star.

First, why is the DOE willing to give up Energy Star products to the EPA? Turns out, the DOE has focused on a new building labeling system:

"[Cathy] Zoi, [the DOE's new assistant secretary for energy efficiency] pointed out that while D.O.E. has lost some of its Energy Star territory in the deal, it gained ownership of a new program that will develop an efficiency rating tool and labeling scheme for assessing energy in buildings — a major source of infrastructural inefficiency."

Second, how many more green labels can be created before consumers can no longer discern between them? Among the many plans put forth by the EPA and DOE, the agencies have proposed a "'Super Star' label to identify products that perform in the top five percent of any given category."

Are you confused by the myriad of green building and product labels yet?

Related Links:

Congress and Agencies Debate an Overhaul to the Federal Energy Star Program (New York Times)

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The Energy Star program, responsible for certifying energy efficient products, is about to undergo some major changes. Recently, the program, run by the Environmental Protection Agency (EPA) and the Department of Energy (DOE), has come under fire from a number of groups:

"Various stakeholder groups, such as manufacturers, utilities and even Consumer Reports , the monthly magazine published by the Consumers Union, have complained in recent years that Energy Star . . . is too inclusive. An internal audit of the program by the Department of Energy found that there is inadequate tracking of whether the appliances have actually met the required specifications for energy efficiency."

The New York Times article lists three primary complaints with the Energy Star program:

1. Too many products are achieving the Energy Star rating, casting doubt on whether evaluations have been properly performed.
2. The program has been slow to keep up with technical advancements.
3. The program has been hamstrung by jurisdictional disputes between EPA and DOE.

The complaint that the Energy Star Program has failed to keep up with technical advancements was of particular interest to me, as it may foreshadow problems with green building regulations that incorporate rating systems. Like green products and appliances, the green building industry and building rating systems are constantly evolving through technical advancements. For example, with the launch of LEED 2009 (which replaces LEED 2.2), the United States Green Building Council's LEED rating system will now be revised every two years.

Here's my concern: as I have written about numerous times, many green building regulations require LEED or other green building certification. Many jurisdictions have created green building regulations that incorporate the previous version of the USGBC's LEED rating system, LEED 2.2.

How will these jurisdictions keep up with advancements in green building rating system?

Related Links:

Congress and Agencies Debate an Overhaul to the Federal Energy Star Program (New York Times)

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[T]he head of the agency shall ... (g) implement high performance sustainable Federal building design, construction, operation and management, maintenance, and deconstruction including: (ii) ensuring that all new construction, major renovation, or repair and alteration of Federal buildings complies with the Guiding Principles for Federal Leadership in High Performance and Sustainable Buildings (Guiding Principles); (iii) ensuring that at least 15 percent of the agency's existing buildings (above 5,000 gross square feet) and building leases (above 5,000 more gross square feet) meet the Guiding Principles by fiscal year 2015 and that the agency makes annual progress toward 100-percent conformance with the Guiding Principles for its building inventory . . . .

• Integrated Design
• Commissioning
• Energy Efficiency
• Measurement and Verification
• Conservation of Indoor and Outdoor Water
• Ventilation and Thermal Comfort
• Moisture Control
• Daylighting
• Low-Emitting Materials
• Protect Indoor Air Quality During Construction
• Recylced Content
• Construction Waste
• Ozone Depleting Compounds

• President Obama Signs Executive Order (White House Briefing Room)
• Guiding Principles for Federal Leadership in High Performance and Sustainable Buildings (EnergyStar - PDF)
• Does Executive Order Signal Shift in Green Building Regulations? (GBLU)

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[T]he head of the agency shall . . . advance sustainable acquisition to ensure that 95 percent of new contract actions including task and delivery orders, for products and services with the exception of acquisition of weapon systems, are energy-efficient (Energy Star or Federal Energy Management Program (FEMP) designated), water-efficient, biobased, environmentally preferable (e.g., Electronic Product Environmental Assessment Tool (EPEAT) certified), non-ozone depleting, contain recycled content, or are non-toxic or less-toxic alternatives, where such products and services meet agency performance requirements . . . .

• A Green Certification on the Horizon for the White House? (GreenerBuildings)
• GSA Sustainable Design Program (GSA)
• President Obama Signs Executive Order (White House Briefing Room)

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President Barack Obama recently signed Executive Order 13514, which sets numerous green requirements for the federal government. The EO will certainly impact the green building industry. According to the White House's Press Release, the Executive Order requires agencies to meet a number of energy, water and waste reduction goals:

• 26% improvement in water efficiency by 2020;
• 50% of construction, recycling and waste materials will be diverted from landfills by 2015;
• 95% of all applicable contracts will meet sustainability requirements;  
• Implementation of the 2030 net-zero-energy building requirement;
• Implementation of the stormwater provisions of the Energy Independence and Security Act of 2007, section 438; and
• Development of guidance for sustainable Federal building locations in alignment with the Livability Principles put forward by the Department of Housing and Urban Development, the Department of Transportation, and the Environmental Protection Agency.

• agencies must inform the public of proposed rules before they take effect;
• the public can comment on the proposed rules and provide additional data to the agency;
• the public can access the rulemaking record and analyze the data and analysis behind a proposed rule;
• the agency analyzes and responds to the public's comments;
• the agency creates a permanent record of its analysis and the process;

• President Obama Signs Executive Order (White House Briefing Room)
• H.R. 6: Energy Independence and Security Act of 2007 (GovTrack)

Photo: Chuckumentary

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(WBJ) (subscription req.)

(GSA)

(GBLU)

(GBLU)

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The Washington Business Journal (a fantastic newspaper) recently ran an informative column by Bill Gormley titled "Government Moves to Define ‘Green’ Contracting" (subscription req.). There was so much information that I am going to spend the next two days discussing it.

In the article, Gormley ran through a list of actions that should be taken by green service or product companies wishing to contract with the government. Here are some highlights:

• "Know the lingo. . . . Know what kinds of requirements and regulations government agencies face, and do your best to help agencies meet them."

• "Be specific. Many companies struggle with explaining how they're green or how they can offer the government an advantage by buying their green-capable service or product. . . . Make your message clear, concise, and specific so your buying audience can clearly see why your service or product offers more green value than your competitor’s."

• "Get public acknowledgment. . . . Because it is so difficult for the government buyer to differentiate between products – and the green value they provide – vendors should be prepared to provide some type of third party acknowledgment that they are truly green. . . . If you are able to say you’re providing your green service or product to another government agency, that is worth your company weight in gold."

• "If you’re trying to sell green services or products to the government, get on the appropriate GSA Schedule that represents what you sell commercially."

The government is the preeminent developer right now, particularly in the design and construction industry. As more agencies start coming out with green building bidding opportunities, it is important that you are strategically prepared to address the needs of the government. Of course, once you get that green building contract, you must also ensure compliance with the government's regulatory requirements.

But you can worry about that another day.   

Related Links:

Government Moves to Define "Green" Contracting (WBJ) (subscription req.)

A Recipe for Green Building Litigation (GBLU)

Photo:  DeltaMike

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Something very important popped out at me when I re-read the New York Times article about the green buildings not performing as anticipated.  The green building highlighted for poor energy performance is a General Services Administration building: 

"The building’s cooling system, a major gas guzzler, was one culprit. Another was its design: to get its LEED label, it racked up points for things like native landscaping rather than structural energy-saving features, according to a study by the General Services Administration, which owns the building."

Photo: wilkins lee

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Reminder:  Don't forget to register for Green Building Law Update's Birthday Happy Hour

If you are looking for green building projects resulting directly from the American Recovery and Reinvestment Act, then the General Services Administration is the agency for you. The GSA received $5.5 billion to support its High Performance and Sustainable Buildings program. Previously, I had reported that the GSA was requiring LEED certification and preferred LEED silver certification. Turns out, those requirements have changed:

As a means of evaluating and measuring our green building achievements, all GSA new construction projects and substantial renovations must achieve Silver certification through the Leadership in Energy and Environmental Design (LEED®) Green Building Rating System of the U.S. Green Building Council. Projects are encouraged to exceed LEED® Silver and achieve LEED® Gold.

