Gov. Jared Polis’ $3.1 billion mandate to upgrade energy efficiency in large buildings takes effect on Sunday, Oct. 15.

So do civil penalties of up to $5,000 per month for buildings not in compliance with Air Quality Control Commission Rule 28.

Critics said the rule is unprecedented, and, in some cases, may be unachievable. Some also argued that the authority the state is exercising to come up and implement the rule exceeds constitutional norms.  

State commissioners maintained that passing the rule is both necessary and mandated by the enabling statute, House Bill 21-1286, which imposes reductions in energy use of 7% by 2026 and 20% by 2030 below 2021 levels. The law’s authors said buildings represent a “significant source of greenhouse gas pollution” in Colorado.

“We’re doing this because there’s been a certain failure on the national level, and, I think, maybe that’s the way this country’s going,” commissioner Jon Slutsky said at a recent hearing.

“The states have to chip in and take care of this business and other business. So, I came into this hearing with the idea that we were going to take care of building emissions. And, as long as we take care of our legislative mandate, if we do more, that’s all right. I’m on board with that,” Slutsky added.

Environmental attorney Paul Seby, who represents the Colorado’s Department Association, the Apartment Association of Metropolitan Denver, and the Pikes Peak Regional Building Department, argued the state has not shown that the standards are feasible.  

“The burden has not been met by the (Air Pollution Control Division) to show that performance standards are achievable,” he said.

Building owners and management companies said what the rule really amounts to is a mandatory electrification requirement. Critics also said renovations that meet the initial 7% reduction by 2026, just 26 months away, may be impossible to achieve due to planning, permitting, and supply-chain issues.

The Polis administration has argued electrification mandates will “save people money.” 

Tim Walsh, CEO of Confluence Companies, which builds and manages multi-family housing up and down the Front Range of Colorado, disagreed.

“We are already constraining the production of natural gas, which is driving up the cost of producing that electricity. So, what he said is completely hypocritical,” Walsh said. “He’s going to make harder and harder for a low wage earner to afford to live in Colorado and pay their utility bills.”

A serious obstacle to the mandate is the supply chain, specifically for the kind of equipment building owners would need to procure to meet standards, according to Walsh.

“Can you imagine the equipment doesn’t exist in the marketplace to do that?” Walsh previously told The Denver Gazette. “I mean you’d have to upgrade electrical panels, upgrade transformers, and then just purchasing the actual heat pump or electric hot water heater or electrical equipment. Some items are (on an) 18-month lead right now. So, I mean, the industry wouldn’t be able to respond to that requirement.”

Under the Greenhouse Gas Reduction Roadmap, building owners face a 100% carbon-free Colorado mandate by 2050.

Other critics said the governor’s plan, even if it achieves its goal, is futile, particularly if other parts of the world, notably China, continue with current emission levels.

Jake Fogleman, an energy policy analyst at the Denver-based Independence Institute, cited a report from the John Locke Foundation in North Carolina, which claimed that every day it takes China only eight minutes to “dwarf Colorado’s daily carbon emissions.”

“Here’s another interesting statistic,” Fogleman told The Denver Gazette. “We’re burning more coal today globally for power production than we ever have. It’s going up, not going down, and all that pollution is going up into the air in third world countries. So, what we do in Colorado won’t even move the needle on reducing greenhouse gases, but it will be a huge economic impact to our citizens here.”

Supporters said such an argument, if embraced, would mean doing nothing to combat emissions. They also argued that the transition away from fossil energy is good for people’s health and the environment, and that, ultimately, it would mean using a more sustainable and cheaper source of power.      

Meanwhile, the Colorado Energy Office disputed the claim the regulation effectively amounts to building electrification.

“The BPS rules will not force any building owners to electrify their buildings,” said Ari Rosenblum, spokesperson for the Colorado Energy Office in an email reply to questions from The Denver Gazette, referring to building performance standards. “Building owners have multiple pathways to comply with the BPS, which allows building owners to determine the most cost-effective path, given their unique circumstances.”

