Green Building Law Update

Environmental Law and Sustainability for Business

2018 IgCC to be Adopted in Baltimore City

By Stuart Kaplow on Posted in City, Green Building, Green Globes, IgCC

This evening an ordinance will be introduced in the Baltimore City Council to adopt the 2018 International Green Construction Code.

In the realm of green building this is a big deal. In the more than 4,400 code adopting jurisdictions across the country only the town of Gaithersburg, Maryland has adopted the 2018 IgCC. It is worthy of note that a second jurisdiction, Montgomery County, Maryland (that includes the municipality of Gaithersburg) has promulgated regulations adopting the 2018 IgCC, but the code is not yet in effect.

I have regularly and consistently been critical of enactments of mandatory green building codes, as violative of the core principal modern green building is built upon that sustainable construction is a voluntary non regulatory response such that the built environment that can repair the planet.

But in this instance it is necessary to understand the context that Baltimore City was among the first in the nation when it enacted a mandatory green building law in 2007 that remains among the most sweeping of that in any major American city. The existing green building code mandates that nearly all newly constructed or extensively modified building must be certified green.

Accepting that this new green code replaces an existing green building mandate, Bill 20-0630 should be applauded as an excellent enactment of the 2018 IgCC, far superior to what Gaithersburg or Montgomery County have done.

Make no mistake, Baltimore is not greenwashing. The 38 pages of amendments to the form 2018 IgCC both cause the code of conform to the existing regulatory scheme in the City and tweak many of the difficult provisions of the form document that have likely caused other jurisdictions to take a pass on this code (.. click here for a free copy of the IgCC).

As proposed, the 2018 IgCC will apply to all building except not 1 or 2 family dwellings and not muli-family dwellings with no more than 3 stories and no more than 5 dwelling units.

Most significant, drawing on the current law, the Baltimore version of the 2018 IgCC is a voluntary code. That is, there are options; there are alternative compliance paths, including a structure that achieves:

LEED Silver certified or better,

Certain multi family residential and mixed use structures, NGBS Silver or better,

Enterprise Green Communities certification, or

GBI Two Green Globes rating.

Also of paramount import “the code official may, in unusual circumstances and only on good cause shown, grant an exemption from any requirement of this code ..”

Wisely, this enactment ameliorates the harsh effects of some of the form 2018 IgCC provisions that are unsupported by good science and appear to be the vestiges old trade group infighting at ASHRAE, including by way of example when in an effort to address urban heat island effect (within a major Northeastern city), Baltimore has reduced the area that must be mitigated to “40% of the site hardscape.”

To add flexibility while preserving sustainability, the enactments creates a new section eleven for electives, of which at least 10 points must be achieved. Those electives are provisions extracted from the form code that projects in Baltimore may not be able to reasonably achieve.

All 10 elective points are satisfied if the project pursues a net zero certification, including the International Living Futures Institute Zero Energy or Energy Pedal or LEED Zero Energy (and the project need only provide documentation demonstrating acceptance into the monitoring period).

Baltimore officials have done a good job at striking a balance with the larger environmental industrial complex and the real estate community when the City is surrounded by jurisdictions that do not have mandatory green building laws.

It should not be lost on the reader that the State of Maryland has to date declined to adopt the 2018 IgCC as a means of satisfying the State high performance building mandate for State capital projects, including new public school building, instead leaving in place a heavily amended version of the now out of date 2012 IgCC that no project has ever utilized. So, the 2018 IgCC does not apply to new public school building or other new State funded building in Baltimore City, Gaithersburg or Montgomery County.

The 2018 IgCC is not for the faint of heart, even with these 38 pages of amendments. There are no 2018 IgCC buildings, yet, anywhere in the country. Recall maybe only 17 or so (.. out of 4,400 code enacting jurisdictions) ever adopted the 2012 version of the IgCC, and Boulder County may be the only place to adopt the 2015 IgCC, so guesstimating difficulty in construction and estimating increased first construction cost is speculative at best. The only jurisdiction I am aware has used the 2018 IgCC, for any purpose, is Denver that included it within its voluntary 2018 Denver Green Code housing pilot program as a compliance option with LEED Platinum, Net Zero Energy or Passive House +Non-Energy DGC. That is, Denver determined the 2018 IgCC to be an alternative to LEED v4 Platinum!

Projects in Baltimore will certainly select one of the alternative compliance paths (.. most major projects will pursue NGBS certification) and avoid the 2018 IgCC until there is some experience with this green code.

Of course, mandatory green building in Baltimore has its critics, from those who believe the City with the highest murder rate and among the highest violent crime rates in America should focus on making the City safe, to those who believe during a COVID-19 pandemic City government should not be enacting new building regulation that will not permit increasing outdoor air ventilation; disabling demand-controlled ventilation; further open minimum outdoor air dampers, as high as 100%, thus eliminating recirculation; improving central air filtration to MERV-13; or keeping systems running longer hours, if possible 24/7; etc.

This ordinance boldly describes its purpose to “reduce the negative impacts and increase the positive impacts of the built environment on the natural environment and building occupants.” Mandatory green building has been and remains the law in Baltimore City. This bill makes the flavor of green building bigger and better while more palatable for all of the City’s occupants.

Supreme Court to decide Climate Change Case

By Stuart Kaplow on Posted in Climate Change, Environmental

While this week the confirmation of Judge Amy Coney Barrett begins in earnest before the Senate Judiciary Committee, last week the U.S. Supreme Court granted BP’s petition for a writ of certiorari in BP P.L.C. v. Mayor and City Council of Baltimore, a much watched climate change case.

