Part I

Stanley N. AlpertConstantine | Cannon LLP335 Madison AvenueNew York, NY 10017212-350-2730salpert@constantinecannon.comhttp://www.constantinecannon.com/attorneys/salpert.php

Copenhagen All industrialized nations, save for Turkey, have officially announced plans

to reduce greenhouse gas emissions. The European Union leads the pack with a proposal to shrink emissions by 20 percent from 1990 levels.

Ambitious targets for financing for developing countries. Developed countries committed to provide support of up to $30 billion from 2010 to 2012 for developing countries’ adaptation and mitigation strategies.

Developed countries also committed to a long-term goal of jointly mobilizing $100 billion annually by 2020.

By January 31 however, industrialized countries had to formally submit commitments for quantifiable economy-wide emissions targets for 2020.

Uncertainty in the United States was pivotal to the U.N. negotiations. The Democrat-proposed climate bill pending in the United States Senate remains far from securing the 60 votes it needs.

Result of January 31 Deadline The deadline came and went, and the vast majority of nations (roughly 130) didn't submit anything.

-- United States: 17 percent below 2005 levels by 2020 (i.e., 4 percent below 1990 levels—but pending legislation)

-- European Union: at least 20 percent below 1990 levels by 2020 (they were promising to go to 30 if other countries did more)

-- Canada: 17 percent below 2005 levels by 2020 (i.e. a 2.5 percent rise from 1990 levels)

-- Japan: 25 percent below 1990 levels by 2020

-- Brazil: 39 percent below 1990 levels by 2020 (mostly by preventing deforestation)

-- China: reduce carbon intensity by at least 40 percent below 2005 levels by 2020

-- India: reduce carbon intensity by at least 20 percent below 2005 levels by 2020

-- New Zealand: at least 10 percent below 1990 levels by 2020

-- Australia: at least 3 percent below 1990 levels and as much as 23 percent below them (depending on what other countries do)

-- Maldives: carbon-neutral by 2020

December 2010 -- Cancun Kept the process alive Non-binding target of limiting a rise in average world temperatures to

below 2 degrees Celsius (3.6 F) over pre-industrial times. (Existing policies could lead to close to double that increase.)

Green Climate Fund would give $100 billion a year in aid to poor nations by 2020. Not clear how the money will be raised.

No firm deadlines for a legally binding accord to succeed Kyoto. The next major global climate talks will be in South Africa at the end of 2011.

Japan, Canada and Russia said they would not extend Kyoto, demanding instead that all major emitters including the United States, China and India join in a new global deal.

Developing nations insist that rich Kyoto countries must extend the agreement beyond 2012 before the poor agree to measures to curb their emissions

Not Enough Ecofys, a consulting firm, estimates that if

all those countries actually met their targets, global temperatures would be on course to rise 3.5°C (6.3°F) above pre-industrial levels. The agreed-upon goal in Copenhagen and Cancun was 2°C.

Looming Federal Carbon Regulation Massachusetts v. EPA, 549 U.S. 497 (2007), EPA has a statutory

duty to determine whether GHGs should be regulated under the Clean Air Act.

Principles affrimed in American Electric Power in 2011 April 17, 2009: EPA issues a draft regulation proposing to find

that GHGs endanger public health and welfare. “The case for finding that greenhouse gases in the atmosphere endanger public health and welfare is compelling and, indeed, overwhelming.”

EPA’s proposed rule finds that GHG emissions present an endangerment that is worthy of regulatory attention under the Clean Air Act.

We will have a federal carbon regulation scheme either from Congress or the EPA.

Proposed Federal Cap and Trade On June 26, 2009, the House passed the Waxman-Markey bill by vote of

219-212, comprehensive climate legislation. The bill’s cap-and-trade program would cover an estimated 7,400 power

plants, oil companies, and other large industrial facilities that emit more than 25,000 tons of carbon dioxide per year – collectively responsible for approximately 85% of our nation’s greenhouse gas emissions.

Under cap-and-trade, the EPA would establish a nationwide cap on GHGs. Companies covered under the bill would need to have a permit for each ton of GHGs they release into the atmosphere that exceeds the cap.

The EPA would initially allocate the allowances through a combination of sales to the highest bidder and free distribution. The recipients would be permitted to sell, trade with other companies or otherwise use the allowances. By the terms of the bill, the government would reduce the number of available allowances issued each year to ensure aggregate GHG emissions reduction to 3 percent below 2005 levels in 2012, 17 percent below 2005 levels by 2020 and 83 percent below 2005 levels in 2050.

EPA’s GHG Reporting Rule In April, EPA published proposed regulations that may mandate GHG reporting

for thousands of facilities and source categories, for suppliers of certain fuels and gases, and for manufacturers of mobile sources and engines. 74 FR 16488 (April 10, 2009).

The Rule requires reporting from a number of sources, including:• Electricity generating facilities that are subject to the Acid Rain Program or

that contain generating units that collectively emit 25,000 metric tons or more of GHGs per year;

• Aluminum production facilities;• Cement production facilities;• Electronics manufacturing facilities that exceed certain annual production

capacities;• Petroleum refineries;• Petrochemical facilities;• Certain underground coal mines; and• Certain municipal landfills.

EPA’s GHG Reporting Rule (cont’d)

The Rule also requires reporting by facilities that emit 25,000 metric tons or more of GHGs per year. Sources with boilers that have an aggregate maximum rated heat input capacity of 30 million Btus per hour or greater also could be subject to reporting. In addition, reporting is be required for suppliers of coal, coal-based liquid fuels, natural gas, and certain other gases, and also for manufacturers of certain mobile sources and engines.

Covered facilities are required to begin collecting data on January 1, 2010 and to report the data to the EPA starting March 31, 2011.

Data reported under the Rule will likely be utilized to design and implement federal GHG regulations.

EPA GHG Tailoring RuleApplies Clean Air Act to GHGs at Major Facilities

On May 13, 2010, EPA issued the final GHG Tailoring Rule. This rule effectivelyraised the thresholds for GHG emissions that define when permits under the PSDand Title V Operating Permit programs are required for new and existing

industrialfacilities. The GHG Tailoring Rule provides time for large industrial facilities andState governments to implement permitting requirements for GHGs.

Starting in January 2011, large industrial facilities that must already obtain Clean Air

Act permits for non-GHGs must also include GHG requirements in these permits if

they are:

newly constructed and have the potential to emit 75,000 tons per year ofcarbon dioxide equivalent (CO2e) or more or if they make changes at the facility that increase GHG emissions by that

amount.

EPA GHG Tailoring Rule(cont’d)

Starting in July 2011, in addition to facilities described above:

all new facilities emitting GHGs in excess of 100,000 tons of per year CO2e and facilities making changes that would increase GHG emissions by at least 75,000 tpy CO2e, and that also exceed 100/250 tons per year of GHGs on a mass basis, will be required to obtain permits that address GHG emissions.

Operating permits will be needed by all sources that emit at least 100,000 tons of GHG per year on a CO2e basis beginning in July 2011.

Sources emitting less than 50,000 tons of GHGs per year on a CO2e basis will not be required to obtain permits for GHGs before 2016.

