New rules imposed by Denver and Colorado that require large buildings to reduce pollution will be too expensive and are at odds with federal regulations, groups representing owners and developers of office towers, hotels and apartment complexes allege in a lawsuit filed this week.
The Colorado Apartment Association, the Apartment Association of Metro Denver, the Colorado Hotel and Lodging Association and NAIOP — an association representing commercial real estate developers — said the green-energy rules preempt a federal regulation that governs the quality and performance of new heating and cooling systems and other appliances in large apartment complexes, hotels and commercial office and retail buildings.
The groups, in their lawsuit filed Monday in U.S. District Court in Denver, are asking a federal judge to throw out the city and state environmental regulations, which in the coming years will force a transition away from natural gas to improve air quality.
The lawsuit names as defendants the Colorado Department of Public Health and Environment and its executive director, the Colorado Energy Office and its executive director and the Denver Office of Climate Action, Sustainability and Resiliency and its executive director, as well as the Denver City Council and Denver Mayor Mike Johnston.
Representatives of the city and state agencies named as defendants declined to comment, citing policies that prohibit them from speaking about litigation.
On a practical level, the associations that filed suit this week also argue the rules would force building owners to make expensive but unnecessary upgrades that ultimately would increase rents for tenants and cause utility bills to rise.
Building owners could meet early goals by adding insulation, LED lighting and new windows, which are relatively inexpensive upgrades.
But as city and state emissions-reduction requirements increase in the coming years, building owners would be forced to get rid of their natural gas heating systems in favor of furnaces and hot water heaters that run on electricity, said Andrew Hamrick, general counsel and senior vice president for both apartment associations.
Replacing those systems and retrofitting apartment buildings for them would be an enormous expense, he said.
His associations represent 817 buildings that would be impacted by one or both rules.
“The formulas are out of whack and, in the end, it boils down to a ban on the use of natural gas appliances,” he said.
Greenhouse gas emissions from buildings are not the largest source of air pollution, and there are better ways to achieve reductions, Hamrick said.
“They’re attacking a small emission problem with a very expensive fix,” he said. “That’s what the friction is all about.”
Colorado and Denver have set ambitious goals to reduce greenhouse gas pollution and are trying to regulate the various sources of that pollution, including automobiles and oil and gas drilling. Greenhouse gases such as carbon dioxide, methane and nitrogen oxide combine in the atmosphere to trap heat, contributing to global warming and climate change. They also harm human health.
Colorado’s northern Front Range is listed as a severe violator of federal air quality standards, which means drivers in the nine-county region will pay for more expensive gas during the summer and more companies will have to apply for federal air permits.
Reducing the pollution coming from large buildings is one of multiple strategies to attack the pollution problem in play by the state.
In 2021, the Denver City Council approved a plan called Energize Denver to reduce greenhouse emissions 100% by 2040 from all large buildings in the city. The plan included different requirements for buildings larger than 25,000 square feet, and those between 5,000 square feet and 24,999 square feet. The lawsuit objects to the requirements for the largest buildings, which impact about 3,000 structures in Denver.
In August, the Colorado Air Quality Control Commission, which establishes rules and regulations for emissions, created a building performance standard rule after the Colorado General Assembly passed a bill requiring it in 2021. The state regulations require buildings that are 50,000 square feet to reduce greenhouse gas emissions by 6% by 2026 and by 20% by 2030. The rules affect about 8,000 buildings in Colorado.
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To meet the new state regulations and the rules for the largest buildings in Denver, property owners will need to conduct assessments of their current emissions to establish a baseline. Then they will have to reassess every so often to figure out what progress has been made.
In the lawsuit, multiple property management companies and hotel managers wrote statements saying those assessments would be expensive, costing up to $200,000 per building depending on the complexity and size of the building.
For example, Anthony Dunn, general manager of the Downtown Denver Sheraton, wrote his energy audit could cost between $100,000 to $200,000 per building. And Jack Damioli, president and chief executive officer of the Broadmoor in Colorado Springs, wrote it would cost $10,000 to prepare annual benchmarking reports and up to $200,000 to conduct the most detailed energy audit.
Neither hotel is in compliance with the new rules and would need to spend significant capital to modify their buildings in the coming years, according to their declarations that are included in the lawsuit.
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