Back in April, we reported on an initial list of ARRA projects published by the GSA. Since then, very little information was available regarding these projects. Bisnow recently reported on the first GSA ARRA project award that I have seen:

[C]ongrats again to sponsor Grunley Construction for landing a renovation contract for the Mary E. Switzer Building at 330 C St., SW. Having completed Phase I in 2008, GSA put Grunley back to work using Recovery Act funding. The project includes: interior construction removal (including Hazmat); a "green roof system"; renovated elevators; and, three 2-story atriums, like the one above. Work is underway, due in July 2011. Designed by HNTB, it's aiming LEED Silver.

The Grunley-GSA contract is just the tip of the iceberg. ENR recently reviewed tremendous progress made by the GSA in awarding ARRA projects:

After taking about six weeks just to produce its list of stimulus projects, GSA has shifted into overdrive. It has awarded contracts totaling nearly $1.1 billion for projects involving about 120 buildings. Twenty of those projects account for more than $940 million of that total.

Most of those funding commitments came in a burst of awards announced since early July, according to Anthony Costa, acting commissioner of GSA’s Public Buildings Service. “At least 20 of the 120 projects are already under construction,” he told the House Transportation and Infrastructure Committee at a July 31 hearing. “The rest will begin soon.”

Even more GSA recovery-act work is on the way. Costa says the agency plans to award another $1 billion in ARRA contracts by Dec. 31, with the goal of having 91% of the $5.5 billion under contract by Sept. 30, 2010.

Of course, it's nearly impossible to report on stimulus projects without highlighting the fact that bids are much lower than anticipated. In the case of GSA ARRA projects, bids are coming in 10 to 15 percent below government estimates. I have serious concerns about bids coming in below government estimates, which I will discuss in more detail next week.

Links:

GSA Sustainable Design Program (GSA)

Grunley! (Bisnow)

New GSA Contracts Starting to Surge (ENR)

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Note:  Don't forget to register for Green Building Law Update's Birthday Happy Hour

This week we will be taking a look at green building and renewable energy funding available through the American Recovery and Reinvestment Act. While the opening of the stimulus spigots has been slow, there has been a noticeable uptick in news the last few weeks.

Today we will look at the Department of Energy; Wednesday we will check in on the General Services Administration; and Friday, we are going local to see how Washington D.C. is using weatherization funding.

If you are in the renewable energy sector, you may want to take advantage of a recently announced loan guarantee program made available by the Department of Energy:

The Energy Department is making available $36 billion in loan guarantees for renewable energy projects and for modernizing the electricity grid.The department said Wednesday it will accept applications for the financing support over the next 45 days.

The government-supported loans are expected to help companies involved in solar, wind, biofuels and other renewable energy projects get private financing. It also aims to spur investments in power grid improvements. 

To learn more about the Department of Energy's loan guarantee program, check out their loan guarantee website.

In addition, other opportunities remain available at the Department of Energy.

DOE's Energy Efficiency and Renewable Energy Program Office is reporting that of the $16,796,000,000 it was allocated, only $3,534,031,000 has been obligated and $63,362,000 has been spent. Many of the deadlines have already passed for the DOE projects so check in now to see where you can benefit.

Anyone had any luck with DOE stimulus projects?

Links:

Department of Energy Loan Guarantee Program

DOE Makes Available Energy Loan Subsidies

Recovery and Reinvestment at the Department of Energy: Welcome

Recovery and Reinvestment at the Department of Energy: Funding Opportunities

Green Building Law Update: Stimulus

Photo:  rebuildingdemocracy

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If you are a contractor lucky enough to have won a stimulus project, one of the pesky requirements attached to the project is reporting the number of new jobs created by the project.  Many builders and contractors have been wondering how exactly to do that.  Finally, at long last, the White House has provided clarity: 

Wait, that didn't answer all the questions out there.  If someone was already working for you, do they count?  What about subcontractors?  If you receive multiple stimulus contracts and employ the same person for both jobs, is that one job or two?  Maybe there is further clarification:  

Oh, now I get it!

The reporting of ARRA jobs is going to be an extremely confusing and important issue for all parties. Back on June 22, I wrote:  "As we draw closer to the 2010 election cycle, you can bet that politicians who supported the ARRA will be looking to tout green jobs that were created." 

Turns out, the federal government isn't the only one hoping to tout good job creation numbers:

As funds for green building projects start flowing from the General Services Administration and the Department of Energy, everyone will be paying attention to the number of green jobs created by these agency projects.  If you have to report green jobs, be extra careful that you follow the reporting requirements, whatever those requirements may be.

Photo:  talkradionews

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You have to have a short memory to write for a blog.  There is no point getting attached to a blog post because it will soon be relegated to the archives.  With that said, sometimes I am reminded of a blog post that deserves revisiting. 

After reflecting on the Waxman-Markey bill over the weekend, I am reminded of a prediction I made at the beginning of the year:

"Green" was the buzz word in 2008.  In 2009, Green Building Law Update predicts that green buzz words will become more nuanced and the focus will be on "energy efficiency," "retrofits," and "existing buildings."

One of the three factors cited for the retrofit prediction was cap-and-trade: 

Finally, climate legislation in the form of cap-and-trade is coming.  Early investments now to reduce energy use through retrofits will pay off for big businesses. 

Not bad!  But you know what I missed?  I never anticipated that the cap-and-trade legislation would be full of financial support for retrofits. 

The post last Friday highlighted three different financing mechanisms for energy efficiency upgrades:  (1) SEED funds; (2) the REEP program and (3) the GREEN ACT, which establishes a green bank. 

Over the next five years, energy efficiency upgrades and retrofits will be big business.  How is your company responding? 

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[Today's post is a collaborative effort with Shari Shapiro highlighting green building provisions in the Waxman-Markey bill. You didn't think I was going to read through a thousand page bill all by myself, did you? I have also made the article available as a white paper for download since it is a bit long.]

Green Building Guide to Waxman-Markey
By: Shari Shapiro and Chris Cheatham

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.

Details after jump.

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Here's an update on "green job" requirements created by the American Recovery and Reinvestment Act. Previously, I wrote

To my knowledge, there is no requirement or guarantee in the American Recovery and Reinvestment Act to create a certain number of "green jobs."

While this is still the case, there are job creation reporting requirements that will likely be used to categorize the number of green jobs created by the ARRA.

Federal agencies must report more than 40 separate pieces of data regarding their stimulus spending to a central repository — and contractors are required to submit similarly detailed reports for all work funded in whole or in part by the stimulus legislation.

The deadlines are clear. What’s less clear is how to submit reports and arrive at certain calculations, such as the number of jobs created or saved by the stimulus-funded work.

The Office of Management and Budget should be coming out with reporting requirement guidelines for contractors soon.

If you are a contractor lucky enough to have successfully bid a stimulus project, pay close attention to future guidelines released by OMB. As we draw closer to the 2010 election cycle, you can bet that politicians who supported the ARRA will be looking to tout green jobs that were created.

Of course, the big question remains, will the ARRA result in a surge in green jobs? I'm not an economist but I can report I have noticed a surge in green startups the last two months. As we slowly emerge from the recession, and as green stimulus funds finally start to flow, look for huge opportunities and resulting success stories from startup green companies.

My money is on a lot of new green jobs being created.

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On Monday we highlighted "headaches" that may arise from climate-related stimulus funding.  Cities and towns are struggling to come up with worthy programs for the funds.  Furthermore, the Department of Energy has warned officials that funding should go towards the long-term establishment of programs: 

"Don't use the entire amount of this money to set up a single capital fund that when that fund is done, your program is done," Bailey told local officials. "Because you will have potentially, I think, wasted an opportunity to set in motion a program that could last five, 10, 15, 20 years."

Virginia should heed this advice.  The state recently announced plans to use stimulus funding from the DOE to create a long-awaited financial incentive program for renewable energy development:

After years of zero financial incentives for alternative-energy enthusiasts, Virginia is bursting out of the starting gate with tens of millions of stimulus dollars just for renewable-energy aid.

The state plans to set aside $39 million from its $70 million share of the federal stimulus package to help residents, businesses, nonprofits, schools and government agencies summon electricity and heat from the sun and wind.