EPA GHG Tailoring Rule(cont’d)

On December 23, 2010, the U.S. Environmental Protection Agency (EPA) issued aseries of rules that put the necessary regulatory framework in place to ensure

thatIndustrial facilities can get Clean Air Act permits covering their greenhouse gas(GHG) emissions when needed and 2) facilities emitting GHGs at levels below

thoseestablished in the Tailoring Rule do not need to obtain federal Clean Air Act

permits.

EPA has been working with state local agencies since that time to make sure that:

o All permitting agencies have the authority to permit GHGs or are on the path tohave such authority, with EPA serving as the permitting authority in the interim,ando Only those sources identified in the tailoring rule—the largest emitters of GHGs

--are required to obtain permits.

Securities Law Impacts A new United Nations report suggests advisors to institutional investorsmay end up in court if they ignore environmental and social concerns.

In January, the Securities and Exchange Commission encouraged public companies to tell their investors about the financial and physical risks they face from climate change.

The SEC's interpretative guidance gives specific examples of areas where companies might have to follow the disclosure rules, including: Existing laws and regulations on climate change Pending legislation and regulations on climate change International accords and treaties on climate change Actual or potential indirect consequences of regulations and business

trends related to climate change, such as a decreased demand for goods that result in significant greenhouse gas emissions

Actual and potential material impacts of environmental matters on companies

How much risk are we facing?

Groups See Added Risks From Change in Climate

April 24, 2009 New York Times

“The effects of climate change, especially rising seas, threaten trillions of dollars’ worth of coastal property, and flood-hazard maps, zoning laws, building codes and insurance rates in the United States do not accurately reflect the risk, an unusual coalition of groups reported Thursday.”

Potential Greater Consequences Not Typically Measured

160 Syrian villages deserted 'due to climate change' By Talal El-Atrache – June 2, 2009

DAMASCUS (AFP) — Some 160 villages in northern Syria were deserted by their residents in 2007 and 2008 because of climate change, according to a study released on Tuesday.

The report drawn up by the International Institute for Sustainable Development (IISD) warns of potential armed conflict for control of water resources in the Middle East.

"The 2007/8 drought caused significant hardship in rural areas of Syria. In the northeast of the country, a reported 160 villages have been entirely abandoned and the inhabitants have had to move to urban areas," it said.

In Syria and also in Jordan, Israel and the occupied Palestinian territories, "climate change threatens to reduce the availability of scarce water resources, increase food insecurity, hinder economic growth and lead to large-scale population movements," the report said.

The study, financed by Denmark, predicts a hotter, drier and less predictable climate in the Middle East, "already considered the world's most water-scarce and where, in many places, demand for water already outstrips supply."

Corporations See Benefits of Early Regulation

Negative Impact on the U.S. Economy?

But the opponents of action claim that limiting emissions would have devastating effects on the U.S. economy. So it’s important to understand that just as denials that climate change is happening are junk science, predictions of economic disaster if we try to do anything about climate change are junk economics.

Even with stringent limits, says the M.I.T. group, Americans would consume only 2 percent less in 2050 than they would have in the absence of emission limits. That would still leave room for a large rise in the standard of living, shaving only one-twentieth of a percentage point off the average annual growth rate.

So we can afford a strong climate change policy. And committing ourselves to such a policy might actually help us in our current economic predicament.

So can we afford to save the planet? Yes, we can. And now would be a very good time to get started.

Paul Krugman, May 1, 2009 Mr. Krugman received his B.A. from Yale University in 1974 and his Ph.D. from MIT in 1977. He has taught at Yale, MIT and Stanford. At MIT he became the Ford International Professor of Economics.

The meter is running.New Orleans Business News May 3, 2009

Entergy Corp. is pushing emissions cap billby Rebecca Mowbray, The Times-Picayune Sunday May 03, 2009 Entergy CEO Wayne Leonard says climate change wakes him up at night

Utilities are sweating about the possibility that Congress may cap carbon-dioxide emissions, and many heavy industries in Louisiana are convinced that a climate-change bill will spell financial ruin.

But Entergy Corp., the New Orleans-based Fortune 500 electric company, is singularly focused on getting Congress to enact the most aggressive carbon-dioxide-emissions cap it can.

"Our point of view on this is different from the industry's," Wayne Leonard, Entergy's chairman and chief executive, said last week. "We need to put a price signal on carbon dioxide."

While electricity prices are forecast to rise dramatically if carbon emissions are capped, Leonard said increases will be modest for Entergy customers. With 80 percent of its electricity being generated from nuclear and natural gas, Entergy's carbon-dioxide emissions are much lower than the utility industry as a whole, meaning there will not be as many costs to pass on to ratepayers. By contrast, utilities nationwide generate about half their power from coal, which is much dirtier.

Right now, proposals in Congress use 2005 emissions as the baseline, which reward companies that have not done anything about climate change and penalizes companies that acted early, since they already picked the low-hanging fruit and now must take more difficult steps to further reduce a baseline presumably lower than peers who had not already been working on the issue. But Leonard said 2005 is better than using 2010 or 2012 as the baseline.

Simple But Very Smart

The analysis goes beyond the obvious operations and carbon concerns will pervade the market

For many companies, the most important climate change risks and opportunities may lie outside of their owned operations. A 2008 McKinsey Study noted that between 40 and 60 percent of manufacturers’ carbon footprints often lie in their supply chains.

Energy Efficiency: McKinsey Report July 2009

The research shows that the U.S. economy has the potential to reduce annual non-transportation energy consumption by roughly 23 percent by 2020, eliminating more than $1.2 trillion in waste – well beyond the $520 billion upfront investment (not including program costs) that would be required. The reduction in energy use would also result in the abatement of 1.1 gigatons of greenhouse gas emissions annually – the equivalent of taking the entire U.S. fleet of passenger vehicles and light trucks off the roads.

Such energy savings will be possible only if the United States can overcome significant sets of barriers. These barriers are widespread and persistent, and will require an integrated set of solutions to overcome them – including information and education, incentives and financing, codes and standards, and deployment resources well beyond current levels.

But the political landscape is constantly shifting

February 16, 2010: Oil giants BP PLC and ConocoPhillips and heavy-equipment maker Caterpillar Inc. announced they won't renew their membership in the three-year-old U.S. Climate Action Partnership, a broad business-environmental coalition that had been instrumental in building support in Washington for capping emissions of greenhouse gases

More than 20 other large companies, including oil company Royal Dutch Shell PLC and industrial heavyweights General Electric Co. and Honeywell International Inc., remain in the coalition with environmental groups such as the Environmental Defense Fund and Natural Resources Defense Council. USCAP expects to add new members in coming months.

Other Legal Schemes

European Union Under the Kyoto Protocol, in 2005 the European Union established a 27-countryEmissions Trading System (ETS) for greenhouse gasses.

The ETS caps the total amount of greenhouse gas emissions from over 11,000power plants, refineries, manufacturing facilities and other large industrial sources,Which emit about half of the EU’s carbon.

Facilities submit one emissions allowance for every ton of greenhouse gassesemitted. The total number of allowances is capped. If a facility reduces itsemissions below its supply of allowances, it can bank the excess credits or sellthem.