In 2017, a number of state and local governments began filing lawsuits in state courts against various energy companies, alleging that the companies’ worldwide extraction, production, sale, and promotion of fossil fuels had caused injury by contributing to global climate change, even though most of the fossil fuel companies were nonresidents of the states where the cases were filed.

Those lawsuits primarily assert that the extraction, production, sale, and promotion of fossil fuels constitute a public nuisance and give rise to product liability under state common law and state consumer protection statutes; the plaintiffs are seeking relief largely in the form of compensatory and punitive damages. The defendant energy companies removed nearly all of those lawsuits to federal court.

In this case, the defendants are 21 domestic and foreign energy companies. The plaintiff is the municipal government of Baltimore, Maryland. Like a number of other state and local governments, Baltimore City filed this action against energy companies in Maryland state court, seeking to recover damages under state law for harms that it claims it has sustained and will sustain due to global climate change. As in other similar cases, the energy companies removed this case to federal court, asserting multiple grounds for removal. The district court remanded the case to state court, and on appeal the federal appellate court agreed (although such was inconsistent with other federal appeals courts), and energy companies filed this petition with the Supreme Court.

On the face of the pleadings, this case is narrowly about procedure in appellate court jurisdiction,

Whether 28 U.S.C. 1447(d) permits a court of appeals to review any issue encompassed in a district court’s order remanding a removed case to state court when the removing defendant premised removal in part on the federal-officer removal statute, 28 U.S.C. 1442, or the civil-rights removal statute, 28 U.S.C. 1443.

And while a federal court of appeals ordinarily lacks jurisdiction to review a district court’s order remanding a removed case to state court, other federal courts of appeal have found there is authority for this appellate review, but moreover this is a case about climate change of national, if not global import, that many believe should not be decided in a Baltimore City Circuit Court courtroom.

Appreciate there are real differences in Maryland and federal law, both procedural and substantive, that may impact the outcome of these disputes. The consensus of environmental attorneys is if this case is heard in federal court such is not only all but certainly a victory for the energy companies, but also a victory for science.

The Supreme Court in a unanimous opinion written by Justice Ruth Bader Ginsburg in 2011 in American Electric Power Co., Inc. v, Connecticut, held

The Clean Air Act and EPA action the Act authorizes displace any federal common-law right to seek abatement of carbon-dioxide emissions from fossil-fuel fired power plants.”

Baltimore and the other state and local governments are ignoring this settled law about claims for climate change and attempting to end run this precedent by suing in state courts.

Additionally, I wrote about a key procedural matter in a recent blog post,

If courts exclude scientific evidence from a jury only because people generally agree some other way, .. think for example excluding evidence in the pending lawsuit for damages from climate change brought by Baltimore City pending in the Maryland courts because one side’s scientific experts are called “climate change deniers,” offering junk science counterposed to “sound science,” .. courts risk being the next vehicle in the car wreck of confidence the public has in scientists.

The possible importance of this case in articulating the nature of applying science in the making of public policy should not be underestimated. A state court bench is simply not a good substitute for a laboratory bench in application of the scientific method.

It is widely suggested officials in Baltimore, a city notorious for its significantly high crime rate, including a murder rate that regularly tops the nation, are wrong and out of their element when they describe their prosecution of this case in apocalyptic terms. Rather the real dispute is not about whether the world is warming or the relative impact of man on the planet, but the costs to society of particular remedies and the efficacy of those remedies versus that money being spent improving the quality of life for earth’s inhabitants; not matters a Baltimore City Circuit Court judge is particularly well suited to resolve. As the Supreme Court has already determined matters of climate change are the purview of EPA and not a trial court judge.

It should be fun to watch BP P.L.C. v. Mayor and City Council of Baltimore, docket no. 19-1189, which will be heard during the Supreme Court’s 2020 – 2021 term with a decision expected by June.

New Green Building Tax Credit is a Progressive Effort

By Stuart Kaplow on Posted in Codes and Regulations, Green Building, LEED

At a time when the building industry is principally concerned with the impact of COVID-19 and the luster is off green building, the Montgomery County Council last Tuesday unanimously approved legislation “to accelerate the construction of highly energy efficient buildings and green retrofitting of existing buildings.”

Bill 10-20 dramatically upgrades the Maryland county’s existing green building real property tax credit, prioritizing energy reduction in the name of GHG emission reduction, in new and existing commercial and multifamily buildings and ensuring incentives are now given only for buildings that surpass requirements of the County’s building code.

While some think tax law is just boring, others have hailed this tax credit scheme as being a superb model ordinance for government incentivizing green building, despite that Montgomery County was among the first jurisdictions in the country, in 2008, to adopt a mandatory green building law for private building, requiring most new construction be LEED certified. Delivering victory to the environmental industrial complex, through a triumph of method over magic, Montgomery is today touted as the county in America with the most LEED building.

This new property tax credit should be viewed against that backdrop, but moreover that the County is on the cusp of being the first to adopt the 2018 International Green Construction Code, as a mandatory code (including that LEED will no longer satisfy the County’s green building mandate).

All of this must be considered in light of the County’s earnest commitment to reducing GHG emissions by 80 percent by 2027 and 100 percent by 2035. “Energy consumption in commercial buildings accounts for 26 percent of greenhouse gas emissions in the County,” according to the most recent GHG inventory. Significantly reducing energy usage and emissions also requires retrofitting existing buildings.

“We need to reduce the energy consumption of our buildings if we are to ever have a chance of meeting our climate goals,” said Councilmember Hans Riemer. “Reducing energy use is expensive and complicated work, and it will take time. The changes to the green building tax credit proposed in this legislation will incentivize our private-sector partners to go further than ever before in designing energy-efficient buildings.”

