Though they may not know it yet, owners of large commercial, multifamily, and public buildings throughout Colorado will soon have to comply with several new state laws and municipal ordinances that impose new regulatory requirements governing building energy usage and efficiency, energy sources, and related matters.
Aimed at reducing greenhouse gas emissions from the built environment, most specifically from larger buildings (of varying sizes depending on which law applies to a given building, as explained below), these laws will subject owners to new annual energy reporting requirements, regulatory scrutiny by city and state officials, various forms of penalties, and new disclosure obligations upon listings for sale—or in some cases leasing.
Although only three municipalities have adopted these programs so far (Denver, Boulder, and Fort Collins), the state law, H.B. 21-1286, stands to impose sweeping energy reduction mandates statewide for buildings over 50,000 square feet in size once an ongoing rulemaking process is completed later this year. For now, though, H.B. 21-1286 only imposes a reporting mandate, requiring owners of covered buildings to track building energy performance for “benchmarking” purposes, and to submit such performance data to the State in the form of benchmark reports that must be submitted annually through an online portal.
Each of these laws imposes a similar reporting mandate, except with somewhat different thresholds for applicability, based on different definitions for what constitutes a “covered building.” Generally speaking, H.B. 21-1286 only applies to buildings with a “gross floor area” of 50,000 square feet or larger; Denver’s mandate, conversely, applies to buildings 25,000 square feet or larger (although it also requires owners of mid-sized buildings between 5,000 and 24,999 square feet to adopt other efficiency measures as well); and each of the Boulder and Fort Collins ordinances applies to even smaller buildings still, as little as 5,000 square feet in size. Denver’s Ordinance and H.B. 21-1286 are the focus of this article, however, so owners who may be affected by the Boulder and Fort Collins ordinances (Boulder Ordinance No. 8071, and Fort Collins Ordinance No. 2018-144) should consult local requirements to verify compliance.
Under the statewide legislation, the first benchmark report, for calendar year 2021, was due on December 1, 2022; the second benchmark report, for calendar year 2022, will become due on June 1, 2023. The 2021 submission is more important for owners, though, as it will provide the baseline data that the State will use to set its energy performance targets for the coming years. Once issued, the State’s targets will require owners of covered buildings, in the aggregate and on a statewide basis, to reduce building Energy Usage Intensity (“EUI”) by approximately 7% in calendar year 2026; by 20% in calendar year 2030; and perhaps more after that. To ensure the State has accurate data and implements manageable and realistic standards, owners who did not already submit their 2021 data should consider doing so now. It may help inform the State’s rulemaking process, or the specific targets it sets for individual buildings. Owners should also start submitting their regular, annual benchmark reports now as well if not doing so already, to avoid future penalties.
In Denver, annual benchmark reports are due every June 1 for the preceding calendar year. Denver, however, already completed its rulemaking process late last year, and is requiring a 30% EUI reduction overall by 2030, along with interim reduction targets in each of 2024 and 2027, which it set using baseline data from the calendar year 2019. Targets are building-specific, though, so owners are encouraged to submit their 2019 verified data now if they haven’t already, as part of “Target Adjustment Applications,” which allow owners to request modifications to their final and interim targets to account for individual circumstances that may be present in specific buildings. Owners are encouraged to apply early, to obtain adjustments that may alleviate the burden of meeting the first interim target starting on January 1, 2024.
In addition, Denver is also accepting “Timeline Adjustment Applications,” to allow owners to request consideration of other circumstances that may affect their ability to meet compliance deadlines, such as the end of major equipment system life, timing of renovations, changes in ownership, or financial distress. Even where no special circumstances are present to merit adjustment of timelines or targets, however, Denver pre-approved a one-time timeline extension across the board, for all owners “that have a complete 2021 calendar year Benchmarking Report (2022 Reporting Year) on file…” Thus even those not currently in compliance have an incentive to submit a late-filed benchmark report now.
Owners should be prepared, because annual data reporting is only the start of it. The greatest burdens will be achieving the EUI reductions themselves, and the corresponding difficulty it may cause when owners must disclose their compliance (or non-compliance) status upon listing a building for sale (or in the case of H.B. 21-1286, listing a building for leasing). For those who fail to comply, penalties may be steep. In Denver, owners who fail to meet the 2030 targets will be required to pay as much as $0.30/kBtu for each kBtu in energy they use in excess of the required target; statewide, the penalties are capped at $500 for first violations, and $2,000 for each subsequent violation.
For more information, contact Zach Price at (303) 628-3617 or zprice@irelandstapleton.com.
What is written here is for general information only and should not be taken as legal advice. If legal advice is needed, please consult an attorney.