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Building owners, developers sue to stop Denver, state building energy standards

Supporters organized for months to pass bill a year after similar measure died in state Senate

Denver skyline on Oct. 27, 2021, in Denver.
SETH MCCONNELL | DENVER BUSINESS JOURNAL

Trade associations for Colorado apartment building owners, hoteliers and commercial real professionals have filed a federal lawsuit to overturn state and Denver rules requiring large buildings to slash their greenhouse gas emissions.

 

The 3,600-member Colorado Apartment Association and the Apartment Association of Metro Denver, the Colorado Hotel and Lodging Association, and NAIOP Colorado filed the lawsuit in the U.S. Circuit Court in Denver saying the rules that violate laws setting energy efficiency standards and making energy regulation of appliances a federal matter.

 

Building owners in Denver have been assessing the cost and difficulties of meeting the standards and finding large price tags and the possibility of having to evict tenants while work is done, said Kathie Barstnar, executive director of NAIOP Colorado, an association of industrial and office park owners.

 

“The standards are so strict that the only way to comply is to electrify,” she said. “We just felt we had no other choice.”

 

Representatives for the City of Denver and the Colorado Energy Office declined to comment on the pending litigation.

 

The lawsuit seeks to have the court declare both city and state building performance standards unenforceable, arguing they violate the National Appliance Energy Conservation Act and the Energy Policy Act passed by Congress three decades ago. Energy standards are a federal matter, the lawsuit complaint says, and local rules cannot exceed Department of Energy efficiency standards, require replacement of federally acceptable appliances or discriminate against types of fuels used.

 

It resembles a similar legal challenge in California that reached the Ninth Circuit federal appeals court and last year rendered natural gas bans in Berkeley unenforceable, forcing cities in that state to reconsider local energy codes encouraging electrification.

 

Denver in 2021 passed building performance and greenhouse gas reduction standards that began kicking in last year for commercial and multifamily buildings larger than 25,000 square feet. The 2023 phase-in at first only required some building owners to scope out what efficiency upgrades the structures would require, with some properties having to make upgrades this year.

 

The goal of the Energize Denver program, developed over months of discussions, is to cut commercial building greenhouse gas emissions in the city by 80% by 2040.

 

Commercial property owners who still want a natural gas replacement heater would have to ensure it is sized correctly for their building or to ensure there are no leaks in the natural gas pipes in the property.

 

The energy efficiency standards are high enough that building owners are finding that meeting the Denver standards could only be accomplished by scrapping functional, energy-efficient systems that aren’t electric, Barstnar said. In some cases, apartment building owners faced having to empty their building of tenants while the structure is “re-skinned” to meet efficiency requirements, she said.

 

The statewide standards share many of the same features as Energize Denver rules but will apply to about 8,000 commercial buildings larger than 50,000 square feet outside of Denver. The rules were passed last year by the state’s Air Quality Control Commission and are slated to begin taking effect in 2026.

 

The Colorado Apartment Association has more than 3,600 members who own and manage properties worth $98 billion and have more than 350,0000 apartments, the association says.

 

Its membership overlaps heavily with the Apartment Association of Metro Denver. The difficulties members were discovering in Denver made building owners outside the city believe the lawsuit was necessary over the statewide requirements, too, Barstnar said.

 

The building owners filed the lawsuit on Monday, April 22. Barstnar said the groups didn’t realize until after the fact that they’d filed their complaint on Earth Day.

 

Barstnar served on state and Denver task forces that crafted the building performance standards. The legal challenge to them isn’t meant as a statement about the aims of the energy conservation programs, she said.

 

“We’re not anti-environment or anti-efficiency, it’s just that these mandates are not fiscally attainable,” she said.