By Jamie Long, Senior Staff Attorney at the Public Health Law Center
This post originally appeared on the Public Health Law Center’s blog.
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In a new ruling in Colorado Apartment Association v. Ryan, the District of Colorado adds to the wave of court rulings affirming local authority to regulate fossil-fuel combustion. On the other hand, it hints at additional risk for regulations on existing building’s energy use; specifically, Building Performance Standards (“BPS”) that are based solely on Energy Use Intensity (“EUI”). But the court indicated that greenhouse gas (“GHG”) based BPS are likely not preempted and generally agreed with the consensus from most other courts that federal preemption leaves plenty of room for a range of building decarbonization approaches.
Background
At the direction of the Colorado legislature, the Colorado Air Quality Control Commission issued a BPS to help reduce emissions from large buildings. Known as Regulation 28, the BPS establishes standards that buildings must meet based on property type using either an EUI or a GHG metric, or a combination of both.
Similarly, the City of Denver passed the Energize Denver Ordinance with a goal of achieving net zero GHG emissions by 2040 for large buildings. The ordinance sets EUI targets that buildings must meet, with multiple compliance pathway options.
The real estate and property manager plaintiffs in this case argue that the Denver and Colorado regulations are preempted by the federal Energy Policy and Conservation Act (“EPCA”), which creates energy-efficiency standards for certain appliances. EPCA preempts state and local regulations “concerning the energy efficiency, energy use, or water use” of an appliance that is covered by EPCA, with some exceptions.
The Good News
In its new decision, the District of Colorado disagreed with an aggressive reading of EPCA preemption from the Ninth Circuit in California Restaurant Association v. Berkeley, which had interpreted “energy use” very broadly to cover regulations that had the effect of preventing the use of EPCA-covered appliances. The Colorado court agreed with the emerging consensus from every other court that has ruled to date since Berkeley (including the Second Circuit) that “a product’s ‘energy use’ is a standardized, fixed measure assigned to a product before it reaches consumers,” not measured at the time the appliance is used. Under this interpretation, regulations are not necessarily preempted by EPCA just because they affect consumer usage of covered appliances. The court found that neither Regulation 28 nor Energize Denver set a floor for appliance energy efficiency, but instead “impose building-wide energy and emission standards, leaving building owners with the choice of how to comply, without reference or regard for the energy use of any particular appliance.”
The court also notes that in the context of BPS, there are ways to comply with a building standard other than replacing EPCA-covered appliances, even if it may sometimes be the cheapest option to replace the appliance.
The Confusing News
Unfortunately, the District of Colorado has created some confusion regarding BPS focused on energy use. In examining the EUI side of the local regulations, the court’s analysis looked to whether “directly regulat[ing] energy usage at a building-wide level” had an impermissible “connection with” the intent of EPCA. The court notes that EPCA’s building code exemptions indicate Congress’s intent to prevent the use of building-wide efficiency standards to evade preemption. These exemptions specify how building codes that regulate EPCA-covered appliances can avoid preemption by, in short, allowing flexible compliance and not requiring the installation of appliances more efficient than EPCA standards.
The court pointed to the dissent from Berkeley as well as to dicta from cases in Maryland, New York, and the Second Circuit as a “growing consensus” of concern around building-wide energy caps. It concluded that: “Plaintiffs have plausibly alleged that the EPCA preempts Regulation 28 in part and Energize Denver in whole.” The court drew this distinction because it specifically took issue with EUI-based standards; Regulation 28 includes both EUI and GHG standards, while Energize Denver is EUI only. Ironically, the court notes that an outright gas appliance ban would not be preempted, but the nature of a building wide energy cap and its interaction with the EPCA building code exception is what concerned the court.
What This Means
The court stressed that this was in the “early stage in the proceedings” and that the preemption arguments as to EUI-based regulations would be “tested through the adversarial process of litigation.” Presumably then, there is likely to be further argument in the case and potentially a final decision on the merits at some point. There may also be an appeal to the Tenth Circuit. But this is the first decision by any court that has explicitly made a finding that EUI-based BPS may trigger EPCA preemption.
This ruling should not discourage jurisdictions from pursuing a BPS policy, since the court still found a GHG approach viable. But for jurisdictions that are considering adopting new BPS policies, this decision points to an increased risk of preemption if the policy is based entirely on EUI. It is likely advisable to at least include a GHG alternative compliance pathway, as Regulation 28 did, in case a court shares the Colorado court’s concern.
Of course, the District of Colorado decision is binding only in Colorado, and other courts may not choose to follow it. But the court did point to dicta from four other courts in making its ruling, so this (incorrect in our view) interpretation of EPCA preemption may not remain limited to this one decision. For help navigating what this decision means for your BPS policy, feel free to contact the Public Health Law Center team at climatejustice@mitchellhamline.edu.