Monday, April 12, 2010

LEED Building for California

by David McPherson LEED AP, Watt Tieder et al

The “green building” niche for the construction industry has been slowly developing for years. However, with the passage of several laws at the federal, state, county and city levels, contractors, developers and owners must be familiar with the green building laws for their particular jurisdictions and the LEED requirements. This article summarizes certain federal and state laws demonstrating the high importance that is being placed on green building and what contractors should know with respect the LEED requirements that they control and can affect during construction.

Last year, the American Recovery and Reinvestment Act of 2009 (the “Stimulus Act”) was passed by the Federal Government seeking to restart the American economy. While the Stimulus Act reaches far and wide, there are significant opportunities for contractors, developers and property owners with respect to “shovel ready” projects. A close examination of the Stimulus Act confirms that a multitude of these opportunities are vested in “Green Building.” Indeed, tens of billions of dollars in the Stimulus Act funding initiatives are earmarked for green building. The Stimulus Act provides at least $45 billion in funding for renewable energy, energy efficiency and other energy related programs. In addition, almost $20 billion in tax incentives for renewable energy and efficiency measures are included. Here are just a few examples: (1) at least $4.5 billion is allocated to the U.S. General Services Administration to convert its facilities to “high-performance green buildings” in an effort to make federal buildings more energy efficient; (2) $4.2 billion was set aside to modernize various Department of Defense facilities to go toward green building related improvements; (3) $6.3 billion in grants were established to assist state and local governments to make investments in energy efficient projects and those that would reduce carbon emissions. While the Stimulus Act includes many additional programs related to green and sustainable building projects, it is readily apparent that the federal government is committed to spending significant resources towards energy efficient and green projects. It is easy to conclude that the Stimulus bill is truly a shot in the arm for the green building market.

But more is happening in green legislation at the federal level. On June 26, 2009, the United States Congress passed the American Clean Energy and Security Act (“ACESA”), and at the time of this writing is before the Senate. The ACESA, if made into law, will have a great impact on green building. Some of the key components of the ACESA are: (1) 20% of electricity derived from renewable energy sources and efficiency by 2020; (2) $90 Billion invested in renewable technology; (3) implementing energy saving standards for buildings and industry; and (4) a cap/trade/offset scheme for carbon emissions. While the ACESA bill contains much more, it is clear that green building is not a trend and is here to stay. The question is: “Are you prepared?”

What does this mean for California? Well, much of the federal funding from the Stimulus Act is intended to flow directly from the Federal Department of Energy to grantees or people who “work with” the Internal Revenue Service to obtain tax rebates. More importantly, considerable funds will flow into California public agencies to benefit the Golden State contractors, owners and residents. Most significantly is the fact that the California Energy Commission will receive almost $300 million in energy efficiency and renewable energy funds. While it remains to be seen how the agencies decide to best coordinate the programs, the significant funding represents a unique and unprecedented opportunity for contractors and developers in the green market place.

While the Stimulus Act alone should be more than enough for California contractors, developers and owners to recognize the need to understand the United States Green Building Association LEED requirements for construction, the California legislature has taken a leading role in implementing laws requiring more and more green building. Here are some examples:

• Executive Order S-3-05 (2005) sets Green House Gas (GHG) emission reduction targets. Californians are to reduce GHG emissions to 2000 levels by 2010, reach 1990 levels by 2020, and then achieve an 80% reduction from 1990 levels by 2050. This would require buildings to become much more efficient and sustainable.

• California Global Warming Solutions Act of 2006 (AB 32) requires the California Air Resources Board to prepare regulations required to reduce GHG emissions to 1990 levels by 2020. These regulations are to be adopted by January 2012.

• Under SB 97 (2007), the California Office of Planning and Research must, by January 1, 2010, prepare guidelines for mitigation of actual GHG emissions or their effects. It is expected that these guidelines will include incentives bonuses for green buildings.

• With the passage of AB 811 (2008), property owners (commercial, industrial, and residential) are able to finance the installation of energy efficiency improvements and distributed generation, renewable energy sources (solar, wind, weatherization, energy efficient technology) that are permanently fixed to real property within the cities and counties opting in to this law with low interest loans which can be repaid in up to 20 years on property taxes.

While the above just scratches the surface, it is abundantly clear that contractors, owners and developers cannot ignore the fact that green building is here to stay. Moreover, California has long been recognized as a leader in green building laws and regulations. It is simply a matter of time until more and more states, counties and cities implement similar laws and requirements. Only those contractors, owners and developers with a working knowledge of the LEED requirements will be able to successfully navigate through this rapidly growing and expanding area of construction.

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