Funding is expected to start flowing for the program, if approved, in July.  The incentive program will be a great short-term solution for renewable energy development in Virginia.  Turns out, though, the long term prospects for a state funding to continue the incentive program are unclear:

That money runs out in September 2010, and Jurman, a self-described eternal optimist, acknowledges that he could still have trouble getting legislative backing then. . . .

Energy advocates worry about the consequences if the incentives disappear after merely a year.

“It looks like we’re going to grow very easily, but it’s not going to shrink easily,” said Peter Lowenthal, executive director of the Maryland-District of Columbia-Virginia Solar Energy Industries Association, which is advising the Virginia agency on the renewable-energy rebate program. “It will be a shot in the arm. People will get some training, so that’s a good thing. But it won’t really meet the goals of the stimulus in order to create permanent job growth.”

Are there better ways to setup renewable energy development incentive programs for Virginia?

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Back on February 20, 2009, I said the following about the American Recovery and Reinvestment Act:

While Republicans, Democrats and the President argued over the stimulus package for weeks, the real battle may arise when state agencies and officials attempt to divide up the stimulus funding and choose the projects that receive funding.

The real battle is now upon us.

The New York Times has written a fascinating article highlighting the benefits, and potential troubles, associated with clean-energy stimulus funds that will soon begin flowing to cities and towns. The article really paints a picture of potential waste and "headache" that may result from these funds. I was particularly struck by this section:

But the sudden flow of federal funding is raising questions about whether many of these communities are really ready for it.

Some 1,000 cities and counties have direct access to the new entitlement account, the Energy Efficiency and Conservation Block Grant Program. They have until June 25 to submit plans, but that's a challenge, because most haven't received federal grants for energy projects before.

Many communities are having trouble retaining enough police officers, let alone hiring sustainability professionals who understand how to establish energy efficiency programs that will evolve into long-term savings in power and money, experts say.

"Some cities are ready for this, others aren't," said Mark Wolfe, executive director of the Energy Programs Consortium, which helps state energy programs establish efficiency policies.

Many cities are using the stimulus funding for energy efficiency retrofits or even LEED certification:

• "Las Cruces expects to receive $888,000. Henry said it will help pay for a solar array and "all the green stuff" on an old adobe bank the city is converting into a natural history museum that will be certified under the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) guidelines. The project will cost about $6 million."

• "Take El Paso, Texas. The sprawling city is due to receive $5.8 million in energy efficiency grants. It will use $3 million of that to help finance a $15 million "performance contract" program aimed at cutting energy use 30 percent in 52 public buildings."

According to the article, in a recent meeting, the DOE also suggested that cities and towns could use the funds to create "carbon trading markets." I don't know about you, but municipal officials new to environmental policy might be better served retrofitting existing buildings instead of creating a complicated, regional carbon trading market.

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It’s no surprise that there is intense competition for stimulus projects.  Competition can be good and result in more efficient construction.  But competition can also lead to complaints, disputes and even litigation.  

Connecticut is experiencing intense competition for stimulus funding.  

"There's nowhere near the amount of money for individual projects that people thought there was," one senior lobbyist lamented.

Still, advocates and their clients ask whether putting solar panels or a geothermal roof on a planned new building would qualify them for some energy funds (it might); they ask about the permit process (a bill to expedite project approvals has yet to be passed by the legislature); and they want to know how the feds define a stimulus 'job' (still not clear). 

When I read this article, I couldn’t help but notice the complaints about the "green" stimulus projects:  

In her meeting with Fritz, Cheri Quickmire, director of Common Cause of Connecticut, noted that a portion of the stimulus money must go to create "green jobs."

"How does a road-paving project create a green job?" Quickmire said last week, recounting her conversation with Fritz.

Stimulus funding for green building projects will help the industry grow.  Complaints about the administration of green building stimulus funds, though, should be of concern to the industry.  Complaints mean bad press.  Complaints mean bid protests.  Complaints mean litigation. 

Have you heard any rumblings about green stimulus projects?

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Back in March, I highlighted that $5 billion in funding had been dedicated to weatherization assistance as part of the American Recovery and Reinvestment Act.  Six short months later, the weatherization funding is scheduled to begin flowing:  

Final applications for the federal weatherization funds were due this month, with the first $2.5 billion expected to reach the states by September. Ohio has announced tens of millions in federal spending and plans to begin spending money for weatherization projects June 1, providing former workers such as Posey hope that they can regain their $18-an-hour assembly-line jobs.

When I ask people about stimulus projects, I keep hearing the same thing:  competition is fierce.  Here’s anecdotal evidence of the intense competition for stimulus projects in Ohio:  

More than 25,000 proposals have been filed on Ohio's stimulus Web site alone. "There's got to be $50 or $100 in requests for every $1 we've got," the state budget director, J. Pari Sabety, said several weeks and several thousand requests ago.

Are you seeing intense competition for green building stimulus projects?

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As readers may know, I am a die hard Kansas Jayhawk basketball fan.  Our main rival is the Missouri Tigers.  So if I discuss something that originates from Missouri, you better believe that the Missourians have come up with something extraordinary. 

U.S. Representative Emanuel Cleaver has established a plan for an innovative "Green Impact Zone" in Kansas City, Missouri that will be funded through the American Recovery and Reinvestment Plan funds: 

So far, the Green Impact Zone involves three primary plans:

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The first step toward implementation of a nationwide cap and trade program has occurred.  On Thursday, May 21, 2009, the House Energy and Commerce Committee passed a comprehensive clean energy bill that includes a strict limit on global warming pollution: 

This vote is a big deal.*  Unless something drastic happens, the bill will easily pass through in the full House of Representatives.  The next battle will occur in the Senate.  While the press may not have significantly covered the Committee debates and vote, the Congressmen understood the importance of their vote:

Have no doubt, this bill will greatly influence the green building industry.  It includes specific provisions about greening new and existing buildings and the overall pollution limit will drive cost-effective energy efficiency in buildings, which are responsible for nearly 40 percent of the country's emissions.  I am not going to go through the Committee bill and pick out green building provisions (unless someone wants to pay me to do it!) because the final regulation will look much different. 

I would love to hear your thoughts on cap-and-trade.  Will it pass the Senate?  What will the impact be on green building?  Will it work? 

*The vote is also a big deal because I get my lady back!  Congratulations Melissa!

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Thanks to the fine folks at the Green Research Council, I was able to review their publication, "Green Guide to the 2009 Stimulus Package."  This guide is packed with information about the American Recovery and Reinvestment Act.  The Guide starts with a review of the stimulus and where to get information about particular projects being funded.  I have been telling people that due to transparency demands of the Obama Administration, there is a ton of information available about the stimulus projects.  The Guide does a great job bringing all of the information together in one place. 

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On Wednesday, we discussed the LEED 25 percent rule: the LEED rating system was only intended to apply to the top 25 percent of buildings.

It is important to remember this premise when considering what is happening in the green building industry today. Many cities are mandating LEED certification for public and private buildings. For example, in Washington D.C., all new construction of private buildings greater than 50,000 square feet will have to be LEED certified after January 1, 2012.

As cities, states and federal agencies are mandating LEED certification, you simultaneously have the USGBC "raising the bar" for green buildings by bi-annually updating the LEED rating system to include even more stringent requirements for certification. The USGBC's goal is not for every building in the country to be LEED certified. Instead, the USGBC wants "to bring in even greener and greener buildings."

You see the problem there. I know you do. But I will say it anyways.

Mandates require 100 percent compliance.

The USGBC is designing a system that only the leading 25 percent of buildings can comply with, at least in terms of certification.

Those two numbers do not add up.

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According to a recent Washington Post article, “Construction firms are so eager for work in the sagging economy that project bids are coming in much lower than expected.”

Great news, right?  Not necessarily.  Lower bids can be a good thing if they are the result of increased efficiency in the construction process.  But lower bids can also be the result of increased competition.  These lower bids can be just that - too low - and result in delays and litigation. 