Under current law, the green building tax credit is tied to the LEED or its equivalent. New and existing buildings meeting higher levels of LEED certification receive increasingly higher levels of the property tax credit for five and three years, respectively. The County caps the overall tax expenditure for this credit at $5 million annually. Since its inception, the County has awarded $33.4 million in credits, across 62 buildings (.. yes, 62 buildings!).

However, the credit has been regularly oversubscribed in the past few years.

To make the credit more effective and better align it with the County’s GHG effort, not green building more broadly, Bill 10-20, as drafted by a broad based work group, makes the following changes to the green building tax credit:

The new law creates a new two-tier structure for the credit. The first tier ties the amount of the credit to the energy reduction level relative to the existing building code. The bill defines “energy reduction level” as a level of energy performance, expressed as a percentage, that the Director of Environmental Protection finds to be at least 10% better than the level of energy performance that would be achieved under the current Building Code. The higher the energy reduction level, the higher the credit.

The second tier assigns a bonus credit. The amount of the credit, in addition to the new building energy reduction tax credit, is: (A) 25% of the property tax owed on the building for 4 years if the building achieves the most recent version available of LEED Gold, NGBS Gold, PHIUS+/PassiveHouse, BREEAM-NC Excellent or an equivalent standard; (B) 75% of the property tax owed on the building for 4 years if the building achieves the most recent version available of LBC Petal Certification, LEED Platinum, NGBS Emerald, 297 BREEAM-NC Outstanding or an equivalent standard; and (C) 75% of the property tax owed on the building for 5 years if the building achieves the most recent version available of Living Building Certification.

Interesting is that Green Globes is not recognized despite that the Montgomery County public school system is pursuing Green Globes certified school buildings.

With respect to existing buildings, the credit would be based upon the ENERGY STAR improvement of the building over a 12-month period. The greater the amount of ENERGY STAR improvement, the greater the amount of the credit. For example, a building that improved its ENERGY STAR score by 25-49 points would receive a higher tax credit than a building that improved its score by 1-24 points.

Significantly, the new law removes the annual cap on the credit for new buildings and maintains a $5 million cap annually for existing buildings. The County Office of Management and Budget estimated that removing the $5 million dollar cap on credits for new construction would result in approximately $2.6 million in additional tax credits, for a total of $7.6 million in credits.

The new law sets a four-year limit on the credit for new buildings and a two-year limit for existing buildings, so the monetary worth and usefulness to a property owner is capped.

Property tax credits are considered by many as the ideal incentive for green building (.. okay, maybe it is adulterated in a jurisdiction with a mandatory green building law?) and this variation is a mature version of that incentive. The ramifications of adopting this incentive at a time the County is in the final stages of adopting the 2018 IgCC as mandatory for all building are not clear beyond that buildings qualifying for this tax credit will be expensive to build. But Montgomery County is not only the most populous county in Maryland and one of the most progressive jurisdictions in the nation, but dramatically it has also been ranked by Forbes as the 10th richest in the United States and as such first construction costs may not have major implications.

This sophisticated property tax credit program, weighted heavily to minimizing energy use in the name of reducing GHG emission, may be a model for jurisdictions across the country that want to advance green building in an effort toward repairing the world. Read Bill 10-20.

Maryland becomes First State to Ban Polystyrene this Thursday

By Stuart Kaplow on Posted in Codes and Regulations, Environmental, State

During the 2019 legislative session, the Maryland General Assembly enacted what will be the first statewide ban of expanded polystyrene foam.

In the Spring of 2019 law makers did not foresee a pandemic that would shift restaurant dining (not to mention school meals and much more) to carry out in transportable food containers, but today in the context of coronavirus disease 2019 with a huge increase in takeout and the CDC recommending that everything in a restaurant be disposable, single use plastic is surging. But maybe not in Maryland?

Senate Bill 285/House Bill 109, became Environment Article 9-2201 et seq, without the signature of Governor Larry Hogan, prohibits a person from selling or offering for sale in the state an “expanded polystyrene food service product” and a “food service business,” which includes specified businesses, institutional cafeterias, or schools from selling or providing food or beverages in an expanded polystyrene food service product.

Although foam coffee cups and plates are often referred to as “Styrofoam®,” that terminology is incorrect. Styrofoam is actually a registered trademark of Dow Chemical Company and is a brand generally used in industrial settings for building materials and pipe insulation. Styrofoam is not used in the food service industry for coffee cups, coolers, or packaging materials, which are generally made of expanded polystyrene.

“Expanded polystyrene food service product” under this law includes food containers, plates, hot and cold beverage cups, trays, and cartons for eggs or other food.

The ban actually went into effect beginning July 1, 2020, but as a result of Maryland’s COVID-19 state of emergency, the Maryland Department of the Environment announced it extended the deadline by which schools and food service businesses must discontinue the sale or provision of food or beverages in polystyrene food service products until October 1, 2020, but such was disingenuous at best because the extension did not apply to the ‘sale’ of polystyrene food service products which continued to take effect July 1, 2020. As a result, food service businesses and schools could continue to use existing inventories of polystyrene food service products until October 1, 2020, but were not be able to purchase additional polystyrene food service products after July 1, 2020.

However, many will not be impacted when the statewide ban goes into effect on Thursday because more than half of Marylanders live in Anne Arundel County, Baltimore City, Montgomery County or Prince George’s County, jurisdictions that already have local bans.

