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September 2013

Chicago Passes Mandatory Energy Benchmarking Ordinance

By Kristen M. Boike, Donald S. Horvath and Michelle M. McAtee

The Chicago City Council recently passed the Building Energy Use Benchmarking Ordinance of the City of Chicago1 (the "Ordinance"), and as a result have joined eight major cities and two states2 that require some form of energy benchmarking for buildings. While there are some exceptions, described below, the Ordinance generally obligates the owners of buildings that contain more than 50,000 square feet to submit information to ENERGY STAR Portfolio Manager, a free tool administered by the United States Environmental Protection Agency, to create a benchmark of energy consumption for buildings covered by the Ordinance. The benchmark will then be shared with both the City, and ultimately, the public.

Timeline

The Ordinance allows for staggered reporting, based on the square footage of the building and the use of the building. A summary of this timeline is set forth below, subject to the exceptions also set forth below.

June 1, 2014:  Any building, or group of buildings with the same PIN, containing 50,000 or more square feet (excluding buildings with at least 10% residential occupancy)

June 1, 2015:  Any building, or group of buildings with the same PIN, containing between 50,000 and 250,000 square feet (excluding buildings with at least 10% residential occupancy)

and

Any building, or group of buildings with the same PIN, containing 250,000 or more square feet and containing at least 10% residential occupancy

June 1, 2016:  Any building, or group of buildings with the same PIN, containing between 50,000 and 250,000 square feet and containing at least 10% residential occupancy

Exceptions and Exemptions

The Ordinance does not require owners of certain types of buildings to participate in the benchmarking. The Ordinance does not mandate benchmarking where more than 10% of the building is used for industrial facilities, storage units, or hazardous use units. In addition, the commissioner may, for any particular calendar year, exempt the owner of a building from benchmarking if the building is presently facing financial distress,3 the building had average physical occupancy of less than 50% for the benchmarking period, or the building was newly constructed and the certificate of occupancy was issued during that same calendar year.

Enforcement

Failure to comply with the Ordinance will subject the owner to a fine of up to $100 for the first violation and an additional fine of up to $25 per day that the particular violation continues.

Disclosure

While energy consumption information about an individual building will be available to the City of Chicago after reporting, such information will not be available to the public for any particular building in connection with the building's first year of required benchmarking. Information about a building's energy consumption will be available publically with respect to the second and subsequent calendar years of a building's required benchmarking. In no year, however, will the City of Chicago release reported benchmarking information for buildings with more than 10% of floor space dedicated to data centers, TV studios, or trading floors.

Other Considerations

In addition to an owner's decision about whether or not to improve energy efficiency in its building as a result of the upcoming transparency associated with the Ordinance, an owner (as well as tenants and property managers) should consider other implications. First, the Ordinance requires that an owner maintain the building's tracked information for a minimum of the three years after the reporting of the information, and that all information transmitted pursuant to the Ordinance be verified in connection with the first year of reporting, and every three years thereafter, by a licensed architect, engineer or other professional recognized by the City.4 Owners should review their existing property management agreements to determine whether the agreements are flexible enough to require the property manager to collect and submit the information required for benchmarking and retain information in an acceptable manner. Second, the Ordinance requires tenants to provide necessary information to the landlord in connection with the building's benchmarking when all necessary energy information cannot otherwise be obtained by the owner. Owners should consider whether this obligation is addressed in their existing and proposed leases. In addition, owners should review their leases to ensure that tenants are required to cooperate generally with actions taken by the owner with respect to energy efficiency. Third, tenants should anticipate that some landlords will endeavor to upgrade certain features of a building to improve energy efficiency and should determine whether the costs of those improvements can be passed through as operating expenses under their leases.

Conclusion

The Ordinance presents new obligations and opportunities for building owners and tenants in Chicago.5 Building owners and operators will need to take appropriate actions so that they can comply with the Ordinance and recoup costs associated with energy efficiency improvements, where appropriate. Similarly, tenants will need to pay particular attention to the Ordinance, and the implications, financial and otherwise, that flow from being a tenant in a building that is subject to the Ordinance.