What factors are causing the lower bids on stimulus projects?  According to Kenneth Simonson, chief economist for the Associated General Contractors of America: 

"Wherever I go, I hear of projects that used to attract two to three bids just a couple of years ago, now it's 20 or 30," Simonson said. "Many [contractors] are coming down on the minimum size of projects they will bid on, and ones who didn't do schools now are bidding on schools. Others are coming from out of state to a new region just to keep busy. And they are essentially giving away their services just to keep their key employees busy."

Why should this be a concern to the green building industry?  As I have detailed, the stimulus is providing nearly $25 billion for green building projects.  The green building industry is newer, the parties more inexperienced, and the technology relatively untested.  The opportunity for underbidding these green building projects is tremendous.  Projects that can't be completed at the promised cost could lead to LEEDigation. 

Be careful with your bids. 

Photo:  Jim Frazier

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When you heard that the Department of Energy would be providing $3.2 billion for Energy-Efficiency and Conservation Block Grants to states, what kind of programs did you have in mind?

"In D.C., environmental leaders have split the District's pot between $4.8 million for solar panels on 20 schools and curriculum additions to help those students be watchdogs for energy waste in their schools, as well as a $3.5 million advertising campaign that includes distributing canvas bags and compact fluorescent lighting to residents in exchange for plastic bags and incandescent bulbs." 

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[Sometimes, it's better not to reinvent the wheel.  As I was preparing this week's posts, I came across Lane Burt's analysis of the Department of Energy's (DOE) stimulus funding.  Lane, an NRDC Policy Analyst, agreed to let me use his post today.  Check out Lane's blog - it's a great resource for energy policy analysis.]   

DOE released the funding distribution for the Energy Efficiency and Conservation Block Grants (EECBG) from the recovery act (ARRA) late last week. With this action, we now know as much as we are going to about the destination of the clean energy dollars.

The big ticket items for clean energy were,

• $5 billion for low income weatherization (WAP)
• $3.1 billion for state energy programs (SEP)
• $3.2 billion for the local block grants (EECBG)
• $4.5 billion for greening GSA facilities

I blogged on the funding breakouts here and here,

We aren't going to get more clarity on the destination of the GSA funding. GSA has a list of projects across the country, but details have yet to be released and GSA is not required to do so.  [Ed. The GSA released its project list after this post.]

The money for state energy programs and low income weatherization is distributed according to an existing formula that sends a baseline allocation out and divides the remainder, 1/3 weighted according population, 1/3 by consumption, and 1/3 equally. The text of the law is here,

Now, DOE has released the funding amounts for EECBG and a nifty little interactive map so you can see where all the funding (SEP and WAP included) is headed.  More detailed state by state info here, including city by city breakouts for the local block grants.  A few clicks show me that my home state of North Carolina is getting $266 million dollars and my hometown of Charlotte is getting close to $7 million of that.  New York recieves $693 million, California gets $764 million and Texas gets $755 million.

Decision time

DOE is doing everything they can to get this money out now. How it gets spent (in the case of SEP and EECBG) is now a state or local matter and there is a lot of discretion given to states and localities on how to spend it. The potential impact of this money is incredible if used properly to save energy and create jobs, but the potential for waste is also very high.

Because of the potential for waste, there are two words that should guide every state, county, and local official in spending this money - Prioritize Efficiency. I cannot say this enough. It is faster, cheaper, and cleaner than any alternative and it is the only way we can spend now to save us money in the future. It supports local jobs and keeps dollars in the local economy. No one can find a stimulus proposal better than the one that will leave you with more money than you started with in just a few years.

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While the General Services Administration announced stimulus projects last week, they have no time to rest.  In fact, choosing the stimulus projects may have been the easiest part of the process.

The next step is contract procurement and administration.  Due to staffing vacancies at the GSA, the administration process may prove difficult : 

"Meanwhile, the ranks of contracting officers who make the day-to-day contracting decisions at the GSA have been shrinking since 2005, through attrition, outsourcing and a convoluted federal hiring process that many say discourages talented people from applying."

The GSA is not the only federal agency that is currently understaffed and tasked with administering billions in stimulus funds.  The Department of Energy must figure out how to administer over $38 billion in stimulus funds and the DOE Office of the Inspector is being upfront about the difficulties the agency is facing:

"The infusion of these funds and the corresponding increase in effort required to ensure that they are properly controlled and disbursed in a timely manner will, without doubt, strain existing resources."

In reading the DOE Inspector General's Report, it seems almost inevitable that some fraud will occur:  "As the Recovery Act implementation proceeds, all parties should recognize that the potential risk of fraud increases dramatically when large blocks of funds are quickly disbursed."

How can these understaffed agencies avoid fraud?

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General Services Administration, I am impressed. 

The American Recovery and Reinvestment Act mandated that the GSA determine projects that would receive $5.5 billion by April 3, 2009.  The GSA beat this mandate, making its list of projects available on April 2, 2009 (hat tip to the Washington Business Journal for breaking the story ).

If you were hoping to benefit from the GSA projects in the D.C. metro area, you have a much better opportunity of working on these projects in the District than in other surrounding localities.  D.C. is set to receive $1.2  billion for GSA projects.  According to the Washington Business Journal, "the amount of work slated for D.C. appears to be more than any other jurisdiction. By contrast, GSA plans to modernize only five buildings for $66 million in Virginia and two buildings for $25 million in Maryland."

A full list of GSA projects receiving funding is available here.  Here's a list of GSA projects in D.C., Virginia and Maryland slated to receive funding:

Washington D.C.

• Department of Homeland Security headquarters, St. Elizabeths Hospital west campus, Southeast, $450,000,000
• Department of Commerce Herber Hoover Building (phase II and III), 14th Street and Constitution Avenue NW, $225,638,000
• GSA headquarters (phase I), 1800 F St. NW, $161,293,000
• Lafayette Building (phase I), 811 Vermont Ave. NW, $128,827,000
• Mary Switzer Building (phase II), 330 C St. SW, $68,241,000
• Department of Interior Building (phase IV), 19th & C streets NW, $63,450,000
• Department of State Truman Building, 2201 C St. NW, $14,735,000
• Veterans Administration, $1,499,000
• Lyndon B. Johnson Federal Building, $4,162,000
• Elijah Barrett Prettyman Courthouse, $3,662,000
• IRS Building, $1,506,000
• Ariel Rios Fed Building, $1,337,000
• GSA-Regional Office Building, $592,000
• Wilbur J Cohen Building, $16,701,000
• Winder Building, $1,865,000
• Theodore Roosevelt Building, $23,551,000
• Robert C. Weaver Building, $3,663,000
• Howard T. Market National Courts, $2,070,000
• Tax Court, $8,083,000
• 601 - 4th St, NW, $2,150,000
• US Secret Service Headquarters, $1,601,000
• EPA East and West and Connecting Wing, $4,564,000
• Reagan ITC and Garage, $16,161,000

Virginia

• Franconia Warehouse, Franconia, $9,512,000
• Martin V.B. Bostetter Courthouse, Alexandria, $1,699,000
• Advanced Systems Center, Reston, $690,000. 
• Poff Federal Building, Roanoke, $50,968,000
• Robert Merhige Courthouse, Richmond, $3,500,000

Maryland

• New Carrolton Federal Building, Lanham, $1,647,000 
• CMS HQ Complex, Woodlawn, $23,723,000

The federal website, www.fedbizopps.gov, should have more information about these projects very soon.  Any luck finding information? 

Wondering how to successfully bid these projects?  My "Getting Green from the Stimulus" slideshow is a good start.

Photo Credit:  JPhilipson

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Today, we run Part II of the Eric Corey Freed interview.  I divided up the interview into two posts because the interview was long and Eric does a great job illuminating green building legal issues in Part II:   "Architects would not be able to guarantee LEED certification because the architect is not the one providing the LEED certification. . . .  I also don't think given the science of building technology that we can guarantee anything about energy usage."    

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It may surprise you to learn that I have a real job.  Seriously, I do and I love it!  I am a construction litigator and I am currently involved in a major construction delay claim.  I have been preparing a motion the last few days, hence the late filing of today’s post. 

