Trade organizations representing builders, developers and building owners joined Washington Gas & Light in filing a lawsuit Monday challenging Maryland’s emissions reduction requirements for large buildings.
The suit alleges that Maryland’s regulation requiring buildings of at least 35,000 square feet to reduce their globe-warming emissions to net zero by 2040 is unlawful because federal law gives the U.S. Department of Energy the power to set energy standards for appliances, not states.
In a filing to the U.S. District Court of Maryland, the plaintiffs argued that Maryland’s regulation is “fundamentally inconsistent with the public interest, restricts consumer choice, exacerbates the State’s housing crisis, and aims to shift the State’s energy demand to an electric system that is facing both historic and increasing electricity demand and dwindling dispatchable electricity supply.”
The regulation, called the Building Energy Performance Standard, is a cornerstone of Maryland’s climate policy, given that direct fuel use in the building sector accounted for 16% of the state’s carbon emissions as of 2020, according to a state report.
The Maryland Department of the Environment developed building regulations at the behest of the state legislature, in the Climate Solutions Now Act of 2022, that set a statewide emissions target, requiring net-zero carbon emissions by 2045.
Maryland’s regulation affects offices, warehouses, apartment complexes and other buildings at or above the size threshold. Historic buildings, elementary and secondary schools, manufacturing buildings, agricultural buildings and federal buildings can apply to be exempted.
To comply with the regulations, many building owners will have to replace existing fossil fuel appliances, such as gas furnaces and boilers, with electric alternatives, such as heat pumps and water heaters.
Other appliances like gas kitchen stoves in those buildings could also be replaced to lower emissions. Building owners can also pay fees instead of complying with the rules, which are based on the amount of excess emissions generated.
The first requirements for building owners under the law arrive in June, when they must submit a benchmark assessment to the state, showing their existing energy use. The state is providing leeway for submissions until September, according to the MDE website. The first emissions cuts are not required until 2030.
In a statement, MDE spokesman Jay Apperson said the department is reviewing the lawsuit, in coordination with attorneys at the Maryland Office of the Attorney General. He also defended the agency’s actions thus far.
“The Building Energy Performance Standards regulation was developed with input from building owners and other stakeholders, and we are working to provide guidance, technical assistance and other resources to help owners as we begin this new program together,” Apperson wrote.
About one-third of the applicable buildings already meet the BEPS standard, according to the department.
“Buildings account for a significant portion of our carbon emissions, which means reducing their pollution is essential to meeting our climate goals,” Apperson wrote in a statement. “Meeting our clean buildings goals will not only reduce pollution, it will save energy and save money.”
While retrofitting Maryland buildings will come with a substantial upfront cost, to the tune of $1 billion annually, according to a 2024 analysis conducted by a pair of DOE-funded laboratories, it would ultimately secure a net $4.5 billion in energy savings.
Monday’s lawsuit pointed to a ruling from the Ninth Circuit, which invalidated a Berkeley, California ordinance banning gas piping in new buildings. That ruling doesn’t apply outside of the circuit, which includes nine western states.
But it held that Berkeley’s ordinance violated a federal law called the Energy Policy and Conservation Act, which generally prevents states from enacting their own energy conservation testing, labeling or standards. States can apply for a waiver.
“On information and belief, Maryland has not applied for a waiver,” reads the suit. “Further, Maryland, even if it applied, could not lawfully obtain such a waiver.”
In a statement, Tim Oberleiton, a senior attorney for Earthjustice, said the argument relied on “overbroad interpretations of federal law.”
“The Maryland Department of the Environment needs every tool in its toolbox to tackle these emissions and meet our climate goals, yet Washington Gas and the building industry want to throw out these standards based on a flawed interpretation of federal law,” wrote Anne Havemann, general counsel for Chesapeake Climate Action Network.
Washington Gas also filed similar suits last year attacking Montgomery County and Washington, DC’s emissions-reduction building codes. Monday’s suit stated that Maryland’s regulation “threatens to erode” Washington Gas’s customer base, contributing to rising costs for gas customers who remain.
It also requires the utility to complete “time consuming and expensive” energy use reports for building owners, starting this year, according to the suit.
The plaintiffs are not solely the utility and nonprofit trade groups such as the Maryland Building Industry Association and the Maryland and Washington, D.C. chapters of NAIOP, now called the Commercial Real Estate Development Association.
They also include several Maryland housing developments, such as Montgomery County’s Leisure World, a gated community that is home to about 8,000 residents 55 and over.
The community includes 18 buildings covered by the Maryland regulation, which will all require “expensive retrofits,” according to the suit.
“These financial harms are compounded because Leisure World is a senior community with many residents on limited or fixed incomes, such that some owners likely will be unable to afford the increased assessments necessary to pay for the compliance work,” read the suit.
The suit stated that NAIOP members will face increased capital costs, vacancy due to construction disruptions, and be at a “competitive disadvantage” relative to large buildings in other states that don’t have to comply with the rules.
Homebuilders and remodelers, represented by the Maryland Building Industry Association, Inc., said in the suit that Maryland’s regulations will “frustrate” their ability to “meet customer preferences.”
“Many homeowners prefer using natural gas appliances for heating, hot water, and cooking,” read the suit. “The increased costs of compliance with the Maryland BEPS likely will also decrease new construction, as customers will be priced out of the market.”
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