_________________

1 Title 18 of the Municipal Code of Chicago will be amended to add Chapter 18-4. 

2 New York City, Philadelphia, Washington, D.C., Minneapolis, Boston, Seattle, Austin, San Francisco, California, and Washington State

3 The Ordinance provides that, in order to show financial distress, the building must either (i) be the subject of a qualified tax lien sale or public auction due to property tax arrearages, (ii) be controlled by a court appointed receiver, or (iii) have been acquired by a deed in lieu of foreclosure. 

4 The licensing requirement may be waived if the verification would cause undue financial hardship. 

5 The City of Chicago estimates that the Ordinance will apply to approximately 3,500 existing buildings.

*This post was initially published on September 24, 2013, as a Practice Alert by Jenner & Block’s Real Estate group.

EPA Proposes New and Differing Carbon Emission Limits for Future Natural Gas-Fired and Coal-Fired Power Plants

Sigel_Gabrielle_COLORBy Gabrielle Sigel

 

On September 20, 2013, U.S. EPA rescinded its first attempt and proposed new rules to establish New Source Performance Standards (NSPS), i.e., national emission limits, for carbon dioxide (CO2) emitted from new electric power plants. EPA's proposed approach is to set different limits, and different technology, depending upon whether the electric generating unit (EGU) is natural gas-fired or coal-fired plant. For coal-fired EGUs, EPA proposed a CO2 limit that requires the use of carbon capture and storage (CCS) technology for at least some CO2 emissions, and sets two different limits based on the averaging period used. Natural gas EGUs have two different limits based on their size, but CCS is not to be required for any of those EGUs. EPA's new proposed rule is a significant departure from its original proposed rule for the electric utility sector, so at the same time it proposed the new NSPS, it formally rescinded its original proposal.

As background, in April 2012, EPA proposed a single electricity output-based emission limit of 1,000 pounds (lb) of CO2 per megawatt-hour (MWh) of gross electrical output for all new fossil fuel-fired plants. This emission limit was reached by determining the CO2 emissions only from modern, newly constructed natural gas combined cycle facilities. However, no new coal-fired plant would be able to use feasible and proven technology and still meet the 1,000 lb. CO2/MWh limit. Thus, the 2012 proposed standard was based on an EPA calculation that no new coal-fired units would be built in the near future.

EPA received 2.5 million comments in response to its 2012 proposed rule, more comments than in response to any other regulation in its history. Many of those comments criticized EPA for its foundational assumption that no new coal plants would be built and accused EPA of plotting the end of coal as an energy source. In response to these comments, EPA rescinded its proposed rule. In doing so, EPA explicitly recognized that its prior modeling did not consider that (a) since April 2012, some coal-fired units had reached advanced stages of construction and development; and (b) several utilities may need to build additional coal-fired units either due to higher than usual electricity demand and/or higher than expected natural gas prices. Thus, EPA proposed to set the NSPS for coal-fired plants at a higher emission limit than for natural gas EGUs, but required coal-fired plants to use of CCS to control their emissions.

Under § 111(b) of the Clean Air Act, EPA is required to set NSPS to limit emissions of "air pollutants" from stationary sources. NSPS are established based on "BSER" – the best system of emission reduction for the particular emission source. EPA already has issued NSPS for other pollutants emitted by power plants, but not for CO2, which was recognized by the U.S. Supreme Court as an "air pollutant" in Massachusetts v. EPA, 549 U.S. 497 (2007).

The new proposed rule recognizes that BSER is different for natural gas-fired electricity generating units than it is for coal-fired units. Thus, EPA set different NSPS based on different BSER for different types of EGUs. Specifically, for natural gas EGUs, EPA proposes to limit emissions to:

  • 1,000 lb. CO2/MWh for units generating greater than 850 mm BTu/hr (large units)
  • 1,100 lb CO2/MWh for smaller units

All new natural gas-fired units would need to use the most current natural gas combined cycle (NGCC) technology in order to meet this limit, but EPA recognized that, even with this technology, smaller NGCC units are less efficient. EPA specifically rejected requiring CCS for any NGCC units because the technology is not used or proven effective to control emissions from those units.

For fossil fueled-fired utility boilers and integrated gasification combined cycle (IGCC) units, which primarily use coal or other solid high-carbon feedstock, EPA proposed two alternative limits:

  • 1,100 lb. CO2/MWh over a 12-operating month period; or
  • 1,000 lb - 1,050 lb. CO2/MWh over an 84-operating month period.