There is a lot going on in the green building world.  The Stimulus.  D.C.’s unique green building bond (i.e. the green building unicorn).  LEED AP exam deadlines.  And also a little basketball.  I often don’t have time to touch on all the issues I would like, so today, I provide you my thoughts on these many issues. 

The stimulus.  In my “Green in the Stimulus” slideshow, I indicated that the General Services Administration has until April 3, 2009 to prepare a list of federal projects to receive stimulus-funding.  While that is true, apparently the GSA does not intend to release this list on April 3:  “Morris said a list of stimulus-funded projects is being vetted by the administration, but he could not give a date for the list’s release.”  Stay tuned for further details.

The D.C. Bond.  You may have noticed that I have been writing a lot about the D.C. Green Building Act's performance bond requirement.  It seems the issue takes a new turn everyday.  The most recent rumor is that the D.C. may incorporate the green building bond into zoning requirements.  How are we going the wrong way on this?  Look for a guest post next week on the issue. 

The LEED AP Exam.  I get a lot of google hits from people trying to decide if they should take the LEED AP exam.  My general thought is that if you are interested in a career in green building and you have some free time and money, you should take the exam.  You do know the deadline to sign up for the LEED AP exam is March 31, right?  Also, the Green Building Certification Institute recently announced that you actually have to take the LEED AP exam by June 30, 2009.   

The Defending Champions.  Finally, it is my favorite time of year.  It is the time of year when the University of Kansas Jayhawks take flight.  In addition to my job and this blog, I also am just a little bit COMPLETELY AND UTTERLY (ed: my fiancee made this change) obsessed with Kansas Jayhawks basketball.  Always have been, always will be.  I hope Sherron Collins, Cole Aldrich, Bill Self and company continue rolling and dispatch of the Spartans in quick fashion tonight.  Rock Chalk Jayhawk! 

Photo:  ruralocity

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Well, that wasn't much time to get prepared. 

The Department of Energy has released the first installment of funding for the Weatherization Assistance Program and the State Energy Program. 

"To jump-start job creation and weatherization work, the Department of Energy is releasing the first installment of the funding - about $780 million -- in the next few days.  The Department will release additional funding over time as states demonstrate that they are using the funding effectively and responsibly to create jobs and cut energy use."

The Weatherization Assistance Program seems fairly straightforward.  Through the program, "an average investment of up to $6,500 per home in energy efficiency upgrades and will be available for families making up to 200% of the federal poverty level - or about $44,000 a year for a family of four."  

The administration of the State Energy Program funding is a bit more murky.  According to the DOE, State Energy Program funding "will be available for rebates to consumers for home energy audits or other energy saving improvements; development of renewable energy projects for clean electricity generation and alternative fuels; promotion of Energy Star products; efficiency upgrades for state and local government buildings; and other innovative state efforts to help save families money on their energy bills."

In the coming weeks, Green Building Law Update will monitor stimulus funding at the state level.  How do individuals apply for weatherization funding?  What programs will be funded through the State Energy Program?  I hope to answer these and many more questions. 

Related Links

• DOE to Release First Wave of $8B in Weatherization, Energy Efficiency Funds from Stimulus (GreenerBuildings)
• Obama-Biden Administration Announces More Than $164.1 Million in Weatherization Funding and Energy Efficiency Grants for Virginia (DOE)
• Getting Green From the Stimulus (GBLU)

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As promised, below is the slideshow from last week's "Green in the Stimulus" presentation as part of Rutherfoord's Trends in Green Building seminar.  Unfortunately, I have not figured out how to synchronize audio files with a slideshow - maybe next time.

I had two goals when I created this presentation:

(1) Explain the green building provisions in the stimulus package.
(2) Convey how parties can prepare themselves now to take advanage of resulting green buiding opportunities. 

You can be the judge whether I succeeded.  The slides, by themselves, do not do the presentation justice.  If you are interested in hosting the "Green in the Stimulus" presentation for your company, please contact me at chris@greenbuildinglawupdate.com.  The presentation can be tailored to your specific state or region and industry. 

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Update:  For a rundown of green building provisions in the stimulus pacakge, see this post.

Thank you to everyone who attended Rutherfoord's "Trends in Green Building" seminar yesterday and listened to my "Green in the Stimulus" presentation.  It was great to recognize so many faces in the crowd.  If you came up and spoke to me about speaking engagements or green building legal programs offered by my law firm, please follow up with me so we can make it happen.  For those of you who missed the event, I will post the powerpoint I presented to Green Building Law Update (hopefully with a voiceover) on Monday. 

Now for the bad part. 

The stimulus package is going to result in increased levels of green building litigation. I hope I am wrong, but I think it is inevitable. 

In my "Green in the Stimulus" presentation, I highlighted three factors that will contribute to an increase in green building litigation.  The first factor is an influx of inexperienced parties attempting to build green.  There are many state and local governments that, to date, have not been substantially involved in the green building industry.  These entities, with the help of the stimulus funding, are now going to require green building projects through regulation.  Here is an example.  These state and local governments will be required by the timelines of the law to fast track these green building developments.  Do you see the problems that can arise from this scenario?

The second factor will be the requirement that projects attain LEED certification.  The website of the General Services Administration states:

As of 2003, all new GSA building projects must be certified through the Leadership in Energy and Environmental Design (LEED) Green Building Rating System of the U.S. Green Building Council, and Silver LEED rating is encouraged. 

The GSA will not be the only entity requiring LEED certification for projects.  Who will be responsible for achieving the LEED certification?  What happens if the project fails to achieve the LEED certification?

Finally, the third factor that will result in more green building litigaiton is the emphasis on energy efficiency.  The drive to build green primarily centers around the desire to reduce building energy use.  However, it is very difficult to anticipate how a building will actually perform.  Under the LEED rating system, energy efficiency is modeled through ASHRAE.  Buried deep in a ASHRAE appendix (ASHRAE 90.1, Appendix G, Section G1.2, Note 2) is the following disclaimer:

"Neither the proposed building performance, nor the baseline building performance are predictions of actual energy consumption or costs for the proposed design after construction. Actual experience will differ from these calculations due to variations such as occupancy, weather, energy use not covered by this procedure, changes in energy rates between design of the building and occupancy, and the precision of the calculation tool."

Not every government or municipality will see or understand this caveat.  Heck, many of the entities requiring certification don't even understand the acronym for the LEED rating system.  What happens when the new green buildings don't actually reduce energy usage? 

I am not the only one concerned about these issues.  Real Life LEED initially raised factor three.  Are we wrong?  Tell me. 

Related Links:

• LEED Risk Management:  Crossing the Model/Reality Chasm (Real Life LEED)
• "The Stimulus:  Now for the Hard Part" (GBLU)
• The Stimulus:  Green Building Provisions (GBLU)
• The Stimulus:  "LEEDS"ing the Way (GBLU)
• The Stimulus:  FedBizOpps Has Green (GBLU)
• The Stimulus:  States Have Green Too (GBLU)
• The Stimulus:  Build Relationships Now (GBLU)

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Update:  For a rundown of green building provisions in the stimulus pacakge, see this post.

I am wrapping up my "Green in the Stimulus" presentation for tomorrow and wanted to provide more information that may benefit your company as you seek out green stimulus projects. 

As you prepare to bid federal and state projects, relationships will be key.  You will need relationships with general contractors or subcontractors to facilitate your bid.  Relationships with the government officials that are creating or letting the government projects can also be helpful.  I am convinced that in the stimulus bidding process, information is power.  Government officials can provide information about requirements and preferences for green stimulus projects. 

How do you develop relationships with these government officials?  Here is an idea. 

Like Virginia, Maryland has developed a stimulus website .  Unlike the Virginia stimulus website, Maryland does not provide information about proposed stimulus projects.  But other information on the website may prove valuable. 



The Governor's office will be providing "Workshops for Local Leaders" related to the stimulus package.  The event is free.  You do not have to register. 

If you are in Maryland and you want to learn about stimulus projects and talk to the officials in charge of these projects, why would you not go to one of these events? 

Related Links: 

• "The Stimulus:  Now for the Hard Part" (GBLU)
• The Stimulus:  Green Building Provisions (GBLU)
• The Stimulus:  "LEEDS"ing the Way (GBLU)
• The Stimulus:  FedBizOpps Has Green (GBLU)
• The Stimulus:  States Have Green Too (GBLU)

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Update:  For a rundown of green building provisions in the stimulus pacakge, see this post.