The trial phase ETS was 2005–07; the next phase tightens coverage and runsfrom 2008–12.

RGGI – Regional Greenhouse Gas InitiativeNortheast States

The Regional Greenhouse Gas Initiative (RGGI) is a cooperative effort by ten Northeast and Mid-Atlantic states to limit greenhouse gas emissions. RGGI is the first mandatory, market-based CO2 emissions reduction program in the United States.

States of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont are signatories.

Carbon dioxide emissions from just one source category (fossil fuel-fired power plants that generate at least 25 megawatts of electricity) are covered. RGGI caps total emissions at 2009 levels through 2015, and then gradually tightens the cap for a 10% reduction through 2019.

Establishes a cap and trade carbon emission system. RGGI is composed of individual CO2 Budget Trading Programs in each of the ten states.

These ten programs are implemented through state regulations, based on a RGGI Model Rule, and are linked through CO2 allowance reciprocity. Regulated power plants can use a CO2 allowance issued by any of the ten participating states to demonstrate compliance with the state program governing their facility. Taken together, the ten individual state programs function as a single regional compliance market for carbon emissions. 

RGGI has been challenged Indeck Corinth, LP v. Patterson (N.Y. Supreme, Saratoga County). A January 2009 Article

78 Petition by a natural gas electricity generating company to cease all enforcement of RGGI.

The Summons, Petition and Complaint may be found online athttp://www.arnoldporter.com/resources/documents/IndeckCornith-v-Paterson.pdf

Indeck alleges that RGGI 1) is ultra vires, because it is a DEC regulatory program and interstate agreement that was not authorized by the New York State legislature; 2) is a tax not authorized by the legislature; 3) is arbitrary and capricious agency action, because the auction imposes unnecessary costs; 4) is preempted by federal regulations under the Public Utility Regulatory Policies Act (PURPA) and promulgated by FERC; 5) violates the interstate Compact Clause of the U.S. Constitution; 6) violates due process and equal protection rights.

The brief of amici the Chamber of Commerce, American Petroleum Institute and others against RGGI may be found online atwww.uschamber.com. The brief of NRDC, EDF, Conservation Law Foundation and Environmental Advocates of New York in favor ofRGGI may be found at http://www.eany.org/news/RGGIAmicusBrief_05202009.pdf. Case settled end of 2009 via a Consent Decree whereby Con Ed covered Indeck’s extra

generation costs due to RGGI and NYSERDA compensated Con Ed through energy efficiency funds.

More State Programs On the West Coast, 11 states and Canadian provinces

are currently developing another trading program through the Western Climate Initiative (WCI), which would cover more economic sectors and greenhouse gasses than RGGI. Program will start in January 2012.

Under a state climate law, California is also pursuing its own cap-and-trade system.

A coalition of Midwestern states have also been planning a regional program.

Other Examples – NYS Executive Order No. 24(there is proposed legislation, too)

It shall be a goal of the State of New York to reduce current greenhouse gas emissions from all sources within the State eighty percent (80%) below levels emitted in the year nineteen hundred ninety (1990) by the year two-thousand fifty (2050).

There is hereby created a Climate Action Council (“Council”) consisting of the Commissioners of Agriculture and Markets, Economic Development, Environmental Conservation, Housing and Community Renewal, and Transportation; the Chairs of the Public Service Commission, and Metropolitan Transportation Authority; the Presidents of the New York State Energy Research and Development Authority, Long Island Power Authority, New York Power Authority and Dormitory Authority of the State of New York; the Secretary of State; the Director of the Budget; the Director of State Operations; and the Counsel to the Governor.  The Director of State Operations shall serve as the Chair of the Council.

The Council shall prepare a draft Climate Action Plan on or before September 30, 2010.  The Council shall hold regional public comment hearings on the draft Plan, and shall allow at least 60 days for the submission of public comment.  Thereafter, the Council shall prepare a final Climate Action Plan which shall be reviewed and, if warranted, adjusted annually by the Council. 

Executive Order No. 24 (cont’d)

In aspiring to meet the greenhouse gas emission reduction goal, the Council, in preparing the Climate Action Plan, shall:

inventory greenhouse gas emissions; identify and assess short-term and long-term actions to reduce greenhouse gas emissions

and adapt to climate change across all economic sectors; identify the anticipated reductions, and the economic implications from each action; identify the anticipated life-cycle implications, consequences, benefits and costs of

implementing each action; identify whether such actions support New York’s goals for clean energy in the new

economy; coordinate its activities with the State energy planning process; identify existing legal, regulatory and policy constraints to reducing greenhouse gas

emissions;    establish estimated timelines for considering and implementing actions; and undertake such actions, and compile such additional material, as deemed appropriate by

the Council in carrying out its responsibilities under this Order.

Carbon Markets As a result of Kyoto, State programs and voluntary corporate efforts,

sophisticated carbon emission rights trading markets have emerged. The international carbon market continued to grow in 2008, reaching a

total value transacted of about US$126 billion, double its 2007 value. Approximately US$92 billion of this overall value is accounted for by transactions of allowances and derivatives under the EU Emissions Trading Scheme (EU ETS) for compliance, risk management, arbitrage, raising cash and profit-taking purposes.

Citation: The World Bank: State and Trends of the Carbon Market 2009,www.worldbank.org

Carbon Markets (cont’d) The second largest segment of the carbon market was the secondary market for

Certified Emission Reductions (CERs), which is a financial market with spot, futures and options transactions in excess of US$26 billion, a five-fold increase over 2007.

Definition: Certified Emission Reductions (CERs): A unit of greenhouse gas emission reductions issued pursuant to the Clean Development Mechanism of the Kyoto Protocol, and measured in metric tons of carbon dioxide equivalent. One CER

represents a reduction of greenhouse gas emissions of one tCO2e. Definition: Clean Development Mechanism (CDM): The mechanism provided by

Article 12 of the Kyoto Protocol, designed to assist developing countries in achieving sustainable development by permitting industrialized countries to finance projects for reducing greenhouse gas emission in developing countries and receive credit for doing so.

See attached Appendix A for further carbon trading market definitions.

Carbon Markets (cont’d)

Carbon Markets (cont’d)

Some Legal Issues: Are the carbon reductions real? Would the operational changes have been made anyway? Do the credits purchased on the open market satisfy the regional or national regulators?

Will the markets work? Some food for thought.

Friends of the Earth: Carbon off-sets 'add to climate change'

Carbon off-setting will do nothing to prevent climate change and is increasing rather than reducing carbon emissions, a leading environmental charity warns today.

The Government’s scheme to buy carbon quotas from developing countries in order to reduce global emissions should be scrapped and developed countries made to cut their own carbon output, a report by Friends of the Earth says.

“Offsetting is a having a disastrous impact on the prospects for averting catastrophic climate change,” Andy Atkins, executive director of Friends of the Earth said.

“Because offset cuts are created against a hypothetical business-as-usual baseline, it is impossible to ensure that offset credits guarantee carbon cuts. Not only can it not guarantee carbon cuts, in some cases it can increase them,” the report says.