EPA provides the choice of a lower limit, but longer compliance period in order to encourage CCS technological advances and allow start-up time for that new technology. To meet either of these numerical limits, a new unit would have to use CCS to capture some of its emissions. EPA rejected requiring full CCS because of its cost, putting the price of electricity at almost three times the cost of natural gas-fired units. However, EPA estimated that partial CCS would allow prices to be within the range of other non-natural gas-fired electricity generated options, such as nuclear, biomass, and geothermal.

EPA estimates that a coal-fired unit meeting the 1,100 lb. CO2/MWh standard would emit 30-50% less CO2 than a coal-fired unit without CCS. Anticipating that its choice of CCS, even on a partial basis, will be criticized as impermissibly imposing an infeasible technology, EPA noted that two IGCC projects currently use partial CCS and two others are in advanced stages of development. EPA also stated that almost all coal-fired EGUs in planning stages intend to implement CCS on some level.

Unlike the 2012 proposed rule, EPA is planning to apply its new rule to all new power plants in the planning phase which have not yet begun construction, except for perhaps one facility that is in an advanced stage of planning, but which is not designed to meet the new emission standard. The new rule would not apply to existing EGUs or those undergoing modification or reconstruction. The new rule also would not apply to EGUs that sell less than one-third of their power to the grid; are liquid oil-fired stationary combustion turbine EGUs; or do not burn any fossil fuels, such as those burning only biomass.

EPA will be receiving public comments on this proposal for 60 days after its publication in the Federal Register, but stated its intent to issue a final rule "in a timely manner," as directed by the President's June 2013 Climate Action Plan. In the same announcement of its proposed rule for new power plants, EPA reiterated its intent to issue proposed and final rules for existing power plants by June 1, 2014 and June 1, 2015, respectively.

Energy and EPA Defend Administration’s Climate Change Approach in Congress

Sigel_Gabrielle_COLORBy Gabrielle Sigel

 

On September 18, 2013, the House Committee on Energy and Commerce's Subcommittee on Energy and Power held a hearing on "The Obama Administration's Climate Change Policies and Activities" in response to the President's Climate Action Plan released on June 25, 2013. The Subcommittee, chaired by Congressman Ed Whitfield (R-Ky), had invited thirteen federal agencies to attend the hearing. Energy Secretary Ernest Moniz and EPA Administrator Gina McCarthy appeared to testify on behalf of the Administration.

In the majority's memorandum announcing the Subcommittee's hearing, its purpose was described as part of the subcommittee's oversight of federal agencies' work on the issue of climate change. As background, the memorandum noted that the federal government had been spending billions on climate change related issues each year since 1993. The memorandum emphasized, however, the Obama Administration's increased focus on the issue.

In prepared remarks, EPA Administrator McCarthy stated that, "Responding to climate change is an urgent public health, safety, national security, and environmental imperative that presents an economic challenge and an economic opportunity." She described the President's plan as directing federal agencies to cut carbon pollution in America, prepare for climate change impacts, and lead international efforts, all within "existing executive authorities." Administrator McCarthy described EPA's role in all three activities, but primarily focused on EPA's role in addressing carbon pollution. She highlighted EPA's role in developing vehicle GHG emission standards and for controlling emissions from new and existing power plants.

In Secretary Moniz's prepared remarks, he began by emphasizing that the scientific basis for the "drivers of climate change" and the likely expected impacts. In describing the Department of Energy's role in the President's Climate Action Plan, he described the role of various methods of energy production in reducing CO2 emissions. He focused in particular on the need for energy efficiency and the development of technologies for a "low-carbon future." The principal action his agency has taken in the short term is to issue a draft solicitation for $8 billion in loan guarantees for advanced fossil energy technologies. He also stated that coal continued to play "a key role in our energy mix," and that his agency sought to invest in advancements in clean coal technologies. He concluded by describing the President's plan as "an all-of-the-above approach to ensure that thisenergy is used wisely and cleanly in a low carbon economy…."