This week, in preparation for my "Green in the Stimulus" presentation, I have been providing what I hope is interesting and useful information about the stimulus.  Today we are briefly going to review a new website in Virginia, Stimulus.Virginia.gov, which is vitally important to anyone expecting to take part in Virginia projects resulting from the stimulus. 

According to Stimulus.Virignia.gov, the "website is a forum for citizens, localities, and others to submit project proposals to be considered when federal stimulus funds become available."  In its current iteration, the most interesting aspect of the website is the "Reports" section .  This section lists projects that have been submitted to the website by municipalities and individuals.

I have skimmed this list and was amazed to see that the very first project was a school seeking LEED certification. 

Do you realize the opportunity that Stimulus.Virginia.Gov, along with FedBizOpps.gov, provide?  Through these two websites, you can inventory all of the potential projects you would want to bid on and begin preparing for these projects now.   Plenty of other states have similar stimulus websites (Ohio and Michigan, for example) so these actions aren't limited to Virginia. 

How do you prepare for these projects now?  What are the risks that have to be accounted for and what should your contracts look like?  You will have to come to my presentation on Tuesday to find out!  (Or check back on my website when I make my slideshow, and possibly the video of the presentation, available).

Related articles:

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"The General Services Administration (GSA), Region 7, is seeking a contractor to perform as the CMc (Construction Manager as Contractor) for the construction of the New United States Land Port of Entry (LPOE) in Tornillo, Texas. The site is located in El Paso County, Texas. It is situated approximately 30 miles east of El Paso and is adjacent to the current Fabens Port of Entry facility, which will be demolished as part of the construction option in this contract.  An estimated 115 acres will compose the new LPOE.

This project must be certified through the U.S. Green Building Council (USGBC) Leadership in Energy and Environmental Design (LEED®) green building rating system. The target USGBC LEED® rating for this project is Silver level."

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Update:  For a rundown of green building provisions in the stimulus pacakge, see this post.

Yesterday, while preparing for my "Green in the Stimulus" talk, I came across something both hilarious and frightening. 

StimulusWatch.org has provided an inventory of proposed projects that could benefit from the stimulus.  The list was prepared from a list of shovel-ready projects prepared by the U.S. Conference of Mayors .  While reviewing the list for "LEED" projects, to my great horror, I made the following discovery:



If an entity is seeking "LEEDS" certification, is the project really "shovel-ready"?  And no, that is not a rhetorical question. 

Related Links: 

• "The Stimulus:  Now for the Hard Part" (GBLU)
• The Stimulus:  Green Building Provisions (GBLU)

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• Stimulus: now for the hard part (CNN)
• Earmark-Free Stimulus Bill Lacks Spending Direction (NPR)
• Democrats Among Stimulus Skeptics (Wash. Post)

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Update:  For a rundown of green building provisions in the stimulus pacakge, see this post.

Thomas C. Mawson - U.S. Green Building Council
Executive Director, National Capital Region Chapter
2009 LEED Rating System Changes and their Impact on Property Owners and Developers

Richard M. Silberman - Healthy Buildings International, Inc.
Chief Executive Officer
Earning the Ventilation-Related Credits Within LEED-NC

Eric M. Oliver - EMO Energy Solutions
President
Looking for Energy Savings In All The Right Places

Bobby C. Christian - Tangible Software Solutions, Inc.
President  
Simplifying Energy – Buy. Use. Manage.

Did I forget anything? 

Related Links:

• Highlights of $787 billion stimulus plan (AP)
• Stimulus: Now For the Hard Part (CNN)

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I met Elaine Lipman Barnes through Twitter (elbarneshouse).  Soon I learned that she manages a billion dollar green schools program in Ohio.  Since green schools are an emerging industry, I thought Elaine would be perfect for a Sensible Interview.  She didn't disappoint.  Enjoy! 

---

Chris:  Can you tell me about the green building program you manage?

Elaine: I manage Ohio's Green Schools Initiative at the Ohio School Facilities Commission (OSFC).  In 2007, Governor Ted Strickland issued Executive Order 2007-02S (Coordinating Ohio Energy Policy and State Energy Utilization) that mandated that, among other things, all state agencies improve energy efficiency in both the buildings they use and the programs they run.  Our response eventually became known as OSFC Resolution 07-124 which mandates that all newly constructed or substantially renovated school buildings that are state funded achieve a minimum of Silver certification in the US Green Building Council's LEED-Schools (Leadership in Energy and Environmental Design) rating system with emphasis in energy conservation.

We estimate that we will provide $4.1 billion in school funding over a 3 year period to begin the construction process of at least 250 schools in Ohio.  My responsibility is to guide our design teams in their process of achieving this standard of excellence.  As of February 1st, we had 97 school projects registered with the US Green Building Council  and expect to have around 180 registered by the close of this state fiscal year.

Chris:  One area where I see potential green building disputes is green schools.  School districts are building green schools, in part, because of the energy efficiency and related cost savings.  How important a factor is energy efficiency for the Ohio green school program?  How do school districts incorporate projected energy efficiency savings into school budgets?

Elaine: Our mandate stems from a desire to make schools energy efficient and to reduce long term operating costs.  Because we have set a high standard for integrating technology into the classroom, and because our average school that will be replaced is over 70 years old, we are buildings schools that have significantly higher energy costs than what the districts are used to. The associated increases in consumption are often 200-1000% greater than the old buildings and many districts have difficulties affording these costs. Further, there are cases where the increase in consumption means an increase in energy rates per kWh (or Btu) and so the costs skyrocket.

We have increased our master plan budgets for all schools that fall under Resolution 07-124 by 3% to account for the new design process and emphasis on potentially greater first cost to reduce long term operating expenses.  Additionally, OSFC has developed provisions for districts to use our Energy Conservation Program (aka 1986 Am. Sub. HB264), which allows the district to incur bonded indebtedness with unanimous approval of the school board without public vote provided the energy conservation measures have a payback period of less than 15 years, to cover incremental costs increases of more expensive systems, renewable energy installation, and co-generation.

The question of how schools incorporate the energy savings into their budgets is interesting.  Traditionally, there is no direct process for that because a school's capital budget and operating budget are both restricted.  HB264 allows for operational savings to pay off capital expenditures over the approved project period.  Governor Strickland and his Energy Advisor, Mark Shanahan are working with the Ohio Department of Education to develop a process of better managing the connection between these budgets and ensuring that districts are able to reinvest their savings into staff, capital expenses, and, of course, the classroom.

Chris:  A portion of the economic stimulus funding is supposed to go to modernizing schools.  Does this mean making schools green?  Do you anticipate seeing some of the stimulus package money designated to your green schools program?

Elaine:  It appears as though both the House and Senate versions of the economic stimulus package have language requiring the school modernizations to be green.  It isn't clear how they will define "green."  It also appears that the stimulus funds will be either offered directly to the districts or to the districts via the Department of Education (ODE).  We will work with ODE and the districts to provide technical support and are currently working with our partners across the state to begin to determine what that might look like.

***
Elaine Lipman Barnes is the Energy & Environment Administrator for the Ohio School Facilities Commission.  For more information about OSFC or Ohio's Green Schools Initiative, visit http://osfc.ohio.gov  or call 614.466.6290

Related Links: 

• Sensible Interview:  AIA President Marvin Malecha (GBLU)

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Today, we bring you a first on Green Building Law Update:  my first radio interview. 

Vik Duggal, over at Konstructr, was kind enough to invite me to be a guest on his KCast interview series.  Konstructr is basically Facebook for the construction industry. 

Some of the topics we discuss include green building attorneys, President Obama's proposed economic recovery package, Twitter and Washington D.C.'s Green Building Act. 

There is one correction I need to make from the interview.  Despite what Vik says, I do not have a "LEED AP" tattoo (or any tattoo for that matter).  Enjoy and please send me your suggestions for future radio interviews! 
 