The law criminalizes the use of some polystyrene. But actually very little of it, when the chemistry industry estimates less than 1% of polystyrene is used in as a ‘food service product’ and that is all this law regulates. County governments are charged with enforcing the new state law’s prohibitions and may impose a penalty of up to $250 on a person or food service business that violates the prohibitions. However, the monetary penalty may only be imposed if the unit of county government first issues a written notice of violation and the violation is not corrected within three months of the written notice.

New York, Maine and Vermont have each enacted similar bans on polystyrene food service products, but none have yet taken effect and New York has expressly delayed any implementation in reaction to COVID-19. Other states are considering similar laws.

Maryland politicians should not be criticized because this new law will no doubt be popular in the very progressive Maryland. In a recent blog post, Maryland Enacts New Environmental  Laws in 2020 , I reviewed other key environmental bills passed in most recent legislative session, including interestingly HB 1442 altering the definition of “expanded polystyrene food service product” enacted the year before to exclude egg cartons (.. apparently the chickens have good lobbyists?). Maryland has been described as having more pages of environmental statutes and regulations on a per capita basis than any other state and Maryland voters appear fine with that.

But getting the facts and science right appears to have evaded this law. During the debate on this legislation supporters regularly used the phase, “in 2018 the United Nations Environmental Programme estimated Styrofoam takes thousands of years to disintegrate.” But, of course, that is not true. In 2019 scientists from Woods Hole Oceanographic Institute reported that sunlight breaks down polystyrene in ocean water over a period as short as decades. Which also ignores that expanded polystyrene, a type 6 plastic, is 100% recyclable.

Reduction of waste is a good aim, but banning legal products does not accomplish that end and is bad government, including that what comes as a replacement may be worse? Moreover, local governments in Maryland with a similar polystyrene ban have each seen an increase in solid waste, in some instances double digit increases.

Media accounts have described COVID-19 associated changes in how Americans live and work has resulted in more than a 20% increase in solid waste over last year. So, in lieu of bans and criminalizing conduct, government might encourage innovation and look to new solutions in truly efficacious efforts repair the planet.

SEC Alters Environmental Disclosure Requirements for First Time in 30 Years But

By Stuart Kaplow on Posted in Climate Change, Federal

A final rule the U.S. Securities and Exchange Commission adopted on August 26, 2020 and effective 30 days after publication in the Federal Register may be more significant for what is not in the rule.

The rule is silent on ESG disclosures, including climate risk.

SEC disclosure requirements, which had not undergone significant revisions in over 30 years, impact a broad breadth of environmental matters, for not only the thousands of public companies, but also for the millions who invest in them, when the Commission alters the description of business, legal proceedings, and risk factor disclosures that public companies are required to make pursuant to Regulation S-K.

While this topic may appear dense, what was done here, including what was not done, is actually fairly straight forward. Longstanding Federal law requires disclosure of “any material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which a [public company] or any of its subsidiaries is a party or of which any of their property is subject.” SEC instructions have long described an administrative or judicial proceeding involving an environmental penalty of $100,000 or more, as not being “ordinary routine litigation incidental to the business.” Under the new rule, that we have been discussing advising public companies about for more than a month, the SEC has increased the disclosure threshold from $100,000 to $300,000 (eliminating an estimated more than 30% of those disclosures for environmental matters).

The SEC will also under this new rule also afford a company some flexibility by allowing management, at its election, to select a different threshold that it determines is reasonably designed to result in disclosure of material environmental proceedings, provided that the threshold does not exceed the lesser of $1 million or one percent of the current assets of the company.

Additionally, the final rule will require, to the extent material to an understanding of the business taken as a whole, “disclosure of the material effects that compliance with government regulations, including environmental regulations, may have upon the capital expenditures, earnings, and competitive position of the registrant and its subsidiaries.” This is an expansion from the longstanding rule that companies disclose the material effect of environmental laws to ‘all’ laws. The final rule also will continue to require registrants to include the estimated capital expenditures for environmental control facilities.

But in keeping with the current positions of the SEC, this new rule takes no position when it does not require or specify ESG related disclosures, arguably because the Commissioner’s principles based disclosure regime already produces disclosures on these topics, if any, that are material.

The same is true for climate risk. In 2010, the SEC issued guidance stating that issuers should include a discussion of climate risk in items 101 and 103, two of the provisions that were amend, to the extent it is material. But that guidance was not altered or even mentioned here.

So, while these express changes to environmental matters are positive, what may be most significant is that this new rule on environmental disclosures is silent on the topic of ESG disclosures including climate risk. A policy making official at a major NYSE member firm suggested, “the only reasonable inference is that these matters are not ‘material’ in the parlance of security regulation by the Federal government.”

And this intentional omission is in a climate when the subject is hot. Last Tuesday, the California Governor pushed the President to accept the role climate change in the California wildfires. On Thursday, the Shanghai stock exchange, China’s largest, proposed listed companies would not be subject to EU ESG and other environmental disclosure requirements. On Friday, a registered investment advisor reported publicly that it had responded to a U.S. Department of Labor inquiry about their use of ESG disclosures. Just last Saturday, the Wall Street Journal published an Op-Ed, “Sustainable Investing is a Self-Defeating Strategy.”

And I published a blog, ESG Going the Way of the Dodo?, last month describing the Labor Department putting another nail in the coffin of ESG disclosures. It may be premature to describe this SEC final rule as the final nail in that coffin, but it now appears more likely than not that ESG disclosures will become extinct like the dodo bird.

Court Adopts New Evidentiary Standard for Science

By Stuart Kaplow on Posted in Environmental

In 2020 when science and politics appear to have collided in a car wreck, confidence of the public in scientists is at an all time low. That observed, the public does not often think about the role courts have in accepting scientific theories. Last week Maryland’s highest court drew attention to this vital unsettled matter nationwide when it adopted a new evidentiary standard for scientific testimony.