TimesOnLine (UK), June 2, 2009

NEPA and State Analogue EIS Analysis RequirementsCase Examples:

In Center for Biological Diversity v. NHTSA, 508 F.3d 508 (9th Cir. 2007), the Ninth Circuit held that the NHTSA was required to prepare a full EIS addressing the effects that its fuel economy standards would have on the global climate.

In Border Power Plant Working Group v. Department of Energy, 260 F. Supp. 2d 997 (S.D. Cal. 2003), the Southern District of California held that the Department of Energy must include an analysis of greenhouse gases emitted from power plant turbines in its NEPA document prepared for an action to approve transmission lines connected to the plant.

Conclusion These materials were an introduction and will shortly be

outdated. Any business with substantial carbon emissions needs a forward-thinking strategy to deal with the quickly changing legal landscape. Smart energy use now can save money, prepare a company for cap and trade, and improve a company’s marketing image.

Green Building: The Future is Now

Part IIStanley N. AlpertConstantine | Cannon LLP335 Madison AvenueNew York, NY 10017212-350-2730salpert@constantinecannon.comhttp://www.constantinecannon.com/attorneys/salpert.php

Environmental Impacts of Buildings: Conventional versus Green

Built environments are responsible for 40% of primary energy use and 72% of electricity consumption in the U.S. Green buildings can reduce energy consumption by 24-50%. U.S. Green Building Council (USGBC).

Built environments are responsible for 39% of greenhouse gas emissions in the U.S. However, in New York City, buildings account for closer to 80% of greenhouse gas emissions. Green building can reduce that by 33-39% (U.S. G.S.A.).

Built environments are responsible for 13.6% of water use in the U.S. Green building can reduce that by 40%. (Environmental Information Administration).

An estimate 136 million tons of building-related construction and demolition debris is generated in the U.S. annually. Green buildings can reduce that by 70% (U.S. E.P.A.).

Environmental Impacts of Buildings: Conventional versus Green

There is no significant increase in average costs as between green and non-green buildings. (Davis Langdon). Or, some have estimated small added costs. According to Green Globes, one environment-friendly building rating system, building a structure to comply with its criteria normally costs between 1% and 2% more than a standard building; in regions with extreme temperatures, the additional costs can rise to 8%.

According to the U.S. Green Building Council, about 103 cities, 34 states and 12 federal departments or agencies have green building policies for government structures; 10 states have eco-friendly construction standards that apply to a range of non-public structures and 69 cities have green building measures on the books for various types of non-government construction.

Green buildings currently remain a small share of the total (roughly 25%) (USGBC). Recent industry surveys have estimated that up to 25 percent of commercial and institutional construction projects will be for green buildings by 2013.

LEED; A Prominent System for Reducing Building Impacts

Leadership in Energy and Environmental Design (LEED). Widely accepted. Whole building approach to sustainability USGBC’s primary device for transforming the market Can be used with any building type Performance across key categories:

Sustainable sites Water efficiency Energy and atmosphere Materials and resources Indoor environmental quality Innovation in design

Benefits: Reduced operating costs Reduced resource consumption Reduced water and energy use

LEED Rating Systems

LEED for New Construction and Major Renovation LEED for Core & Shell LEED for Commercial Interiors LEED for Schools LEED for Healthcare LEED for Retail LEED for Existing Buildings: Operations and Maintenance LEED for Homes LEED for Neighborhood Development

LEED Rating System Points

Generally 100 base points plus 6 for Innovation in Design and 4 for Regional Priority. (LEED for homes is on a 125-point scale, plus 11 Innovation in Design points.)

LEED Certified = 40-49 points LEED Silver = 50-59 points LEED Gold = 60-79 points

LEED Greatest Hits Sustainable sites (26 points)

Development Density and Community Connectivity (5) Public Transportation Access (6)

Water efficiency (10 points) Use reduction or efficient landscaping (2-4 each)

Energy and atmosphere (35 points) Optimize Energy Performance (1-19) On-Site Renewable energy (1-7)

Materials and resources (14 points) Building Reuse (1-3)

Indoor environmental quality (15 points) Low-Emitting Materials (1 each)

Innovation in design (4 points)

Performance ManagementOne Example

Continuous Energy Management & Optimization (CEMO) from Davies Energy Systems, Inc.

Real-Time Energy Monitoring, Dashboards, and Reporting Data Collection and Analysis for Benchmarking Automation of EPA Portfolio Reporting

Long-Term Benefits Better Manage Facility Energy and Water Usage Make Smarter Energy Choices Stay on Budget with Real-Time Data Reduce Costs with Increased Awareness and Accountability Continuously Updated Database Web Accessible

Do LEED buildings perform as expected?

USGBC announced that buildings certified under LEED 2009 would be required share energy- and water-use data. There has been much debate in recent years about whether LEED-certified buildings actually perform well. Building Performance Partnership (BPP) will expand the amount of data available, leading to more reliable analysis in the future and helping underachieving projects fix performance problems.

The reporting requirement raised fears that a project could lose a LEED certification due to poor performance, or that unflattering data would become public. USGBC says “no building will be decertified for performance or a performance gap,” and USGBC has promised that public reports of data will be anonymous, while owners will receive tailored reports.

Gifford v. USGBC, October 2010, Originally Filed as a Class Action

Suit alleges that USGBC’s claim that it verifies efficient design and construction is “false and intended to mislead the consumer and monopolize the market for energy-efficient building design.”

Four classes alleged: 1. All persons who paid for LEED certification in reliance on alleged deceptive marketing related to energy performance in LEED buildings.  

2. "All persons who design energy-efficient buildings and whose livelihoods are injured by USGBC's monopolization of the market through fraudulent and intentionally misleading representations in the marketing and promotion of the LEED product line. . ."

3.  All taxpayers whose city and state tax dollars are spent on the costs of LEED certification in publicly-commissioned buildings.

4.  Trades injured by USGBC's alleged deceptive trade practices because the trades lose money and time in having to comply with LEED certification even though the buildings are allegedly not saving energy.

Gifford v. USGBC, October 2010, as amended

Primarily a false advertising and consumer fraud act case under Federal and State law.

No longer a class action. No monopolization claim. Alleges that USGBC has misrepresented the

energy efficiency of LEED buildings, and that the LEED certification is not a verification of the actual energy performance of the

building. 

Green Globes This is a standard that competes with LEED.

Green Globes states that its substantive criteria are similar, but says that it is less expensive to implement, making it especially

useful for smaller projects.

Passive Buildings; A New, Developing Methodology

A different concept than LEED. Focuses solely on reducing energy use to a minimum through building design:

A Passive House is a very well-insulated, virtually air-tight building that is primarily heated by passive solar gain and by internal gains from people, electrical equipment, etc. Energy losses are minimized. Any remaining heat demand is provided by an extremely small source. Avoidance of heat gain through shading and window orientation also helps to limit any cooling load, which is similarly minimized. An energy recovery ventilator provides a constant, balanced fresh air supply. The result is a system that saves up to 90% of space heating costs, and provides high indoor air quality.

Passive Buildings; A New, Developing Methodology

Passive homes typically include the following components: (1) Tightly sealed with superior insulation, double the typical amount on roofs,

walls and ground slabs.

(2) Minimize thermal bridges (areas that are poor insulators) and no gaps in insulation.