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"Green" was the buzz word in 2008.  In 2009, Green Building Law Update predicts that green buzz words will become more nuanced and the focus will be on "energy efficiency," "retrofits," and "existing buildings." 

I don't mind making this prediction because it is not much of a stretch.  There are three factors that will contribute to the popularity of retrofitting existing buildings to improve energy efficiency. 

First, as we have been discussing all week, President-Elect Obama is pushing a large stimulus package aimed at, in part, improving the energy efficiency of existing buildings and homes.  Yesterday, President-Elect Obama again stated his plan "to modernize 75 percent of federal buildings and improve energy efficiency in 2 million homes to save consumers billions of dollars on energy bills."

The second factor that will contribute to increased popularity for retrofitting current building stock is a slowdown in new building project developments.  At this point, we have all heard the dire warnings of a construction slowdown.  This construction slowdown is due, in part, to tightened lending options.  We also know that tenants are now demanding green buildings.  The result will be that building owners will look to "retrofit" their existing buildings so as to offer more green building options. 

Finally, climate legislation in the form of cap-and-trade is coming.  Early investments now to reduce energy use through retrofits will pay off for big businesses. 

What do you think?  Are my predictions off?  What is your one prediction for the green building industry in 2009?   

Related Links:

• Obama's Green Energy Plans Build Hopes, Skepticism (Reuters UK)
• Construction Slowdown Hits Architects (BizJournal)
• Construction Slowdown Still to Come (Wall Street Journal)
• Congress to Delay Action on Cap-and-Trade (Wall Street Journal)
• A Very Detailed Green Stimulus Proposal (GBLU)

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Update:  For a rundown of green building provisions in the stimulus pacakge, see this post.

On Monday, we highlighted some green building strategies that might be incorporated in the Obama Administration's proposed stimulus program.  The Alliance to Save Energy, Edison Electric Institute, Energy Future Coalition and the Natural Resources Defense Council (NRDC) recently published a comprehensive Energy Efficiency Initiative to be included in the proposed stimulus plan.  You should read the letter yourself but here is a good summary from NRDC's Peter Lehner:

The proposal we put together would invest approximately $33 billion for greater energy efficiency. . . . One of our primary recommendations is to make grants available to states and local governments giving them a huge incentive to increase efficiency. Under this program, states would provide funding under the grants program to entities such as utilities, cooperatives, energy service companies and school districts.

The grants would fall into the following broad categories: home energy efficiency retrofits, retrofits of public buildings, commercial building efficiency retrofits and efficiency programs matching fund. 

The Initiative's plan to allocate the state grants is particularly intriguing.  The first half of the funding would be allocated without conditions.  The second half of the funding would be tied to, in part, a state adopting and implementing more stringent energy building codes: 2009 IECC (for residential buildings) and the ASHRAE Standard 90.1-2007 (for commercial buildings).

If the stimulus package includes any or all of these proposals, the impacts on the green building and construction industry would be enormous.  In a few short years, we would simultaneously see huge government investments in green building strategies to improve energy efficiency while states simultaneously adopt building codes that will force private projects to include new green building techniques and technologies. 

If you are in the construction or green building industry, you better pay attention to the details of the final stimulus package. 

Related Links: 

• The Stimulus:  "LEEDS"ing the Way (GBLU)
• The Stimulus:  Now for the Hard Part (GBLU)
• The Stimulus:  Green Building Provisions (GBLU)
• NRDC and Utilities Agree:  Efficiency Works (NRDC Switchboard)
• Big Business Support Green Stimulus Package (GBLU)

Photo:  Kimberlyfaye

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Update:  For a rundown of green building provisions in the stimulus pacakge, see this post.

Over the weekend, news broke that the massive economic stimulus package will not be ready for President-Elect Barack Obama to sign on day one. As you may recall, President-Elect Obama had previously indicated that the stimulus package would include support for green building strategies.

While it was not previously clear what green building strategies were to be included, a December 24, 2008 letter from the United States Climate Action Partnership (USCAP), a business-environmental coalition arguing for mandatory global warming legislation, detailed what it believed should be included as part of the package:

It is possible to move fast and make investments in energy efficiency that can immediately put people to work on transit projects and existing building retrofits. These include weatherization, insulation, HVAC upgrades, and use of waste heat in industrial processes and facilities.

Rural and urban homes and businesses alike can take advantage of renewable technologies such as solar photovoltaic systems, hot water heaters or small wind turbines, and communities can benefit from development of local renewable energy resources.

This letter was signed by CEOs of some of the biggest corporations in the energy industry:

Alcoa
The Dow Chemical Company
Duke Energy
DuPont
General Electric
NRG Energy, Inc.
PG&E Corporation
PNM Resources
Siemens Corporation

With much of the energy industry and the President-Elect supporting a stimulus package that invests in energy efficiency strategies, we are likely to see an influx of capital for green building projects.

How is your business preparing for these new construction opportunities? 

Related Links: 

• The Stimulus:  "LEEDS"ing the Way (GBLU)
• The Stimulus:  Now for the Hard Part (GBLU)
• The Stimulus:  Green Building Provisions (GBLU)
• Stimulus Bill Faces Delay to Win Support (USA Today)
• The Political Winds are Changing: Part II (GBLU)

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On Wednesday, we highlighted the Bush Administration's recent decision to order the Office of Management and Budget (OMB) to not adopt regulations that would have improved energy efficiency in all federal buildings.  This decision is in stark contrast to the political platform and green building policies being pushed by President-Elect Obama. 

If you may recall, back in 2008, Green Building Law Update highlighted the green building political platforms of both President-Elect Obama and Senator John McCain.  Among the green building proposals, both Obama and McCain supported "greening" the federal government by applying a higher efficiency standard to government buildings.  While we can not be certain what an Obama Administration would have done, the Bush Administration's decision to kill the federal building energy efficiency regulation contrasts sharply with Obama's platform. 

Even more telling, Obama has emphasized green building policies as part of a massive federal stimulus package that is likely to be voted on as soon as Congress returns in January: 

Roughly $350 billion would be invested to rebuild roads and bridges, modernize schools and help hospitals and doctors switch to computerized patient records. That category also would include projects aimed at improving energy efficiency, such as weatherizing buildings, as well as aid to the poor through expanded unemployment and food-stamp benefits.

As one of his first acts, President-Elect Obama plans to use $350 billion to, in part, improve energy efficiency in buildings and modernize schools.  Improved energy efficiency in buildings and modernizing schools will likely require green building strategies.  The political winds have most definitely shifted in favor of green building policies. 

If you are looking for green building projects, make sure you pay attention to the upcoming federal stimulus package.  We will continue to keep you appraised here at Green Building Law Update. 

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As we head towards the finish line of 2008, we turn our eyes towards 2009 and what lies ahead for green building.  The next two posts at Green Building Law Update will highlight the shift in political support for green building policies that will soon occur. 

In order to understand the shift, we must start with the current political support, or lack thereof, for green building policies.  Heading into the New Year, the Bush Administration has quietly been passing and killing regulations through the Office of Management and Budget (OMB).  One such regulation that the Bush Administration refused to adopt would have improved energy efficiency in federal buildings:

On Nov. 19, the OMB ordered the Energy Department to kill new regulations that would have forced the federal government to buy more-energy-efficient lights, appliances, and heating and cooling systems. Daniel J. Weiss, climate strategy director at the Center for American Progress Action Fund, called that retreat from a 2005 requirement "unbelievable."

Notably, 2005 energy efficiency requirements were passed by a Republican Congress.  According to Department spokeswoman Jennifer Scoggins, the energy efficiency regulations may be issued before or during the next administration.

As the economic downturn continues into 2009, construction players must seize all opportunities for new projects.  On Friday, we will discuss the shift in support for green building policies that will occur with the incoming Obama Administration and new business opportunities that result.

Related Links: 

• At the Last Minute, A Raft of Rules (Wash. Post)

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Here at Green Building Law Update, we remain troubled by the disbanding of the proposed ASHRAE 189.1 green building code committee, but we have to point out one bright spot. 