The questioning of Secretary Moniz and Administrator McCarthy by Congressional members of the Subcommittee included the following topics:

  • The Administration's commitment to coal and nuclear power, both of which the Administration's representatives agreed played important roles in the country's energy future.
  • The effect of the upcoming proposed New Source Performance Standards for new power plants and the future rules for existing plants. Administrator McCarthy refused to discuss any details of the proposed rule to be released two days later. Chairman Whitfield later said that the Subcommittee would hold a hearing on the new proposed rule soon after it was released.
  • Whether there was scientific support for the anthropogenic source of climate change. Both Republicans and Democrats stated their con and pro positions and submitted competing studies into the record.
  • The President's emphasis on pursuing climate change strategies within his executive authority, which Republicans found offensive to their legislative powers.

The day before the hearings began, Senate Minority Leader Mitch McConnell (R-Ky) introduced legislation to prevent EPA from issuing rules regulating CO2 emissions from power plants unless the rules were "explicitly authorized by an Act of Congress." (S. 1514) Unlike Congress's relatively quiet response to the Administration's first-term regulations of CO2 under the Clean Air Act, Congress now promises to respond earlier in the regulatory process to President Obama's use of executive power to address climate change.

EPA Releases Proposed Carbon Pollution Standard For New Power Plants

Torrence_Allison_COLORBy Allison A. Torrence

 

On September 20, 2013, the U.S. EPA announced a Proposed Carbon Pollution Standard for New Power Plants. The announcement marks the first major step under President Obama's Climate Action Plan announced this July. The proposed rules include the following limits on carbon dioxide (CO2) emissions from new coal-fired power plants:

  • 1,100 pounds of CO2 per megawatt-hour, over a 12-month period; or
  • 1,000 – 1,050 pounds of CO2 per megawatt-hour, over a 7-year period

The proposed rules include the following limits on CO2 emissions from new natural gas-fired power plants:

  • 1,000 pounds of CO2 per megawatt-hour for larger units
  • 1,100 pounds of CO2 per megawatt-hour for smaller units

According to the EPA, "Power plants are the largest stationary source of carbon pollution in the United States: about one third of all greenhouse gas pollution in the U.S. comes from the generation of electricity by power plants." However, the current proposal addresses only emissions from new power plants. Standards for existing power plants are still forthcoming, but are expected to be less stringent than the standards proposed for new power plants.

The proposed rule will be published in the Federal Register, and EPA will accept written comments on the proposed rule for 60 days following publication.

More information about the Proposed Carbon Standards for New Power Plants can be found on EPA's website.


Will Phthalates Go The Way of BPA?

Siros_Steven_COLORBy Steven M. Siros

 

Recent actions taken by retailer Walmart may have sounded the death knell for phthalates, especially with respect to personal care products.  Phthalates are a group of chemicals that are typically used to soften and increase the flexibility of plastics and vinyl. In chemical mixtures, phthalates can also carry other chemicals and are often found in fragrances and other consumer products. Certain categories of phthalates have been found to have caused adverse reproductive effects on laboratory animals, albeit at concentrations many orders of magnitude higher than typically found in consumer products. Phthalates are already subject to extensive regulation in both the United States and the European Union. For example, phthalates are on the list of California Proposition 65 chemicals that require warnings if sold in California and are subject to use prohibitions under the Consumer Product Safety Improvement Act in children's toys and certain child care articles. 

In September 2013, Walmart released its Policy on Sustainable Chemistry in Consumables which will require disclosure of ingredients contained in household cleaning, personal care, beauty and cosmetic products by January 2015. Walmart also identified a list of ten "high priority chemicals" which it targeted for continuous reduction, restriction and elimination. Although Walmart did not identify which specific chemicals are on its list, Procter & Gamble's and Johnson & Johnson's recent announcements that they would be eliminating phthalates from their beauty and personal care product lines would seem to suggest that phthalates made Walmart's list. 

Like BPA several years ago, phthalates are one of several groups of chemicals that have been recently targeted by various consumer activists groups. These groups have been very successful in convincing major retailers to stop selling and consumers to stop buying products containing certain chemicals such as BPA and phthalates. In light of these efforts, it is likely that even in the absence of action by U.S. EPA and other regulatory entities, phthalates and other similarly situated chemicals will be phased out of personal care products in the near future. 