While the case before the Court involved the harm caused by lead paint exposure and many think of expert scientific testimony about medical malpractice, and cases of those types that appear on court dockets in large numbers, there are also other overarching public policy cases that involve science, for example lawsuits over damages for climate change and banning pesticides; that all will be impacted by this Court opinion.

The Court said, “we have implicitly recognized that a trial judge’s gatekeeping function should not be limited to new scientific theories—old ‘junk science’ should be kept out of our courts as well,” but some background is necessary, ..

Nearly a century ago, the United States Court of Appeals for the District of Columbia announced a new evidentiary standard by which the admissibility of expert testimony rooted in a novel scientific principle or discovery turned on the “general acceptance” of such evidence “in the particular field in which it belongs.” Frye v. United States. In the ensuing fifty years, “almost all of the courts in the country” that considered “the admissibility of scientific evidence” adopted the rationale set out in Frye, including Maryland held, “before a scientific opinion will be received as evidence at trial, the basis of that opinion must be shown to be generally accepted as reliable within the expert’s” relevant scientific community.

In 1993 the Supreme Court of the United States upset the applecart of the admissibility of expert scientific testimony. In Daubert v. Merrell Dow Pharmaceuticals, Inc., the Supreme Court held that Federal Rule of Evidence superseded Frye’s general acceptance test. In place of Frye, the Supreme Court provided a list of flexible factors to help courts determine the reliability of expert testimony.

All these years later, Maryland now joins a majority of other states and adopted the Daubert reliability factors, overruling Frye. Many trial lawyers believe what the high court has done is a good thing:

When interpreting considering the admissibility of scientific evidence, now Maryland courts, instead of merely looking to the general acceptance in the relevant scientific community, should consider, but are not limited to: (1) whether a theory or technique can be (and has been) tested; (2) whether a theory or technique has been subjected to peer review and publication; (3) whether a particular scientific technique has a known or potential rate of error; (4) the existence and maintenance of standards and controls; (5) whether a theory or technique is generally accepted; (6) whether experts are proposing to testify about matters growing naturally and directly out of research they have conducted independent of the litigation, or whether they have developed their opinions expressly for purposes of testifying; (7) whether the expert has unjustifiably extrapolated from an accepted premise to an unfounded conclusion; (8) whether the expert has adequately accounted for obvious alternative explanations; (9) whether the expert is being as careful as he or she would be in his or her regular professional work outside his or her paid litigation consulting; and (10) whether the field of expertise claimed by the expert is known to reach reliable results for the type of opinion the expert would give.

But, it is not that simple, a three judge dissenting opinion, questioning in part the high court making this change in an opinion in a case as opposed to in a public process,

At a minimum, before any decision to adopt the Daubert standard, I would recommend that the Standing Committee on Rules of Practice and Procedure undertake a study of the impact of Daubert and make a determination as to whether adoption of Daubert in Maryland will negatively affect African American people, people of color, or people of limited financial means as potential litigants.”

The majority replies in a footnote, “We do not reject the seriousness of this contention.” And curiously goes on to quote parenthetical in a law review article, .. (“[A] state’s choice of scientific admissibility standard does not have a statistically significant effect . . . [and] a state’s adoption of Frye or Daubert makes no difference in practice.”)

The dissenting opinion goes on, “The Majority does not advise that the article, like other sources, likens Daubert to tort reform, stating: .. The resulting effects of Daubert have been decidedly pro-defendant.” Be assured with the courts as a coequal branch of government, keeping science out of cases because it may be unpopular or worse, not only puts a thumb on the scales of justice in civil cases, but also criminal prosecutions.

The public is increasingly sophisticated and understands that all science is bought and paid for, whether by a police department crime lab or an industry trade group, and many believe all science is junk science carrying with it that pejorative connotation that the science is untowardly driven. Allowing more scientific evidence into a case rather than excluding some, and allowing a jury to evaluate it all may restore trust.

There is no question the Court had the authority to make this change when Maryland Constitution provides, the Court of Appeals from time to time shall adopt rules and regulations concerning the practice and procedure in and the administration of the appellate courts and in the other courts of this State, which shall have the force of law ..”

But the broader question may be the far reaching consequences of a nearly two decades old (.. are you using the same phone you used in 1993?) new, but dated, evidentiary standard now used by a supermajority of courts across the country for the admission of scientific evidence in future cases that will emanate from coronavirus disease 2019 to CRISPR gene editing, and much more.

Science by consensus is at best not reliable and at worst junk science. Simply because there is a general agreement upon something does not actually make it true. If courts exclude scientific evidence from a jury only because people generally agree some other way, .. think for example excluding evidence in the pending lawsuit for damages from climate change brought by Baltimore City pending in the Maryland courts because one side’s scientific experts are called “climate change deniers,” offering junk science counterposed to “sound science,” .. courts risk being the next vehicle in the car wreck of confidence the public has in scientists.

The case is Stanley Rochkind v. Starlena Stevenson.

I Just Read my 1000th Phase I Environmental Site Assessment this Year

By Stuart Kaplow on Posted in Codes and Regulations, Environmental

For those concerned about the state of the environmental industrial complex during the coronavirus disease 2019 pandemic, I can report that last Friday I reviewed my 1,000th Phase I Environmental Site Assessment this year. In context, last year I did not hit that 1,000 mark until late September, and while it is an unscientific indicator, because it is often a gateway assessment into matters of environmental law, I find, annually, it is an accurate gauge of environmental law activity.

