IT’S NOT EASY BEING GREEN:
GREEN LEASING FOR OWNERS AND TENANTS OF COMMERCIAL PROPERTY
Federal Government Requirements for Green Buildings
- Background. Federal mandates are becoming more germane when considering green leasing terms. The federal government possesses one of the world’s largest real estate portfolios, having more than 500,000 sites and nearly 3.5 billion square feet of space. Some of that space is government owned and operated and, therefore, outside of a private real estate practitioner’s concerns. The balance of the federal portfolio is leased from or operated by third parties. Federal agencies lease space from commercial landlords as leased space can be obtained in a shorter time frame than an owned site can be constructed, and usually at a lower cost. Federal agencies are also landlords under programmatic contracts in which the contractor performs the work in space owned by the government (known as “government owned/contractor operated,” or “GOCO”). Anyone who touches federal agency leasing from any of those aspects must have at least a cursory knowledge of the federal green leasing requirements.
The federal government is a leader in the research, funding and implementation of environmentally sound practices in commercial and industrial buildings. In the early 1990’s, the Department of Energy (DOE) funded a study of green buildings and sustainable practices. A series of laws and executive orders followed that accelerated the federal government’s environmental stewardship. The laws imposed successive levels of requirements for energy use, recycling and sustainable design sites owned and leased by federal agencies. This outline summarizes relevant past federal requirements that have evolved to today’s standards and highlights the current green requirements for federal facilities.
- Initial Federal Efforts. This is not a comprehensive listing of the historical federal green buildings or environmental stewardship laws and orders, but lists those that have contributed to the current federal agency requirements. Certain of these have been superceded in part or in whole as noted.
2.1. National Energy Conservation Policy Act of 1978, PL 95-619, 42 USC 91 (1978, amended 1985 by PL 99-58). This Act is one of the first to list goalsfor energy intensity reduction. The goals have been updated numerous times, most recently by the Energy Independence and Security Act of 2007 (EISA).
2.2. Energy Policy Act of 2005, PL 109-58, 42 USC 15851 (August 8, 2005). The EPACT 2005 institutes comprehensive sustainable design requirements for federal facilities. It requires federal agencies to reduce energy and resource consumption, institutes guidelines to measure and track performance, and sets mandatory goals for both usage of renewable energy and energy intensity. The energy intensity goals have been superceded by EISA.
2.2.1. All federal facilities must obtain a percentage of their electrical requirements from renewable sources: at least 3% per year through 2009, at least 5% per year from 2010 through 2012, and at least 7.5% per year from and after 2013.
2.2.2. Renewable energy sources include biomass, solar, ground source, geothermal, ocean and hydro resources, and wind.
2.3. Office of Management and Budget Circular A-11 (2002). The OMB encourages federal agencies to incorporate Energy Star ® or US Green Building Council LEED rating systems into new construction or space renovation. The Energy Star guidelines were expanded and made mandatory for Government Services Administration (GSA) space by EISA.
2.4. Executive Orders 13101, 13123, 13134, 13148 and 13149. These executive orders are among the first to address waste reduction, recycled content, renewable power purchases, and energy efficiency for federal agencies. They are all superceded by Executive Order 13423, below.
2.5. Federal Leadership in High Performance Sustainable Buildings Memorandum of Understanding (2006). Before 2006, the various federal agencies each had their own published criteria for green building requirements. DOE may have differed from the Department of Defense, or of State, or from any of the armed services, or the EPA, or the GSA, or NASA – all having a substantial number of facilities. In 2006, 19 agencies signed what is known as the “MOU,” to collaboratively “establish and follow a common set of sustainable Guiding Principles … for integrated design, energy performance, water conservation, indoor environmental quality and materials.” The MOU is for internal management only and is not legally enforceable among its signatories. Nevertheless, the MOU was the first document to establish uniform federal agency requirements for owned and leased space. Its five Guiding Principles have been subsequently made mandatory for all federal facilities in EO 13423. The Guiding Principles are:
2.5.1. Employ Integrated Design Principles. This principle includes performance goals for siting, energy, water, materials, and indoor environmental quality.
2.5.2. Optimize Energy Performance. This principle targets both energy efficiency and the measurement and validation of energy performance.
2.5.3. Protect and Conserve Water. This principle incorporates both indoor potable water consumption and outdoor water usage through landscape design, irrigation, and re-use. It also aims to reduce storm water and polluted site water runoff.
2.5.4. Enhance Indoor Environmental Quality. This principle covers ventilation, thermal comfort, moisture control, daylighting, low emitting materials, and the use of air quality protections during construction.