Live: Costa Concordia Salvage Operation – Italy Anticipates Minimal Environmental Impacts

Grayson_Lynn_COLORBy E. Lynn Grayson

 

Follow live as the Costa Concordia, which capsized off Giglio Island, Italy, is raised in the biggest salvage operation of its kind in maritime history. Progress has been made and the ship is slowly rightsizing with efforts expected to continue at least through Tuesday.

The efforts of 430 professionals working round the clock to right the Costa Concordia have come up against the complex reality of what has been called the most challenging salvage operation ever performed, with the granite rocks underneath the ship and rough seas.

Rescue teams have managed to stabilize the ship, which is anchored to underwater granite with four submarine anchor blocks and wires, each able to withstand a thousand-ton force. Twenty-five welders are working to reinforce the hull of the Concordia on the sea side, where the wires and hull projections used for stability and to pull up the vessel will be attached.

Salvage workers are drilling holes into the granite that will support six undersea platforms that should arrive in February. On the sea side, between the platforms and the rocks, salvagers will also place an artificial bottom made of 18,000- to 20,000-ton cement bags – about the size of three-quarters of a football field – to create an even surface on the slanting sea bottom.

Once it is sea-ready, the ship will be pulled to a large and deep harbor located a convenient distance from the shipwreck site, although few harbors in Italy fit that description.

Over all, the quality of the water around the half-submerged ship has not been significantly polluted, according to Tuscany's Regional Agency for Environmental Protection, which is in charge of monitoring the site. A fluid spill from the ship's engine room last month, and other small spills, are not of great concern, the agency said.

Investigators are expected to seek indictments of the ship's captain, Francesco Schettino, eight other crew members and Costa Cruises officials in February. Charges could include manslaughter, causing a shipwreck, abandoning ship before passengers were evacuated and causing environmental damage.

View a live cam of the salvage operation at http://www.telegraph.co.uk/news/worldnews/europe/italy/10311659/Costa-Concordia-salvage-operation-live.html.

 

 


United Nations Global Compact Releases Its Global Corporate Sustainability Report 2013

Essig_Genevieve_COLORBy Genevieve J. Essig

 

Yesterday, the United Nations Global Compact released its Global Corporate Sustainability Report 2013, which reviews information received from nearly 2,000 companies around the world regarding their efforts to incorporate corporate sustainability / corporate responsibility principles into their businesses and analyzes “the state of corporate sustainability today.” (6).  According to the authors, the report is also intended as a “guide” that “outlines a comprehensive set of actions that companies of all sizes can take to ingrain human rights, labour, environment and anti-corruption principles into their corporate DNA.” (Id.).  The four key findings of the report are as follows:

  1. Companies are moving from good intentions to significant action.
  2. Large companies still lead the way.
  3. Supply chains are a roadblock to improved performance.
  4. Companies see the big sustainability picture.

With respect to the first finding, the authors observe that companies are making commitments and defining goals with respect to sustainability, but are still lagging when it comes to action, as often steps to action require greater investment of time and resources.  The authors note that the most progress has been made so far in the areas of labor rights and environment.  As for the second finding, the report finds that smaller companies encounter barriers to sustainability progress that are “more fundamental” than those encountered by larger companies, primarily a lack of financial resources and knowledge. (16).  Regarding supply chains, the report notes that, while “a majority” of companies have sustainability expectations for their supply chains, few are taking actions to track or support compliance with these expectations. The final finding represents survey feedback indicating that “companies feel they are in a position to help address urgent sustainability challenges.” (20).  Climate change was cited by respondents as one of the top global sustainability challenges; it was also listed as one of the areas in which companies felt they could have the most positive impact.

The United Nations Global Compact is a voluntary corporate responsibility initiative under which member businesses commit to aligning their operations and strategies with key principles in the areas of human rights, labor, environment, and anti-corruption.  The initiative includes a transparency and accountability element, “Communication on Progress,” that requires participating companies to issue an annual public disclosure to stakeholders on progress made in implementing the principles and in supporting broader UN development goals.


EPA, OSHA and ATF Issue Ammonium Nitrate Chemical Advisory

Grayson_Lynn_COLORBy E. Lynn Grayson

 

EPA, OSHA and ATF have issued a chemical advisory that provides information on the hazards of ammonium nitrate (AN) storage, handling and management. This action supports the goals of President Obama's August 2013 executive order on "Improving Chemical Facility Safety and Security." The advisory provides lessons learned for facility owners and operators, emergency planners and first responders from recent incidents, including the explosion in West, Texas, involving AN in order to prevent similar incidents.