So, I can report the state of the business of the environmental in the U.S. is strong. There is great opportunity for those who seize it.

The majority of our work in reviewing Phase I Environmental Site Assessments is for lenders across the country, much of that undertaken by a non law subsidiary of this law firm, but the fastest growing segment in this space, by far, is Phase Is for commercial tenants.

As a result of an amendment to the Superfund law for the first time making clear that tenants can qualify as bona fide prospective purchasers, protected from cleanup costs from the presence of hazardous substances on a property, is prospective tenants are now ordering Phase l Environmental Site Assessments to take advantage of the new liability protections in the federal law.

Buried in the more than 800 page Consolidated Appropriations Act signed on March 23, 2018 were the very few words of Division N, the ‘‘Brownfields Utilization, Investment, and Local Development Act of 2018’’ (the BUILD Act).

The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA, commonly referred to as Superfund), 42 U.S.C. § 9601 et seq., provides an important liability protection, including from cleanup costs, for parties who qualify as bona fide prospective purchasers (BFPPs).

The potential applicability of the BFPP protection to a tenant who leases contaminated or formerly contaminated real estate has been the subject of debate for the decades since the CERCLA’s enactment. The cases interpreting CERCLA make clear that the mere execution of a lease does not necessarily make a tenant liable as an owner or operator under the law. But courts have acknowledged uncertainty regarding the potential liability of tenants under CERCLA including because a tenant may be an operator of the property as well as a responsible person, but tenants had previously lacked any express protection in the Superfund laws. A prospective tenant may now to seek BFPP treatment in the event of a future federal CERCLA cleanup action at the leased property or simply to ensure appropriate environmental stewardship of the property.

Such is a dramatically large issue with the economic contribution of real estate to the U.S. economy, when in any given year the vast majority of real estate transactions are leases and not contracts of sale. In 2020, an increasingly large number of prospective tenants, from commercial banks to sports apparel retailers and the defense industry are actively seeking protection from existing contamination before signing leases.

Eighteen years ago, in 2002, as part of the Small Business Liability Relief and Brownfields Revitalization Act, the BFPP definition was amended to include the parenthetical phrase “(or a tenant of a person)” in the description of who can claim the BFPP defense, but there was no other direction on the treatment of tenants.

EPA later issued guidance in 2012 on the treatment of tenants as BFPPs, providing that a tenant could only derive it BFPP status through the property owner, and that status was limited to “so long as the owner maintains its BFPP status.” So while instructive, it provided little, if any, comfort to tenants.

This 2018 BUILD Act addresses the uncertainty dating to 1980, by amending CERCLA § 101(40) including by in subclause (II), by inserting

‘‘, by a tenancy, by the instruments by which a leasehold interest in the facility is created,’’ ..

And in that subsection, the term “bona fide prospective purchaser” has been amended to mean,

“(ii) a person who (I) who acquires a leasehold interest in the facility after January 11, 2002; (II) who establishes by a preponderance of the evidence that the leasehold interest is not designed to avoid liability under this Act by any person; and ..”

Which has the macro effect of increasing the value of many commercial and industrial properties making reuse viable, obviating one of the longstanding criticisms of CERCLA, that the law limits urban redevelopment across America, and the micro effect of mitigating a tenant’s risk in an individual leasehold, by allowing a tenant to avoid CERCLA liability by any of the following three means:

One, establishing the landlord is a BFPP because that landlord completed the “all appropriate inquiries” as required by federal law (including with a Phase I Environmental Site Assessment); or two, establishing that the landlord completed all appropriate inquiries, but later failed either with compliance or to complete additional requirements; or three, establish the tenant itself, as the BFPP, by completing all appropriate inquiries prior to acquiring the leasehold interest and maintaining compliance with the additional requirements, if any.

A tenant can now assert, without having to rely on the landlord’s status, the innocent landowner defense being protected from CERCLA liability including cleanup costs from the presence of a hazardous substances on the property.

In this year when cursed energy is “out” and dark energy is “in” Phase I Environmental Site Assessments ordered by prospective tenants are in.

As a pendent matter, when a Phase I Environmental Site Assessment report exists, it may now as a result of the 2018 Build Act be material information, under state law, that a real estate broker is obligated to disclose to a prospective tenant.

Concomitantly, should the Phase I Environmental Site Assessment reveal a recognized environmental condition, a tenant could seek protection as a “inculpable person” not liable for existing contamination under state Brownfield laws.

In 2020, the state of the environmental industrial complex is strong. Among the opportunities being seized upon are that a prospective tenant for commercial and industrial properties are now ordering a Phase I Environmental Site Assessment.

Selling a House with Solar Panels is Fraught with Peril

By Stuart Kaplow on Posted in Energy, Green Building, Solar Panel

There are nearly 2 Million houses in the U.S. with solar panels installed on the roof and that number was reached just 3 years after the 1 millionth installation. It can be perilous to fail to properly address rooftop solar panels at the time of sale of a house.

With home sales reaching lofty heights during this pandemic, among the most often made inquiries to this law firm are those arising from the failure to correctly transfer installed solar panels.

We have for years assisted real estate owners and those acquiring property in positively leveraging the constraints and finding advantages in matters involving solar power, often including new approaches and possibilities in this emergent area.

Today, the contracts for the sale and purchase of a house are often provided through a multiple listing service usually by a local board of realtors and most of the forms in common use do not adequately address the admittedly new and only now evolving issues arising from a sale with rooftop solar panels. A form that may be the most widely utilized in the country only provides,

SOLAR PANELS: Solar panels are devices that convert light into electricity. If solar panels are installed on the property, Buyer is advised to inquire about the terms under which the solar panels were installed, how to transfer the ownership or lease, and any costs associated with the transfer.