Walsh, the developer, called the “multiple pathways” claim by the energy office a sham, arguing the the true intent of the regulation is forced electrification, the ultimate goal of which is to eliminate the use of natural gas. 

“Everybody seems to be just in this collective illusion that if we switched to electricity, somehow the cost is going to go down and we’re going to save the environment,” he said. “We’re going to be disproportionately hurting the hardest working Coloradans and the lowest wage earners by implementing this rule.”

Walsh also said dwellers in older buildings will end up paying for upgrades – from windows or insulation to central boiler hot water heating electrification to swapping gas appliances for electric – one way or another, and that it’s likely many would be evicted during renovations.

Walsh added that major reconstruction to replace existing gas infrastructure with electric will trigger asbestos abatement requirements, and all of the tenants of those buildings will be required to vacate their apartments.

Rosenblum countered that the rule offers flexibility.

“Building owners can also request target and timeline adjustments, if needed,” Rosenblum said. “With this built-in flexibility, it is simply not the case that buildings will need to evict residents and conduct major renovations to meet BPS targets.”

Rosenblum also pointed to help that’s coming to some building owners.

“The state is taking advantage of all available opportunities to maximize the savings from the BPS for owners of multifamily housing buildings in low-income communities,” Rosenblum said. “Some of the cost will be covered by applicable programs that building owners/managers apply to. Not all of the cost will be passed onto tenants. Even then, in terms of overall spending, the benefits of implementing this rule are far greater than the cost.”

Rosenblum said the state is looking at options to provide tenants with temporary housing in “rare cases where tenants need to vacate a building to address health and safety concerns as a part of an energy improvement.”

Will Toor, director of the Colorado Energy Office, said adequate safety measures exist in the regulation for those who can prove it’s neither possible nor economically feasible to meet them.

A state economic impact earlier report said the direct cost to large building owners for capital expenditures, reporting, and management is $3.1 billion – expenses that will be incurred by the 20% energy reduction deadline set for 2030.

The report said building owners will see savings of $4.6 billion in electricity costs and $577 million for natural gas, totaling $5.1 billion by 2050. The report also cited $1.24 billion in savings from the social cost of eliminating 26 million metric tons of CO2-equivalent gasses.

“Building owners might pass on some or all of the cost of implementing this rule to their tenants, which may lead to higher rents,” the report said.

Seby, the attorney, warned that the fines building owners face are substantial: For failing to submit the annual greenhouse gas benchmarking data, the fine is up to $500 for a first violation and up to $2,000 for each subsequent violation.

It’s far worse if the building owner can’t make the building compliant, or just refuses to do so, according to Seby.

In a joint email statement from the energy office and the governor’s office, Rosenblum said, “For the performance standards, a building owner would be considered non-compliant if they fail to meet their established 2026 or 2030 target by the required deadline for each year they must comply with the target. The initial violation is subject to a civil penalty of up to $2,000. A subsequent violation is subject to a civil penalty of up to $5,000. Under the BPS rule, subsequent violations may occur on an individual monthly basis if the building owner fails to demonstrate compliance with the performance standards or progress towards meeting the standards.”

All civil penalties, fees, gifts, grants, donations, and legislatively appropriated funds go into a climate change mitigation and adaption fund available only to the energy office “for the purpose of financing and administering the building performance program.”

“The legislature has been busy the last two years totally reversing our state’s entire history and custom and practice on home rule through building codes and on these kind of greenhouse gas things,” Seby said. “The legislature totally quietly dismantled any home rule considerations.”

“It’s an egregious delegation of the legislature’s authority with no statutory bounds to it. They’re not an agency, so they’re not subject to all of the legal requirements and sideboards that other agencies have to follow,” Seby added. “The governor declared war on average, normal Coloradans going about their lives, and people who own buildings better watch out because they’re all of a sudden blacklisted greenhouse gas emitters. This is a gross expansion of government authority, off the books, off of the normal constitutional separation of powers.”