(3) Air tightness verified with blower door tests.

(4) Ventilation system with high efficiency heat exchange, integrating heating and cooling.

(5) High performance windows and doors that eliminate air leakage.

Zero-Energy Buildings; Another Goal-Based System

“Zero” is really “net zero.” The sums of the flows in and out are equal and opposite. This does not imply zero flows. Energy can be used but it should be generated on site, or, in some cases, purchased from outside renewable sources.

Savings are measured against the baseline of ANSI/ASHRAE/IESNA Standard 90.1-2004, Energy Standard for Buildings Except Low-Rise Residential Buildings.” For example, a 30% energy goal is measured from Standard 90.1-2004 on the path to zero.

Zero-Energy Buildings; Another Goal-Based System

Also: Create a good thermal envelope—especially considering thermal bridges

at the corners and around steel beams. Implement day lighting with automated controls wherever possible and

dim, or better, turn off the lights. Consider natural ventilation. Size the HVAC system to match reduced loads. Source: ASHRAE Journal, Understanding Zero Energy Buildings, Sept.

2006. The U.S. Department of Energy is presently funding zero energy building

research.

February 14, 2011 New York Times

Soaking Up the Sun to Squeeze Bills to Zero

National Renewable Energy Lab of the federal Department of Energy moved in to a $64 million building in the Rocky Mountain foothills

Light-bending window louvers cast rays up into the interior office spaces. A giant concrete maze in the sub-basement holds and stores radiant heat

Through off-the-shelf technology, costs were brought in at only $259 a square foot, nearly $77 below the average cost of a new super-efficient commercial office building

For zero net electricity over 24 hours, lighting was a main target. That forced designers to lower the partition walls between work cubicles to only 42 or 54 inches which raised privacy concerns

People print less paper when they share a central printer that requires a walk to the copy room. People also use less energy, managers say, when they know how much they’re using. A monitor in the lobby offers real-time feedback on eight different measures.

The feedback comes right down to a worker’s computer screen, where a little icon pops up when the building’s central computer says conditions are optimal to crank the hand-opened windows.

Plain Old Energy EfficiencyBy GreenerBuildings StaffCreated 2010-07-08 03:30BUFFALO GROVE, IL — Candlebrook Elementary in the

Pennsylvania community King of Prussia has helped its school district save almost $340,000 in energy costs by developing an efficiency program with an integrated Siemens building automation system at its core.

In the process, Candlebrook cut its electricity consumption by 53 percent and its natural gas consumption by 43 percent. That earned the school an Energy Star rating of 98, one of the higher efficiency scores of the energy performance ranking system.

The district cut its utility bill by $336,444.28. The district estimates that if the more than 15,000 districts in the country took similar steps, they could save as much as $5 billion.

PACE Financing PACE (Property Assessed Clean Energy) are local

government initiatives that allow property owners to finance energy efficiency and renewable energy projects for their homes and commercial buildings.

Financing for improvements through an assessment on property taxes for up to 20 years.

Energy improvements such as weather sealing, insulation, energy efficient boilers and cooling systems, new windows, and solar installations.

Repayment obligation to transfer automatically to the next property owner if the property is sold.

PACE has first lien.

PACE Financing (cont’d): Cognitive Dissonance

In October 2009, the White House and federal agencies issued a policy initiative supporting PACE and providing $150 million in ARRA funding.

In July 2010, the Federal Finance Housing Agency (FFHA) issued a directive to Fannie Mae, Freddie Mac, and FHLB banks which effetively stated that the government would not purchase mortgages with PACE first lien priorities, creating a severe setback for local PACE programs.

NRDC filed suit against the directive in October 2010.

New York State Green Building Laws

State Green Building Construction Act. N.Y. Energy Law Art. 13. (effective March 2009), attached as Appendix A:

Applies to state agency buildings that are owned by the state Applies to new construction and substantial reconstruction projects The State Department of Environmental Conservation, in consultation

with the New York State Energy Research and Development Authority (NYSERDA) , must publish regulations for green buildings, informed by LEED rating criteria, Office of Parks, Recreation and Historic Preservation criteria, and the Green Building Initiative’s Green Globes rating system. N.Y. Energy Law § 13-107(3).

State agencies are also required to prepare annual building performance reports containing information on energy consumption, waste and water reduction, how indoor air quality compares with set benchmarks, and changes to major energy consuming equipment. N.Y. Energy Law § 13-107(2).

New York State Green Building Laws

Green Residential Program Act, N.Y. Pub. Auth. L. § 1872, attached as Appendix B.

Establishes a state grant program for green buildings. NYSERDA is to create and administer guidelines and criteria for the design and building techniques used in the residential sector. These will apply to builders and renovators of single- and multi-family homes with fewer than 12 dwelling units.  Grants will be paid to owners who fulfill the standards and who produce a certificate of occupancy for their buildings between January 1, 2010 and October 31, 2013.  The grants are subject to a cap, based on a number of considerations, including the size and type of the residential structure, and whether the owner is eligible for any other type of financial assistance from any other source. Depending on the number of units, the caps run from $7,500 to $15,000. In addition, no owner can receive more than $120,000 in grants in any year.

New York State Green Building Laws

Tax Credits There are a variety of green building tax credits in New York that may

be found on NYSERDA’s website. www.nyserda.org. Executive Orders No. 111 & No. 142, attached as Appendices C & D. Executive Order No. 111, "Directing State Agencies, State Authorities,

and Other Affected Entities to be More Energy Efficient and Environmentally Aware." Requires state agencies to implement a variety of energy efficiency measures, including reductions of energy use in state buildings.. Directed NYSERDA to issue a set of guidelines within six months from the issuance of the Order. Established an Advisory Council and several working groups to address issues and questions associated with the Order.

Executive Order No.142, "Directing State Agencies, and Authorities to Diversify Fuel and Heating Oil Supplies Through the Use of Biofuels in State Vehicles and Buildings." Requires state agencies to move toward the use of ethanol and biofuels.

New York City: Backdrop to the Rules: Climate Protection Act of 2007

Intro 20-A requires the city to meet two climate reduction goals: to reduce greenhouse gas emissions from city operations by at least 30 percent by the year 2017, and to reduce greenhouse gas emissions citywide (including from homes and businesses) by at least 30 percent by the year 2030.

The Climate Protection Act will achieve greenhouse gas (carbon dioxide, methane and nitrous oxide) reductions through a blend of mandatory, market-based and voluntary approaches. The city is already implementing some measures, including the planting of carbon dioxide-absorbing trees and new building codes that will create more energy-efficient buildings.

New York City Green Building StandardsLocal Law No. 86 (2005)

Section 1. Statement of findings and purpose. Probably no urban activity has greater

impact on human health and the environment than building construction and use.Enormous quantities of resources are used during building construction, renovation

andoperation, and the production of these resources has substantial environmental

impacts.It is estimated that 40% of raw materials consumed globally are used for buildings.

Inaddition, in the United States, commercial and residential buildings are responsible

forapproximately 65% of electricity consumption, 30% of greenhouse gas emissions,

12%of potable water use and 136 million tons of construction and demolition waste

annually. Also, many indoor building materials release hazardous toxins, impairing indoor

airquality and reducing occupant health and productivity.

