When Colorado regulators passed emissions-reduction regulations on large commercial buildings in 2023, property managers decried the infeasibility of complying with the rules. A group of organizations filed a lawsuit. And sector leaders told the state they need help.
So, supporters of those 2023 rules, including the Colorado Energy Office, brought a bill this year that seeks to ease some of the compliance burdens on building owners and offer more state aid toward getting them to achieve a 20% sector-wide cut in emissions by 2030. But after two hours of discussion over House Bill 1269 on Thursday, building leaders said the details of this bill do not yet constitute the help they need.
The bill, from Democratic Reps. Jenny Willford of Northglenn and Alex Valdez of Denver, removes an interim requirement that affected buildings — about 8,300 statewide that are larger than 50,000 square feet, including apartment buildings — cut emissions 7% by 2026. It also allows their reductions to be made from a 2019 benchmark rather than one from 2021, a post-pandemic time when offices were less occupied and used less energy, and it allows the CEO to offer both technical and financial help in meeting their goals.
However, to fund that assistance, HB 1269 also sets up a new enterprise that will charge the owners of each affected building $400 annually, and it tells the Colorado Air Quality Control Commission to make rules to achieve even greater sector emissions cuts by 2040. Plus, it moves enforcement authority to the Colorado Air Pollution Control Division, which can institute fines of as much as $47,500 per day by 2030 on noncompliant buildings that also are dealing with rising vacancies and revenue declines.
Why bill sponsors are bringing the legislation
Valdez emphasized to the House Energy & Environment Committee that the bill is an effort to ease regulations and make it easier to comply after a coalition of building managers and business groups sought compromise with existing rules. Another part of HB 1269 states that when affected buildings are within cities that have their own rules to cut emissions from the sector, such as Denver, compliance with equally strict or stricter local codes is enough to signal compliance with state law.
“Colorado has been a leader in this area,” said Christine Brinker, senior buildings policy manager for the Southwest Energy Efficiency Project. “And this gives us the chance to remain a leader in this area while supporting the buildings in which we live, work and play.”
But in addition to opposing the fees and higher penalties HB 1269 imposes, Stephen Shepard, chief staff officer for the Denver Building Owners and Managers Association, said sector leaders have asked for amendments they haven’t yet received. Those include more industry seats on the enterprise board and the task force that will suggest 2040 rules, a feasibility study on the costs of compliance for the industry and penalty guardrails beyond an existing provision saying officials will seek to mitigate issues before assessing fines.
For David Spriggs, a small-business operator who owns his building, the rules will cost him thousands of dollars for consulting, tens of thousands of dollars in compliance reporting and more than $1 million for energy-efficiency upgrades. This, he said, is an issue that goes beyond building-sector regulation because regulatory costs will force local owners to sell their buildings or avoid expansion that could require bigger structures.
“The state of Colorado spends millions of dollars to attract big companies while at the same time creating regulations that disincentive small business,” Spriggs said.
Building upgrades hold carbon-reduction benefits
Still, the committee passed HB 1269 by a Democrat-led, party-line vote of 9-4 late Thursday afternoon. It heads next to the House Appropriations Committee.
If the bill becomes law, the CEO will bring on another one to two employees to work with building owners on compliance, paying for them and assistance funding out of the $2.6 million it expects to collect each year through its new enterprise, bill backers said. And it can work with the sector on compliance options, including installation of energy-efficient appliances, addition of insulation to building interiors and the conversion of buildings to electricity or heat pumps to reduce the usage of emissions-producing natural gas.
The new regulations are expected to reduce greenhouse-gas emissions between 1 million and 1.5 million tons annually by 2030, said Clay Clark, APCD’s climate-change program director. He and others also added that the division tries to enact fines only against businesses that are repeat offenders or ignore repeated calls to come into compliance.
“So, I think that’s an unfounded worry,” Valdez said of the suggestions that buildings that try but can’t comply will face millions of dollars in fines annually.
Building owners and managers say they need more
Some of the changes and an amendment added to HB 1269 on Thursday are very helpful, particularly conversion of the near-impossible 2026 deadline to a recommendation on the way to the 2030 requirements, industry leaders said. But many issues remain with the bill.
For example, requiring the creation of a building-funded enterprise to allow the CEO to offer more help to the industry means that structure owners will take on more cost before they receive any aid, Shepard and others said.
“It would seem inefficient to charge the same people you are looking to help, especially with the loss of some of that fee to administrative expenses,” said Reagan Shane, legislative and policy advocate for Colorado Counties Inc.
Publicly owned buildings, such as those operated by the state governments and local governments. will not have to pay fees and won’t incur fines, according to an amendment added Thursday. That came as a relief to groups like the Colorado Municipal League but an annoyance to some Republican committee members, like Rep. Ken DeGraaf of Colorado Springs, who noted the state is exempt from the rules it’s forcing onto the private sector.
Negotiations continue on bill
And even with the delay in enforcement, expenses of converting gas heating systems to electricity will be so high that tenants, particularly those in apartments, will see rents rise significantly, Colorado Apartment Association General Counsel Andrew Hamrick said. And those costs could scare off businesspeople looking to buy buildings and create jobs, like a client that commercial real estate advisor Ryder Fink described as walking away from a plan to open an indoor recreational facility in Denver’s Sun Valley neighborhood because he learned that renovations needed for compliance would cost him $500,000.
“I encourage you, yes, to think of the building owners — but also to think of the businesses,” said Fink, testifying for commercial property association NAIOP.
Shepard said the Energy Forward Coalition will continue negotiating with bill sponsors and the CEO to see if it can get more relief as the bill moves ahead.