That language accomplishes next to nothing for the seller or buyer and may only serve to mitigate risk for the real estate brokers.

There is of course no one homogeneous solar panel ‘deal’ with contract terms including ‘who owns the panels’ vary from one transaction type to another, and these installations are governed by checkerboard of state laws.

That observed, many residential solar panel ‘leases’ contain language similar to, ..

You agree that the solar panel system is the Company’s personal property under the Uniform Commercial Code.  You understand and agree that this is a lease and not a sale agreement. The Company owns the solar panel system for all purposes.

Obviously that language creates issues when selling a house with solar panels installed on the roof that belong to someone else. But despite that language, in many states the so called 20 to 25 year leases are not actually leases of fixtures attached to the land because they are not recorded and a lease of real estate and improvements of 7 years or more (the length of time varies from state to state) that is not recorded is not enforceable.

But it is also common that those residential solar panel leases, really adhesion contracts, contain language similar to, ..

If you sell your home you can transfer this lease and the monthly payments.

The person buying your home can sign a transfer agreement assuming all of your rights and obligations under this lease by qualifying in one of three ways: (1) the home buyer has a FICO score of 650 or greater; (2) the home buyer is paying cash for your home; or (3) if the home buyer does not qualify under (1) or (2), if the home buyer qualifies for a mortgage to purchase your home and the home buyer pays us a $250 credit exception fee.

Or, if you are moving to a new home in the same utility district, then where permitted by the local utility, the system can be moved to your new home. You will need to pay all costs associated with relocating the system, ..

So, as a threshold matter, issues of timing need to be considered when entering into a contract to sell a house,

You agree to give the Company at least 15 days but not more than 90 days prior written notice if you want someone to assume your lease obligations.

Some of the companies engaged in this business (.. but not all and maybe not even most) file a UCC-1 financing statement or filing in the land records that puts third parties on notice to their rights in the system. That fixture filing is in most states a lien or encumbrance against the system. But because in many residential transactions, title companies do not search the UCC-1 indexes (.. that are primarily used for business purposes), solar leases are regularly missed, if they are recorded at all.

However, the express language of solar system leases cannot be missed,

EXCEPT AS SET FORTH IN THIS LEASE, YOU WILL NOT SUBLEASE, ASSIGN, SELL, PLEDGE OR IN ANY OTHER WAY TRANSFER YOUR INTEREST IN THE SYSTEM OR THIS LEASE WITHOUT OUR PRIOR WRITTEN CONSENT.

That accepted, as suggested by the solar lease language above, there are options and fertile, enabling and desirable business terms that can add significant value to the real estate. The solar lease, as well as any power purchase agreement need to be considered in light of federal and state law (including tax laws) that stimulate new possibilities including create profit.

Maybe not surprisingly, this dark underbelly of the solar industry is not only a residential problem. This firm regularly receives inquiries arising from commercial real estate transactions that have not adequately addressed matters of solar panels, PPAs, tax credits and the like.

And while it might appear there is little litigation in this area, such is deceptive. Most residential real estate contracts contain mediation provisions, if not also mandatory arbitration provisions, so these disputes and differences are often resolved without judicial redress. But those contracts also usually contain fee shifting clauses such that the prevailing party in the mediation is entitled to attorneys’ fees.

In 2020, when cursed energy is “out” and dark energy is “in” leaders in the solar industry have projected there will be more than 2 Million new solar installations this year alone. Concomitantly, the issues related to the sale of houses will get much larger, faster.

Selling a house with solar panels is fraught with peril. There can be real legal jeopardy and significant dollar liability for the seller and buyer, failing to address the issues associated with solar power. As more solar panels are installed each year and those houses now being sold, with home sales surging in a market reshaped and accelerated by the pandemic, we are seeing a sudden, rapid increase in the opportunities to turn the environmental risk, that is a solar power, into an opportunity.

2018 IgCC Poised to be Adopted for the First Time

By Stuart Kaplow on Posted in Green Building, IgCC, LEED, Local Government

Montgomery County, Maryland is on the cusp of being the first to adopt the 2018 International Green Construction Code.

The proposed Executive Regulation 12-20 appeared in the Montgomery County Register on August 1. A public hearing will be held on proposed regulation on September 3. And written comments may be submitted until October 5.

Montgomery County was among the first jurisdictions in the country, in 2008, to adopt a mandatory green building law for private building, requiring most new construction be LEED certified. Delivering a success to the environmental industrial complex through a triumph of method over magic, Montgomery is touted as the county in America with the most LEED building. But apparently not for long.

Since 2017, the 2012 IgCC has been permitted in the County as an alternative to mandatory LEED building. But in what is being described as a requiem to LEED in America, the 2018 IgCC will now be required, but LEED will no longer satisfy the local legal green building mandate in Montgomery County.

Make no mistake, the 203 page document that is the 2018 IgCC, unveiled by the coterie of trade group authors (.. including the USGBC) and available from the ICC for sale to the public (.. click here for a free copy of the IgCC), is an entirely new standard and bears little, if any relationship to earlier IgCC versions.

For a section by section review, see my earlier blog post see, 2018 IgCC – A Fast Paced Deep Dive.

The 2018 IgCC is ideally suited to be edited and revised for use as a voluntary compliance code promoting sustainability and energy efficiency, for specifications in contract documents, for college and professional school textbooks and curricula, and the like, but without significant editing it is not ideal for use in a regulatory setting for the compulsory certification of all buildings and construction materials as green.