SOME GREEN BUILDING FACTS FACT: In New York City, commercial and residential buildings are

estimated to contribute not 30% of greenhouse gas emissions, but 80%.

FACT: A recent study conducted for the State of California concluded that, on average, green buildings show a ten times return on the investment in green building design. This comprehensive analysis of 33 green buildings revealed an average green cost premium of less than 2%, with only a 0.66% premium for buildings that achieved the most basic level of LEED certification.

FACT: Numerous municipalities, including Atlanta, Austin, Boston, Boulder, Chicago, Dallas, Los Angeles, Portland (Oregon), San Diego, San Francisco, San José, and Seattle, have adopted LEED or have otherwise required that city-owned buildings be built according to green building criteria. Some localities have created incentive programs for privately-owned green building construction, including the use of direct subsides, density bonuses and expedited permitting. Boston will soon require private sector buildings of over 50,000 square feet to be LEED-certifiable.

The Statute and Implementing Regulations, in Summary

Local Law 86 applies to capital building projects of New York City agencies and to non-city entities that receive capital funding from the City. Most building occupancies are covered by the law, with the exception of residential, high hazard, or industrial occupan cies and open-air structures. For covered projects, the law’s requirements fall into four basic categories.

First, they require that capital building projects with over $2,000,000 in construction costs achieve a rating according to the LEED green building standard developed by the USGBC or according to an equivalent, approved standard. A LEED Certified rating is required for health and educational facilities and a LEED Silver rating is required for all other types of occupancy.

Second, they require that projects with a green building rating requirement and construction costs over $12,000,000 also reduce energy costs by 20 to 30%.

Mayoral Exemption

The mayor may exempt from each provision of the law capitol projects accounting for up to 20% of the capital dollars in each fiscal year subject to such provision if in his or her sole judgment such exemption is necessary in the public interest. At the conclusion of each fiscal year the mayor shall report to the council the exemptions granted pursuant to this section.

The Statute and Implementing Regulations, in Summary

Third, for certain projects that involve the replacement or installation of specific systems including boilers, lighting, and HVAC comfort controls, a 5 to 10% energy cost reduction is required.

Fourth, a 20 to 30% potable water use reduction is required for some projects that involve the replacement or installation of plumbing systems. See discussion of Brac Greywater Systems, infra.

The law also requires the preparation of an annual report for ten years after the law takes effect, commencing in 2008. This first annual report provides the information requested in the law and, in some instances, expands upon it.

See Green Building Standards Rules, attached as Appendix E.

A Note on Wind The City of New York purchases wind credits

that support the production of approximately 29,000 MWH a year. The City has arranged with the U.S. Green Buildings Council (USGBC) to utilize this purchase in order to qualify for green power credits that contribute to the achievement of a LEED® rating on city projects.

New York City Green Roof Tax Abatement

The bill, # A.11226, passed in June 2008. It amended Article 4 of the Real Property Tax Law ("RPTL") by adding a new Title 4-B, providing for a tax abatement for the construction of a "green roof" on a class one, two or tour building in the City of New York.

In general, a green roof is an addition to a roof that includes, among other things, a growth medium and a vegetation layer of drought resistant and hardy plant species. The amount of the abatement is $4.50 per square foot of green roof: limited to the lesser of $100,000 or the building's tax liability for the year in which the abatement is taken. The green roof tax abatement is a pilot program that sunsets March 15, 2013.

The benefits are conditioned on compliance during the year in which the benefit is taken with applicable provisions of law, maintaining the green roof: permission to inspect the green roof and related structures, and payment of real estate taxes, water and sewer charges, payments in lieu of taxes or other municipal charges, and includes a process for revocation for non-compliance.

New York City Solar Panel Tax Abatement

The bill, #A11202 , passed in August 2008. It amended Article 4 of the Real Property Tax Law ("RPTL") by adding a new Title 4-C, providing for a four-year tax abatement for the construction of a solar electric generating system in connection with a class one, two or four building in the City of New York. If the solar electric generating system is placed in service on or after the effective date of the new Title 4-C and before January 1, 2011, the amount of the tax abatement is 8-3/4% of eligible solar electric generating system expenditures in each year of the four-year compliance period. If the solar electric generating system is placed in service on or after January 1, 2011 and before January 1, 2013, the amount of the tax abatement is 5% of such expenditures for the four-year period. The benefit in each tax year is limited to the lesser of the amount of taxes payable or $62,500.

New York City Solar Panel Tax Abatement

"Eligible solar electric generating system expenditures" include reasonable expenditures for materials, labor costs properly allocable to on-site preparation, assembly and original installation, architectural and engineering services, and designs and plans directly related to the construction or installation of the solar electric generating system.

The benefits are conditioned on compliance during the four-year compliance period with applicable provisions of law, maintaining the solar electric generating system, permission to inspect the solar electric generating system and related structures and equipment, and payment of real estate taxes, water and sewer charges, payments in lieu of taxes or other municipal charges, and includes a process for revocation for noncompliance.

The NYC (Almost) Revolution of December 2009

A sweeping package of green building laws announced on Earth Day in April 2009 by Mayor Michael Bloomberg passed, with modifications, in December. Four separate bills were presented to the City Council, requiring building energy benchmarking, and rewriting commercial lighting standards and parts of the city’s energy code.

According to New York City, the legislative package will save consumers $700 million annually in energy costs, create 17,880 jobs, and cut city CO2 emissions by 4.75%. According to the city, that would be the largest emissions reduction achieved by a single program in PlaNYC, the city’s long-term sustainability program.

The NYC (Almost) Revolution of December 2009 (cont’d)

The original legislation included a retrofitting measure requiring buildings subject to the law to conduct energy audits every 10 years. The original version of the bill required both retrofitting and retro-commissioning to correct deficiencies found in an audit, if the costs would pay themselves back through savings in five years.. The approved version requires private buildings to carry out the retrocommissioning only.

Retrofitting involves capital alterations and installation of new equipment, while retro-commissioning includes noncapital improvements, or “fine tuning” and maintenance of existing systems. City-owned buildings larger than 10,000 square feet would still have to retrofit with “all reasonable capital improvements” within a year of filing an audit report, if the work would generate an energy cost-savings payback within seven years. The audit bill includes financial hardship exemptions from the upgrade requirements.

Buildings covered are those over 50,000 square feet, accounting for half of the building square footage in the City.

The NYC (Almost) Revolution of December 2009 (cont’d)

The other bills require buildings subject to the law to benchmark their energy use and water consumption through

EPA’s Portfolio Manager energy leadership program (Intro. No. 476-A);

require large commercial buildings to carry out lighting upgrades by 2025 (Intro. No. 973-A);

and create a city energy conservation construction code for building renovations that would, among other things, remove an exemption from the State Energy Code for renovations that include less than 50% of a building’s subsystems (Intro. No. 564-A).

Brand New Local Laws – Fall 2010

Local Law 47 of 2010 (eff. Jan. 2011). For means of egress, lobbies and hallways, encourages the use of natural light and occupant sensor of photosensor lighting controls.

