Landlords and developers of large office buildings, hotels and apartment complexes have challenged new rules by Denver and Colorado that clamp down on natural gas.
The Colorado Apartment Association, the Apartment Association of Metro Denver, the Colorado Hotel and Lodging Association and NAIOP, representing commercial real estate developers, filed the federal lawsuit aiming to overturn state and Denver rules requiring large buildings to slash their greenhouse gas emissions, the Denver Business Journal and Denver Post reported.
The groups are asking a federal judge to throw out the city and state environmental regulations, which in coming years will force a transition away from natural gas to improve air quality.
They contend the green-energy rules preempt federal rules that govern the performance of new heating and cooling systems, as well as appliances in large apartment complexes, hotels and commercial office and retail buildings.
They also say the rules would force landlords to make expensive but unnecessary upgrades that would result in higher rents and higher utility bills.
Building owners in Denver have been looking at the cost and difficulty of meeting the new standards, staring at large price tags and the possibility of having to evict tenants while work is done, Kathie Barstnar, executive director of NAIOP Colorado, an association of industrial and office park owners, told the Business Journal.
“The standards are so strict that the only way to comply is to electrify,” she said of the lawsuit. “We just felt we had no other choice.”
Building owners could meet early goals by adding insulation, LED lighting and new windows, which are relatively cheap.
But as city and state emissions-reduction requirements ratchet up in coming years, building owners would be forced to jettison their natural gas heating systems in favor of electric furnaces and hot water heaters, Andrew Hamrick, general counsel and senior vice president for both apartment associations, told the Post.
Replacing those systems and retrofitting apartment buildings for them would come at enormous cost, he said.
“The formulas are out of whack and, in the end, it boils down to a ban on the use of natural gas appliances,” he told the newspaper.
Representatives for the City of Denver and the Colorado Energy Office declined to comment on the pending litigation.
The federal lawsuit seeks to have the court declare both city and state building performance standards unenforceable, saying 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, according to the complaint, and local rules cannot exceed Department of Energy efficiency standards, require replacement of federally acceptable appliances or discriminate against types of fuels used.
The lawsuit resembles a similar legal challenge in California that reached the Ninth Circuit federal appeals court, which last last year rendered natural gas bans in Berkeley unenforceable, forcing cities in the Golden State to reconsider local energy codes encouraging electrification.
In 2021, Denver 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, according to the Business Journal.
The phase-in last year 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 percent by 2040.
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Commercial landlords who still want a natural gas replacement heater would have to make sure it’s sized correctly for their building and ensure there aren’t leaks in the natural gas pipes.
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 are slated to begin taking effect in 2026.
The Colorado Apartment Association has more than 3,600 members who own and manage 350,000 apartments valued at $98 billion, the association says.
— Dana Bartholomew