As you may recall, last week we  discussed the merits of the “Proposed Standard 189: Standard for the Design of High-Performance Green Buildings Except Low-Rise Residential Buildings" and the disbanding of a committee that was to create the code, apparently due to pressures from industry groups.   After the committe was dissolved,  the USGBC voiced strong support for the green buiding code: 

Brendan Owens, vice president for LEED Technical Development at USGBC, told EBN that it was “very surprised at this action taken by ASHRAE,” adding that USGBC is trying to learn more about ASHRAE’s reasons.

 

“We want to make sure that this is the best path forward,” Owens said. Acknowledging the uncertainty about Standard 189, Owens noted that a minimum green building standard that can be incorporated into codes is “so fundamental to everything USGBC is about, we are very committed to making sure it happens.”

• Uncertain Future for ASHRAE Standard 189 (BuildingGreen)
• Industries Halt Proposed Green Code (GBLU)

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Last week, Green Building Law Update questioned whether governments should be requiring LEED certification through regulations and mandates.  Assuming governments should get out of the green building certification business, what then should governments do to support green construction strategies?  There are generally two options, one of which we will discuss today:  green building codes. 

Green building codes essentially incorporate green building strategies into construction codes.  By incorporating green building strategies into code, governments can not only mandate the strategies they deem most important but also avoid the costly and time-consuming certification process. 

Apparently, not everyone agrees with me.  Shari Shapiro first brought my attention to the fact that the committee constituting the “Proposed Standard 189: Standard for the Design of High-Performance Green Buildings Except Low-Rise Residential Buildings” recently disbanded.  Proposed Standard 189-P was supposed to serve as a minimum green building code. 

A committee composed of members from ASHRAE, the USGBC and the Illuminating Engineering Society of North America (IES) had been put together in 2006 to work on the standard.  But on October 14, 2008, the committee was suddenly disbanded and the reasons remain unclear:   

Several committee members discussed the move with EBN, all of them speaking off the record, either because they were unauthorized to speak by the organizations they work for, or did not want to jeopardize their chances to rejoin the committee.

Discussing resistance from various industry groups, including steel, gas and utilities, wood, and building owner interests, one committee member said, “We must have been doing a good job.” While those trade associations had specific complaints in some cases, in others they were unsupportive of ASHRAE’s involvement, as a mechanical engineering association, in a broad green building standard.

There are many nuances to creating a green building code, which we will discuss in future posts.  Managing all of the associated parties' interests is one clear impediment to proposed green building codes. 

Related Links: 

• A Week of Epiphanies:  I Don't Mean to Diminish This But . . . (GBLU)
• The Death of ASHRAE 189? (Green Building Law)
• Uncertain Future for ASHRAE Standard 189 (BuildingGreen)

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On Tuesday, hopefully you are planning on exercising your civic duty to vote.  Here at Green Building Law Update, we try to remain non-partisan but we could not ignore this monumental election.  Thankfully, though, the candidates have made it easy for us.  Did you know that a vote for either Barack Obama or John McCain will be a vote for green building? 

It's true.  While the two candidates may hold substantially different opinions on other issues, both hold similar positions on green building energy efficiency standards:

"There really is a lot more alignment between the two platforms than folks may at first expect," says Jason Hartke, director of advocacy and public policy for the U.S. Green Building Council (USGBC). "They both do a very good job of emphasizing energy efficiency in their platforms."

• Obama and McCain both support increased energy efficiency standards. 

• Obama and McCain both want to "green" the federal government by applying a higher efficiency standard to government buildings. 

• Obama and McCain both believe that global warming is real and that a cap-and-trade program should be instituted. 

• Obama, McCain on Energy and the Environment (ecohome)
• Obama v. McCain -- No Real Contest on The Environment (Green Building Law)

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You may remember that in previous posts, GBLU warned that September was going to be a big month for green building regulations in Washington D.C. It was anticipated that the D.C. City Council would vote on new green building codes on September 16 but the codes were tabled to allow for more feedback from affected parties. But there was still significant green building regulations voted on yesterday in D.C.

Late Monday night, H.R. 6899, the Comprehensive American Energy Security and Consumer Protection Act, was passed by the House of Representatives by a vote of 236-189. The big story will be that an energy bill was passed that permits more oil drilling off U.S. Coasts. But as expected, the legislation also included green building mandates. 

Among these mandates is Title IV – Greater Energy Efficiency in Building Codes. This section requires the Secretary to update the national model building energy codes and standards at least every three years to achieve specific overall energy savings, compared to the 2006 IECC for residential building and ASHRAE Standard 90.1-2004. From prior discussions, you may remember ASHRAE 90.1-2004 is the energy standard used by the USGBC’s LEED rating system. 

But GBI’s Green Globes rating system also found its way into the legislation. Under Title VI – Green Resources for Energy Efficient Neighborhoods, the legislation described requirements for both residential and non-residential projects seeking HUD assistance. Among these requirements, to qualify for HUD assistance projects can comply with one of numerous green building standards:

1)      The national Green Communities criteria checklist

2)      The gold certification level for the LEED for New Construction rating system, the LEED for Homes rating system, or the LEED for Core and Shell rating system

3)      GBI’s Green Globes assessment and rating system; or

4)      The National Green Building Standard

It seems peculiar that this legislation would require LEED gold certification but not include a similar requirement for Green Globes. Like the LEED rating system, Green Globes awards “globes” for each level of certification. The equivalent of LEED gold certification would be achieving three globes through Green Globes. 

Word on Capitol Hill is that the Senate is likely to adopt a different version of energy legislation so it is unclear whether green building mandates will be included in the Senate’s version.   

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On Monday, we discussed the possibility of a federal green building mandate being voted on this week on Capitol Hill and what that green building mandate might look like. Yesterday, GBLU received a great tip regarding previous federal green building legislation that passed in the House of Representatives but not in the Senate. In 2007, H.R. 3221 was passed in the House of Representatives and included green building mandates covering residential, commercial and federal building efficiency.

This federal legislation would have set energy efficiency standards for buildings throughout the country. Notably, H.R. 3221 incorporated ASHRAE 90.1-2004 as the energy efficiency benchmark. As we discussed on Monday, ASHRAE 90.1-2004 is the benchmark standard incorporated in the USGBC’s LEED rating system, though this legislation did not refer to the LEED standards explicitly. Furthermore, H.R. 3221 included a rulemaking process that allows for regional adjustments to the green building mandates. As a commenter pointed out on Monday, regional adjustments to federal green building mandates would be necessary to account for the differing climate zones found in the United States.

Legislation could be could be offered up today or tomorrow by House Democrats that is likely to include green building mandates similar to those included in H.R. 3221. GBLU will provide further analysis of this federal legislation that will affect owners, contractors, designers, sureties and insurers across the country.

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One factor that has significantly increased demand for green building is government regulation that requires green building strategies. So far, GBLU has focused green building initiatives at the city level. While there has been some federal green building legislation, GBLU anticipated major federal green building legislation would emerge from Congress in 2009.  It now looks like federal green building mandates could be voted on before the 2008 presidential election ever occurs. 

As Congress returns to Capitol Hill today from the two parties’ conventions, one of the primary issues on the table is energy policy and offshore drilling.  A recent Greenwire article detailed how Democrats intend to offer a piece of legislation that includes energy-efficiency standards for buildings in order to counter the congressional Republicans demand for offshore drilling:

Top House Democrats say that shortly after Congress reconvenes, they will put on the floor a piece of legislation that will include an expansion of offshore drilling but also a renewable electricity mandate, energy-efficiency standards for buildings and oil industry tax provisions.

Under the USGBC’s LEED rating system, projects must satisfy a minimum energy performance by complying with provisions in ASHRAE 90.1-2004. The Democrats’ legislation could require compliance with ASHRAE 90.1-2004, or a similar standard, like the EPA’s Target Finder.  

GBLU was on Capitol Hill on Friday to discuss what additional Federal green building legislation might look like. The consensus was that Federal green building legislation would most likely come in the form of mandates for specific green building components. For example, Federal legislation could mandate the use of Energy Star compliant appliances. The list of possible green building mandates is long: insulation, certified wood and pervious paving are just a few. 

If you think of other potential green building mandates, please submit a comment below. GBLU would like to put together a list and discuss what each mandate could look like. 

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