Local Law 48 of 2010 (eff. 12/28/10). For commercial spaces, lighting shall be by occupant sensor (with turn-off switch but no override) for classrooms, conference rooms, employee lunch and break rooms, and offices smaller than 200 square feet.

Brand New Local Laws – Fall 2010 (cont’d)

Local Law 49 of 2010. States intent of NY Code for plumbing, mechanical and fuel gas systems to safeguard not just life, limb and property, but also the environment.

Local Law 51 of 2010. At construction sites, encourages the use of natural light, and permits the use of photosensors for lighting for temporary walkways and footbridges (eff. July 2011).

Brand New Local Laws – Fall 2010 (cont’d)

Local Law 54 of 2010 (eff. Jan. 2011). Prohibits the use of potable water for “once-through cooling,” meaning to cool a condenser and then be discharged to a sewer, with exceptions for ice-making machines that produce less than 500 pounds per day or existing refrigeration installed before January 2011 and replacements that use the same or less water.

Local Law 56 of 2010 (eff. Jan. 2011). Requires sub-metering for commercial water to enable the quick detection of leaks and avoid them.

Local Law 57 of 2010 (eff. July 2012). Requires dual-flush toilets using less water for liquid waste and use of EPA’s Water SENSE program for showers, faucets and urinals.

Federal Stimulus American Recovery and Reinvestment Act of 2009(the

“Stimulus Bill”) P.L. 110-343 Tax Deductions for Commercial Buildings: § 303 | Extension of Energy-Efficient Buildings Deduction Current law allows taxpayers to deduct the cost of energy-efficient

property installed in new or existing commercial buildings. The amount deductible is up to $1.80 per square foot of building floor area for buildings achieving a 50% energy savings target. The energy savings must be accomplished through energy and power cost reductions for the building’s heating, cooling, ventilation, hot water, and interior lighting systems. This bill extends the energy efficient commercial buildings deduction through December 31, 2013 (5 Years) by amending Section 179D.

American Recovery and Reinvestment Act of 2009(the “Stimulus Bill”) P.L. 110-343

A tax deduction of up to $1.80 per square foot is available to owners or designers of new or existing commercial buildings that save at least 50% of the heating and cooling energy of a building that meets ASHRAE Standard 90.1-2001. Partial deductions of up to $.60 per square foot can be taken for measures affecting any one of three building systems: the building envelope, lighting, or heating and cooling systems. These tax deductions are available for systems “placed in service” from January 1, 2006 through December 31, 2013.

Federal Energy Efficiency Laws The Energy Policy and Conservation Act (“EPCA”), 42 U.S.C.

6201, as amended by the National Appliance Energy Conservation Act (“NAECA”), Pub.L. No. 100-102 (1987), and the Energy Policy Act of 1992 (“EPACT”) 42 U.S. C. §§ 6311-17. The EPCA, as amended by the NAECA and the EPACT, established nationwide standards for the energy efficiency and energy use of major residential and commercial appliances and equipment, including heating, ventilating, and air conditioning (“HVAC”) products and water heaters. Principal responsibility for maintaining, and, if necessary, amending these standards was given to the U.S. Department of Energy (“DOE”).

Federal Energy Efficiency Laws

 The American Clean Energy and Security Act (the cap and trade bill) would also require the EPA to develop procedures for rating building energy efficiency, in addition to recommending efficiency standards for lighting and other appliances.

Voluntary Regulatory ProgramsMemoranda of Understanding

In the MOU, Cushman & Wakefield recognized the significant impact of the commercial real estate sector on the environment. The MOU sets out environmental best practices designed to enhance energy efficiency and reduce carbon footprint, promote water conservation and minimize waste within Cushman & Wakefield's corporate offices and in properties under management.

Cushman & Wakefield will leverage its partnerships with EPA and its experience with LEED for existing buildings. Cushman & Wakefield also will join two new EPA partnership programs: WasteWise, which promotes waste reduction and resource conservation, and GreenScapes, which provides environmentally-friendly solutions for landscaping.

The firm will also utilize its own Green Practice Policies as a platform to engage clients in adopting sustainable approaches to pest management, construction, purchasing, cleaning, solid waste management, and control of environmental tobacco smoke.

Litigation IssuesFederal Preemption

Three forms of federal preemption: express preemption by statute occupation of the field, or inherent conflict between state laws and a federal

regulatory scheme. English v. General Elec. Co., 496 U.S. 72, 78-79 (1990).

Green Buildings Case:AIR CONDITIONING, HEATING AND REFRIGERATION INSTITUTE v.CITY OF ALBUQUERQUE (D.N.M. 2008)

Albuquerque’s Energy Conservation Code changed building regulations to reduce greenhouse gas emissions and make more effective use of energy:

For new commercial or multi-family buildings, they must either:

i) achieve LEED Silver certification, or ii) be 30% more efficient than the baseline building set

forth in American Society of Heating, Refrigeration, and Air Conditioning (“ASHRAE”) Standard 90.1-2004, or

iii) meet specified standards for certain building components such as HVAC and water heaters.

Green Buildings Case:AIR CONDITIONING, HEATING AND REFRIGERATION INSTITUTE v.CITY OF ALBUQUERQUE (D.N.M. 2008)

Plaintiffs alleged that the Albuquerque code was preempted by federal energy efficiency statutes, namely the Energy Policy and Conservation Act (“EPCA”), 42 U.S.C. § 6201, as amended by the National Appliance Energy Conservation Act (“NAECA”), Pub.L. No. 100-102 (1987), and the Energy Policy Act of 1992 (“EPACT”) 42 U.S. C. §§ 6311-17. The EPCA, as amended by the NAECA and the EPACT, established nationwide standards for the energy efficiency and energy use of major residential and commercial appliances and equipment, including heating, ventilating, and air conditioning (“HVAC”) products and water heaters.

Green Buildings Case:AIR CONDITIONING, HEATING AND REFRIGERATION INSTITUTE v.CITY OF ALBUQUERQUE (D.N.M. 2008)

EPCA, as amended, contains an express preemption provision that prohibits any state regulation “concerning” the energy efficiency, energy use, or water use of any covered product with limited exceptions. 42 U.S.C. § 6297(c). A “state regulation” is defined as any “law, regulation, or other requirement of a State and its political subdivisions.”42 U.S.C. § 6297(a)(2)(A). EPCA provides a number of exceptions from federal preemption. Id. at § 6297(f).

Ruling: The Court granted a preliminary injunction against enforcement of the new Albuquerque code. It held that the express preemption provision applied, and that none of the listed exceptions were applicable. 2008 WL 5586316 (D.N.M. 2008).

On the Other HandBuilding Industry Association of Washington (BIAW) v. Washingon State Building Code Council

Relying on EPCA’s exceptions to express preemption provision, upholds the Code.

Washington Code gives choices or different paths to compliance. Washington Code is different than Albuquerque's and Court

expressly distinguishes that decision. Higher efficiency appliances are not the only way to comply, so

no preemption.

