Effective October 15, 2023, Colorado’s Air Quality Commission (the “Commission”) approved Regulation 28, titled “Building Benchmarking and Performance Standards,” which requires “covered building” owners to meet certain energy use targets or implement greenhouse gas emissions reductions to increase efficiency, as part of Colorado’s broader plan to reduce emissions by 50% prior to 2030.[1] A ”covered building” under Regulation 28 includes any residential or commercial building over 50,000 square feet. This regulation impacts approximately 8,000 buildings in Colorado.
Regulation 28 does not apply to storage facilities, stand-alone parking garages, buildings in which over half of the gross floor area is used for manufacturing, industrial, or agricultural purposes, or single-family homes, duplexes, or triplexes.[2] The applicability of Regulation 28 to owners of public buildings, which includes those owned by a governmental entity and educational institutions, is limited.
Regulation Requirements
Covered building owners must report benchmarking data for the previous calendar year to the Colorado Energy Office (“CEO”) and pay an annual fee to the CEO of $100 per covered building, which payment does not apply to owners of public buildings.[3] The annual report must specify the owner’s plan to reduce the building’s greenhouse gas emissions in order to achieve Colorado’s 2026 target to reduce emissions by 7%.[4] In 2028, each annual report must address the owner’s plan to meet the 2030 target to reduce emissions by 20%.[5] Owners may apply to the CEO for a waiver, extension of the deadline, or an exemption from these reporting requirements.
Pathways to Compliance
In order to meet these emissions targets, owners must reduce the building’s greenhouse gas emissions through the following compliance pathways, which may be combined, providing some flexibility to owners:
- Owners may implement energy efficiency measures and technologies to meet the property type weather-normalized site Energy Use Intensity (“EUI”) requirements set forth in Table I to Regulation 28.[6] If a covered building owner is unable to achieve the site EUI target, they may comply by maintaining a standard percent reduction in their covered building’s weather-normalized site EUI as compared to the covered building’s 2021 benchmark.[7]
- If the owner is unable to meet the EUI targets, the owner may implement high-efficiency electric equipment and replace fossil fuel equipment to decrease the building’s greenhouse gas emissions.[8] An owner may also use customer-owned generation systems or utility subscription services to reduce their emissions.
Regulation 28 provides owners flexibility in what efficiency measures are utilized, including (1) converting natural gas equipment to electric space and water heating, (2) adding LED lighting and timer lights, (3) increasing insulation, (4) thickening walls, (5) replacing windows and doors, and (6) installing high-efficiency appliances. Owners may also enroll in utility-offered programs or purchase renewable energy credits.[9] However, if an owner is unable to meet the 2026 or 2030 building performance standards by implementing these measures, the owner should request an adjustment to the timeline for these emissions targets.
Regulation 28 further requires owners to maintain records related to the building’s compliance pathway and performance standards for seven years for the CEO to review upon request.[10]
Requests for Adjustments
If necessary, owners may request an adjustment from the CEO by demonstrating the owner’s plan to achieve the performance targets within the proposed adjusted timeline, as well as measures the owner has already taken to reach that goal (including submitting purchase orders for new equipment, documentation demonstrating supply chain delays, or documentation demonstrating collaboration with the building’s utilities to update the infrastructure).[11]
Owners of under-resourced buildings may also apply for an adjusted timeline from the CEO. The application must include (1) each year of benchmarking data up to the current date, (2) a narrative detailing the building characteristic or functional variations that qualify it for the adjustment, such as age of construction or historical status, (3) an inventory of the natural gas equipment in the building, (4) documentation of operation and maintenance improvements, and (5) documentation of collaboration with the building’s utilities to determine the feasibility of electrification.[12]
All requests for an adjusted timeline are due by December 31, 2025, for the 2026 target and December 31, 2029, for the 2030 target.
Penalties for Non-Compliance
Beginning June 1, 2024, penalties for failure to submit the benchmarking report include a fine of up to $500 for the first violation and $2,000 for each subsequent violation. An owner whose building fails to meet the performance standards is subject to a civil penalty of up to $2,000 for the first violation and up to $5,000 for each subsequent violation.[13] Each month that an owner fails to demonstrate compliance with the building performance standards or fails to demonstrate progress towards meeting the standards constitutes an independent violation.
Real Estate Industry Opposition.
Commercial real estate owners vehemently opposed Regulation 28, objecting to the unfair burden the retroactive application of these standards will have on existing buildings and further arguing that they are already experiencing significant financial stress due to high vacancy rates, rising foreclosures, stagnant demand, declining lease rates, rising interest rates, and ongoing supply chain problems.[14] BOMA estimates that the cost of compliance with Regulation 28 will exceed $3.1 billion.
[1] GHG Pollution Reduction Roadmap 2.0., https://energyoffice.colorado.gov/climate-energy/ghg-pollution-reduction-roadmap-20
[2] Section A.III.O.
[3] Sections A.IV.A, B.I.
[4] Section B.I.A.1.
[5] Section B.I.A.2.
[6] Section C.I.A.1.
[7] Section C.I.A.3.a.
[8] Section C.I.B.1.
[9] Section C.I.B.1.e.
[10] Section D.I.
[11] Section C.II.A.
[12] Section C.II.C.1.
[13] Sections E.1 and E.2.
[14] Colorado Real Estate Alliance & Regulation 28, Fact Sheet.