The proposed regulation that is an adoption with very only modest editing of the 2018 IgCC form into a compulsory construction code can be accessed at MCER 12-20. County staff anticipates releasing a clean copy of the proposed regulation along with guidance, in the coming days (because the official version is difficult to interpret in that includes all of the text from the to be superseded Executive Regulation 21-15 AMII).

The Council may approve or disapprove of the regulation within 60 days of date it was transmitted, so it is possible that the regulation will be effective October 1, 2020. However, despite that nothing in the proposed regulation so provides, it is clear this is only phase one of a two phase enactment process. Not included in this regulation are any provisions from the IgCC about zoning, water use reduction or regulations of buildings after issuance of a certificate of occupancy because the Department of Permitting Services does not have the authority to regulate those matters through a building code, green or otherwise, without a change in law. That change in law will happen later and then further 2018 IgCC regulations will follow.

Rockville, the city that serves as the County seat separately regulates green building and will have future enactments. In a deep, dark secret, Gaithersburg, another city in the County, the fourth largest in the state, just behind Rockville, actually adopted the 2018 IgCC last year but apparently no building has yet been constructed to the green code.

There is no grandfathering in the new regulation, however, the County DPS will likely permit a 6 month phase because it has been their long standing and accepted policy when transitioning into a new code or code cycle, that projects significantly into the design phase during the regulatory transition period be allowed to apply under the code or regulation. Despite that the real estate community has known this action by county government was coming for nearly two years (.. DPS staffers should be applauded for having candidly discussed this), and sophisticated real estate developers have planned and redesigned building for the dramatic shift, the broader business community has expressed concern that the 2018 IgCC may have a stifling effect on not only new building but also renovations in the County.

Montgomery County is striving to be on the bleeding edge of green building regulation, even at a time when many believe green building in the U.S. has been a victim of COVID-19 and is moribund. Make no mistake, adopted the 2018 IgCC in whole as mandatory building code is much more than merely staying ahead of other local governments when there is no sense of reliability, there has been no testing or pilot anywhere and there appears to be no desire or appetite for this extreme government code. But the progressive County government is poised to enact this new code that nearly all acknowledge has a high risk in increasing renovation (including tenant fit outs) and new construction costs to a point beyond where new construction will simply move outside the County?

While no jurisdiction has yet utilized the 2018 IgCC as a building code, it is important to note that maybe only 17 or so (.. out of 4,400 code enacting jurisdictions) have adopted the 2012 version of the IgCC, and Boulder County may be the only place to adopt the 2015 IgCC, so estimating increased construction cost is speculative at best. The only jurisdiction I am aware has used the 2018 IgCC, at all, is Denver that included it within its voluntary 2018 Denver Green Code housing pilot program as a compliance option with LEED Platinum, Net Zero Energy or Passive House +Non-Energy DGC. Don’t miss that, Denver determined the 2018 IgCC to be an alternative to LEED v4 Platinum!

And while anticipating increased construction cost is suppositional, and of course there is no one homogeneous building type, the increase from a LEED 2009 New Construction Silver certified building to a 2018 IgCC building will be considerable (.. maybe 20% more for a typical suburban 5 story 125,000 sq. ft. office building!).

The County may choose to apply this new regulation to its own County owned building, but the most common government constructed building is a K thru 12 school, which building in accordance with state law must be LEED Silver certifiable, two Green Globes certifiable or constructed to the 2012 IgCC.

Some have suggested a novel coronavirus pandemic is not a good time to adopt a new green code, including mandated indoor air quality specifications that make it not legal to build to now accepted guidance on operating a safe space. In the name of green and without consideration to the health of building occupants, Montgomery County’s new regulations will not permit: Increasing outdoor air ventilation; disabling demand-controlled ventilation; further open minimum outdoor air dampers, as high as 100%, thus eliminating recirculation; improving central air filtration to MERV-13; or keeping systems running longer hours, if possible 24/7; etc.

Should the Montgomery County Council determine this is not the time, that this piecemeal adoption process is not correct, or not be comfortable being the only place in the country to adopt this code, the 2021 IgCC is in the final stages of preparation and will be published the first quarter of 2021. Or the Council could delay approval and alter this regulation (.. to mirror the County government’s own construction) to allow LEED or Green Globes as alternative compliance paths, which each do not preclude the new normal of indoor air quality treatment.

Some may be surprised that Baltimore City, just a few miles to the north, a jurisdiction with a mandatory green building law on the books since 2007 and that has allowed the 2012 IgCC as an alternative compliance path since 2014, is within days of introducing a bill that will adopt the 2018 IgCC amending Chapter 37 of the building code, likely to be effective before the end of the year; possibly beating out Montgomery County as the first jurisdiction to adopt the 2018 IgCC.

Imposing civil penalties or criminalizing the failure of a landowner to satisfy some level of social engineering in constructing a building (.. while obviously not in the same order of magnitude as the penalty of death imposed by the Code of Hammurabi for failure to construct a building properly) raises very real issues including how efficacious a green project will be toward repairing the planet when the owner is only seeking to avoid legal jeopardy.

The ramifications of adopting the IgCC in this longstanding LEED only jurisdiction are of national import having longtime USGBC customers agonizing about the future of a beloved industry innovator as well as the road ahead for the very sector itself. Montgomery County is not only the most populous county in Maryland, it is one of the most progressive jurisdictions in the nation. It has also been ranked by Forbes as the 10th richest in the United States and as such first construction costs may not have major economic implications. Politically, the County is heavily Democrat and the citizens are likely in lockstep with this type of regulation. However, observers fret, if the green luster is off LEED (.. the green building rating system that disrupted markets) there, it will falter elsewhere.

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