Green Financing Case:

DESTINY USA HOLDINGS, LLC v. CITIGROUP GLOBAL MARKETS REALTY CORP, 69 A.D.3d 212, 889 N.Y.S.2d 793 (4th Dept. 2009)

Facts: Destiny had construction financing from Citigroup, requiring periodic payments during the construction period for a green multi-use project in Syracuse. Actually, financing came from three sources: Destiny Holdings, proceeds from bonds issued by the City of Syracuse Industrial Development Agency (SIDA) and approximately $155 million loaned by Citigroup. Citigroup stopped the payments, claiming the developer failed to comply with certain contractual provisions related to spending on tenant improvement costs. Asserting it would lose the ongoing project in the absence of financing, Destiny moved for a preliminary injunction requiring Citigroup to make its payments, which the Supreme Court GRANTED.

Green Financing Case (cont’d):

DESTINY USA HOLDINGS, LLC v. CITIGROUP GLOBAL MARKETS REALTY CORP, 69 A.D.3d 212, 889 N.Y.S.2d 793 (4th Dept. 2009)

Ruling: The Fourth Department AFFIRMED. In addition to analyzing likelihood of success and balance of the equities, the Court considered irreparable injury, which prong of course is not met when one can be compensated adequately later with money damages.

The Court gave two reasons why this was an exceptional case and later money damages were not adequate. First,

“cases of construction mortgages are an exception” to the general rule (Southampton Wholesale Food Term. v. Providence Produce Warehouse Co., 129 F.Supp. 663, 664). “Since the law regards land as unique [,] an agreement to buy land can be specifically enforced even though the defendant's sole obligation is to pay money ... Although the question is close, it may not be too great a stretch to include advances under a construction mortgage” (id.) In such circumstances, the “agreement ... is not a simple contract to lend money. It is an integral part of a contract to sell [or develop] real property.

Green Financing Case (cont’d):

DESTINY USA HOLDINGS, LLC v. CITIGROUP GLOBAL MARKETS REALTY CORP, 69 A.D.3d 212, 889 N.Y.S.2d 793 (4th Dept. 2009)

The second reason the Court gave tends to elevate financing of green projects to a special status under the law, which may or may not hold long term given the 3-2 split of the Court, but here it is:

Second, an exception is warranted because the Project's unique character renders it difficult to calculate any damages sustained by Destiny Holdings. Citigroup stated through its Managing Director at a U.S. Green Building Council Presentation on November 8, 2007 that the Project is a “visionary project” that has created a “new financing paradigm for green economic development” that is “revolutionary.” Citigroup Chairman and Chief Executive Officer Charles Prince called the use of newly-created Federal

Green Bonds in financing the Project “ ‘groundbreaking [and] a step forward in addressing climate change in the U.S. because [the Project] incorporates sustainable design, energy conservation and renewable

energy sources on a large scale’ ”

Contract or Tort Claims; Generally

In the green building context, breach of contract claims may include breach of the implied warranty of fitness or suitability of construction materials, workmanship and purpose; failure to deliver a promised level of LEED or other certification; or failure to meet energy efficiency standards. Owners might sue contractors and subcontractors, as well as design professionals. Depending on the language in their contracts, a general contractor may be entitled to assert indemnification claims against a subcontractor if it was the subcontractor and not the general contractor who ultimately caused a construction defect.

Contract or Tort Claims; Generally

Tort claims may include fraud or other misrepresentation claims for allegedly misleading statements regarding the green attributes of a building. If the purchasing or lessee business has marketed itself as green and the builder or lessor fails to deliver, there may be claims for negligence or tortious interference with contract or prospective economic relations, depending on the facts and how much was shared with the builder or lessor.

To reduce the likelihood of litigation, contracts should be carefully drafted, including specifications for certification, tax credits (where applicable), and sustainability goals or product specifications.

A New Contractual Model

On November 10, 2009 the Virginia-based ConsensusDOCS organization released its Green Building Addendum. The Addendum includes a section that specifically addresses the allocation of green building risk. It is a rating-system neutral and focuses on specific green performances rather than ratings.

The Addendum creates a new role for design professionals, contractors, or consultants: the Green Building Facilitator, responsible under the terms of the Addendum for coordinating and facilitating the process of obtaining the green building status or certification, identifying green building measures (both procedural and physical), potential design and construction alternatives, and other services as required by the terms of the Addendum.

A New Contractual ModelArticle 8.2 provides that the parties are subject to limitations onliability included in their underlying contracts. Yet the provisionexplicitly acknowledges that the owner’s “loss of income or profit orinability to realize potential reductions in operating, maintenance,or other related costs, tax, or other similar benefits or credits, marketingopportunities and other similar opportunities or benefits, resulting from afailure to attain the [project’s green building goals] shall be deemedconsequential damages subject to any applicable waiver of consequentialdamages” in any underlying design or construction contract.

Parties are free to negotiate terms, the Addendum notwithstanding,including (i) the types of damages which would be included in theprovision; and (ii) any waivers – mutual or otherwise – in the underlyingagreement.

A New Contractual ModelThe Addendum also makes it clear that no project participant otherthan the Green Building Facilitator will be liable or responsible forthe failure of green measures to achieve the project’s greenbuilding goals,” including the project’s failure to earn any third-party certification. However, the Addendum also makes clear thatthese limitations on the project team’s liability do not relieve themfrom any obligation to perform or provide procedural or physicalgreen measures required by their underlying contracts.

ConsensusDOCS was founded in 2007 and, to date, its suite ofform design and construction agreements has been endorsed by 23different architectural, engineering and construction organizations.

A Case Study: Shaw Development v. Southern Builders; Loss of Tax Credit

This 2007 state court case arose from a contract for construction of Captain’s Galley, a 23-unit condominium project in Crisfield, Maryland. The scope of work required a “Green Building,” satisfying LEED Silver certification requirements. In response to Southern Builders’ action to collect on its mechanics lien, Shaw Development countersued. Among other claims for damages, Shaw asserted that Southern had failed to timely deliver a Silver-rated building, causing it to lose out on a $635,000 tax credit that would have been available if a timely, compliant building had been delivered. Claims in a case like this may include breach of contract, fraud, and other business torts.

Consider the result if the new Addendum had been used.

Litigation May be LoomingNew York Times, August 31, 2009

Some Buildings Not Living Up To Green Label Starting this year, the program also is requiring all newly constructed buildings

to provide energy and water bills for the first five years of operation as a condition for certification. The label could be rescinded if the data is not produced, the officials said.

The council’s own research suggests that a quarter of the new buildings that have been certified do not save as much energy as their designs predicted and that most do not track energy consumption once in use. And the program has been under attack from architects, engineers and energy experts who argue that because building performance is not tracked, the certification may be falling short in reducing emissions tied to global warming. Some experts have contended that the seal should be withheld until a building proves itself energy efficient, which is the cornerstone of what makes a building green, and that energy-use data from every rated building should be made public.

Nuts and Bolts

Old construction and plumbing codes may not be ready to accommodate green systems such as solar, wind or water use reduction measures.

Brac systems can be installed in commercial or residential buildings, and may save roughly 30% of water use. In a home, for example, shower and sink water is routed to a tank where it receives required but not expensive treatment, and it is then re-used for toilet water. Provisions of the NYS Plumbing Code, show that it has evolved to allow grey water systems, so long as certain requirements are met, such as indentifying any source of grey water to ensure that it is not used for drinking.