The advisory takes steps now to reduce the risks associated with AN to workers, first responders and communities. It is part of an ongoing coordinated federal government effort to improve chemical safety with regards to AN and includes information on ensuring proper building design, storage containers and fire protection at their locations; learning from other accidents; and knowing and understanding the hazards that exist when developing their emergency response plans.

Earlier this month, President Obama directed the federal government to improve operational coordination with state and local partners; enhance federal agency coordination and information sharing; modernize policies, regulations and standards; and work with stakeholders to identify best practices to improve chemical safety.

President Obama established the Chemical Facility Safety and Security Working Group. To this end, this advisory was developed by working group members and was facilitated by the working group process.

View the advisory and more information on EPA's risk management program: http://www.epa.gov/emergencies/content/rmp/index.htm.

View President Obama's Executive Order: http://www.whitehouse.gov/the-press-office/2013/08/01/executive-order-improving-chemical-facility-safety-and-security.

 


ECHA Reports Significant Non-Compliance And Limited Enforcement Of REACH Requirements

Siros_Steven_COLORBy Steven M. Siros

 

According to a recent report issued by the European Chemicals Agency (ECHA), one out of every ten companies was found to be using at least one unregistered chemical substance. Under the REACH regulations, companies are prohibited from using chemical substances unless those substances were registered on or before December 1, 2008. In addition, the ECHA report found that 67 percent of the inspected companies were in violation of one or more provisions of REACH or the Classification, Labeling and Packaging regulations (which complement the REACH regulations). Notwithstanding the fairly systemic non-compliance noted in the report, enforcement was very sporadic with fines being levied in only eight cases and criminal proceedings being initiated in only four cases (compared to 789 total instances of non-compliance). Under REACH, enforcement authority is vested with each individual member state. Responding to the fairly low incidence of enforcement actions by individual member states, ECHA issued a statement noting that failure to comply with REACH's registration requirements constituted a "major" breach of REACH and that the individual member states should adopt an enforcement approach that is "proportional, effective and dissuasive." 

Please click here to see a copy of the ECHA report.


New Preliminary Risk Data Available For Explosives

Grayson_Lynn_COLORBy E. Lynn Grayson

 

EPA is announcing a public meeting to provide an opportunity for public input and discussion on preliminary materials for Integrated Risk Information System (IRIS) chemicals prior to the development of the assessments for the following chemicals:

  • ethyl tert-butyl ether (ETBE)
  • tert-butyl alcohol (tert-butanol)
  • hexahydro-1,3,5-trinitro-1,3,5-triazine (RDX)

New materials recently posted provide EPA's strategy for identifying relevant scientific literature for its planned IRIS assessment of RDX, preliminary health effects identified, and dose levels studies causing some or no effects. The documents are among information on five chemicals EPA released prior to its first public bimonthly IRIS meeting scheduled Oct. 23-24.

The chemicals and associated materials under discussion include:

ethyl tert-butyl ether (ETBE) – Chemical Manager: Keith Salazar

  • Preliminary draft literature search and associated strategy and evidence tables for ETBE 
  • All references sorted by author 
  • Systematic review of the ETBE literature
  •  Opportunity to provide comments on these materials in the ETBE docket

tert-butyl alcohol (tert-butanol) – Chemical Manager: Janice Lee

  • Preliminary draft literature search and associated strategy and evidence tables for tert-butanol
  • All references sorted by author (tert-Butanol)
  • Systematic review of the tert-Butanol literature
  • Opportunity to provide comments on these materials in the t-butanol docket

hexahydro-1,3,5-trinitro-1,3,5-triazine (RDX) – Chemical Manager: Louis D'Amico

  • Preliminary draft literature search and associated strategy and evidence tables for RDX
  • All references sorted by author (RDX)
  • Systematic review of the RDX literature 
  • Opportunity to provide comments on these materials in the RDX docket 

More information about newly posted data and upcoming meeting is available at http://www.epa.gov/iris/publicmeeting/iris_bimonthly-oct2013/mtg_docs.htm.