Lawsuit against Denver and Colorado building energy standards draws fierce support, pushback

The filing of a federal lawsuit against energy standards for large building in Denver and Colorado ignited fiery responses, with supporters calling the legal challenge "baseless" and critics of the regulations describing the latter as "wrong headed."

The lawsuit, filed last Tuesday by apartment and hotel trade organizations, claims that the city and state building energy efficiency regulations are actually intended to control what kinds of appliances and equipment can be used in large buildings, such as apartment houses, hotels and hospitals — specifically the ones using natural gas.

“Everyone’s concerned about the lack of affordable housing, yet these policies will make housing much more expensive,” said Kathleen Sgamma, president of the Western Energy Alliance. “Preventing the use of natural gas appliances in the name of climate change is wrong-headed on several levels.”

“This lawsuit is a baseless attack on innovative programs to tackle pollution from buildings, the number-one source of carbon pollution in Denver,” countered Jessica Goad, vice president of programs at Conservation Colorado in a news release. “Both Colorado and Denver’s programs provide incredible flexibility and support for building and business owners. This lawsuit is a cynical attempt to undermine what Coloradans want and deserve — healthy communities and a safe future for ourselves and our kids.”

The lawsuit is the latest twist in the long-running feud between Democratic policymakers at the state Capitol and in the City and County of Denver — who argue that the transition away from fossil energy is good for people's health and the environment, and that, ultimately, it would mean using a more sustainable and cheaper source of power — and critics, including businesses, who insist that the goals are impractical and the changes being sought are happening too fast, too soon, without regard to technological and logistical challenges.     

The Colorado Air Quality Control Commission, a four-member body operating under the Colorado Department of Public Health and Environment and appointed by Gov. Jared Polis, passed Regulation 28, which forces owners of existing buildings larger than 50,000 square feet to reduce energy usage by 7% by 2026 and 20% by 2030.

This, the complaint alleged, violates the federal Energy Policy and Conservation Act that preempts local regulation of appliance energy efficiency standards.

“EPCA contains express preemption provisions that bar, with limited exceptions, any state regulation, or revision thereof, concerning the energy efficiency, energy use, or water use of the covered products,” the complaint said. “EPCA reflects Congress’s decision that the nation’s energy policy cannot be dictated by state and local governments.”

Plaintiffs claimed that the new efficiency standards are intentionally set so low that only full electrification of appliances and building systems can meet them. This, they argued, places undue financial burdens on building owners, in part by requiring replacement of existing, operational equipment purchased under long-term contracts.

In its statement, Conservation Colorado said that the standards are meant to "promote energy efficiency, reduce renters’ energy bills, and cut unhealthy indoor and outdoor air pollution.” 

"Instead of just making their buildings more efficient to benefit air quality and cut energy bills, these groups would rather put their money to attorneys to fight popular regulations," added Sarah Tressedor, building electrification field organizer at Colorado Sierra Club.

Critics of the regulations have argued they will increase housing costs and potentially limit rental housing stocks if building owners cannot afford to make the required upgrades. 

In their lawsuit, the plaintiffs said there is no combination of upgrades or replacements — such as building insulation, changing lighting, or putting in higher efficiency windows — that would make buildings meet the energy performance standards.

Citing a case out of Berkeley, California, the plaintiffs pointed out that the Ninth Circuit Court of Appeals overturned a city regulation prohibiting the installation of natural gas piping in new buildings intended to achieve similar CO2 reductions, which they insisted is the actual purpose of the Colorado and Denver regulations.

In the Berkeley decision, the court said the Energy Policy and Conservation Act "expressly preempts state and local regulations concerning the energy use of many natural gas appliances."

"Instead of directly banning those appliances in new buildings, Berkeley took a more circuitous route to the same result. It enacted a building code that prohibits natural gas piping into those buildings, rendering the gas appliances useless,” the court said. 

The Western Energy Alliance's Sgamma said Berkley’s ban on natural gas hookups was "overturned specifically on the basis of the Energy Policy and Conservation Act."

"The judge ruled that EPCA prevents governments from imposing laws or regulations that deny consumers access to natural gas appliances,” Sgamma said. “Natural gas has a low carbon profile and unlike wind and solar energy, is available 24/7 and (is) more affordable.”

“Natural gas heating and appliances provide consumers with not only better features — just ask any chef what type of stove they use — but are available during electricity outages. Those with natural gas can heat their homes and cook their food during power outages,” Sgamma added.

Jack Luellen, energy and natural resources special counsel in the Denver office of Buchalter, said the plaintiffs in this case may have an uphill battle.

“In the case of the Denver regulations, the plaintiffs are claiming impossibility preemption,” Luellen said. “That is going to be a hard case in my opinion. Courts have been very strict in deciding impossibility. It must not simply be more difficult or more expensive to comply with both, but truly impossible.”

“The other argument from the plaintiffs attacks the intent of the state law, essentially calling the regulations a subterfuge to eliminate the use of natural gas in large buildings and to fulfill similar objectives,” Luellen said. “This will be a hard argument, as courts generally are reticent to find a malevolent motive in a state action, and, furthermore, even a motive not enunciated in the statute, would not render the law preempted or otherwise unenforceable.”

In the Berkeley case, the Ninth Circuit said said states and localities "can't skirt the text of broad preemption provisions by doing indirectly what Congress says they can't do directly."

"(The) ability to use covered products is meaningless if consumers can't access the natural gas available to them within the City of Berkeley,” the court said. 

The Colorado Air Pollution Control Division estimated that Regulation 28 would cost owners of some 8,000 buildings larger than 50,000 square feet $3.1 billion by 2030 and that making the changes will provide a total benefit worth $10.8 billion in energy savings.

No estimate of cost or benefits for Denver’s Energize Denver regulation for some 3,000 buildings larger than 25,000 square feet was available at press time.