2.5.5. Reduce Environmental Impact of Materials. This, the broadest principle, addresses recycled content, biobased content, construction waste and ozone depleting compounds.
a. At least 10% of materials used must have recycled content (EPA has a higher threshold).
b. Agencies must use rapidly renewable resources and certified sustainable wood products (USDA has a higher threshold).
c. Agencies must use local recycling and salvage operations, and manage construction to recycle at least 50% of construction waste, availability permitting.
d. Products containing ozone depleting compounds cannot be used if alternative products are available.
- Current Federal Requirements. Any private landlord that is leasing to a GSA tenant, or company taking space in a government-owned facility, or a company entering into a GOCO based contract, must understand the then current mandates for green clauses in the lease. Those requirements will impact the construction, operation, maintenance and enforceability provisions of any lease for a federal agency facility. Currently, the three primary sources of applicable requirements are EPACT 2005, EO 13423, and EISA.
3.1. Energy Policy Act of 2005,PL 109-58, 42 USC 15851 (August 8, 2005). As discussed in Section 2.2.1, above, EPACT 2005 mandates that all federal facilities obtain and use a portion of their electrical requirements from renewable sources. EO 13423 further refines this requirement.
3.2. Strengthening Federal Environmental, Energy and Transportation Management, Executive Order 13423, 72 FR 3913 (January 26, 2007). EO 13423 strengthens and consolidates the goals and practices implemented by previous executive orders, requires more stringent energy efficiency goals than those contained in EPACT 2005, and makes the MOU Guiding Principles mandatory for all federal agencies.
3.2.1 EO 13423 seeks to achieve in 10 years the same level of reduction of energy intensity that has been realized over the last 20 years, and increases by 50% the energy efficiency goals of EPACT 2005. Energy intensity in federal facilities must be reduced by 3% annually through 2015, or by 30% by 2015.
3.2.2. At least half of the renewable power use requirements of EPACT 2005 must be obtained from “new” renewable sources; that is, from sources placed into service since January 1, 1999. For example, if the facility must satisfy a 5% purchase from a renewable source, then 2.5% needs to be from a new provider. EO permits non-electric sources of renewable power. However, EPACT 2005 only recognizes electric sources towards its requirements.
3.2.3. Water consumption must be reduced by at least 2% annually, or by 16% by 2015.
3.2.4. All agencies must follow compliance management systems to plan, implement, train, track and enforce the building, energy and sustainability requirements.
3.2.5. An EO 113423 objective is “High Performance Buildings,” being facilities that reduce life cycle costs for environment and energy, improve energy efficiency and water conservation, use renewable energy, provide healthy and productive working environments, and promote environmental stewardship.
a. All federal agencies must meet or exceed the MOU Guiding Principles (see 2.5, above) for all new construction or major renovations of owned sites and for new, amended or extended leases.
b. By 2015, 15% of each agency’s existing inventory must be upgraded to meet MOU Guiding Principles.
c. Energy efficiency and renewable power requirements can be waived upon the agency head’s recommendation if compliance is impractical and all practical methods are implemented.
d. The Secretary can waive EO 13423 compliance generally for national security and law enforcement uses if necessary to protect intelligence sources or undercover operations.
3.3. Energy Independence and Security Act of 2007, PL 110-140, 42 US 17001 (December 19, 2007). EISA broadly addresses the development and use of renewable energy resources, improved standards for energy using products, advanced energy research and programs, and energy savings in federal buildings and public institutions. Subtitle C addresses “High Performance Federal Buildings.” The requirements apply to all facilities, both owned and leased, unless otherwise stated. While aggressive, most of these requirements permit waivers if a situation proves impractical to fully implement.
3.3.1. EISA Section 432 amends the National Energy Conservation Policy Act to require federal agencies to implement energy and water saving measures that are life cycle cost effective at facilities that constitute at least 75% of that Agency’soverall energy usage, and to survey all facilities at least once every 4 years.
3.3.2. EISA Section 433 requires that all new buildings and major renovations reduce fossil fuel consumption compared to baseline 2003 by 55% by 2010, and in increasing increments up to 100% reduction by 2030. For non-GSA sites, the fossil fuel reduction may be waived if it would be technically impractical to satisfy.
3.3.3. All new or renovated federal facilities must reach a long term net zero energy usage by 2025. All existing federal facilities must reach a long term net zero energy usage by 2050.
3.3.4. All new and renovated facilities must apply “sustainable design principles” pursuant to the then accepted criteria for high performance green buildings. The criteria for what constitutes a high performance green building must be updated at least once every 5 years.
3.3.5. EISA Section 434 requires that all replacements of energy equipment (including heating and air conditioning equipment) installed in existing space, or work performed during any renovation or expansion of existing space, employ the “most energy efficient designs, systems, equipment and controls that are life cycle effective.”
3.3.6. EISA Section 435 mandates that beginning in 2010 federal agencies can only lease space in buildings that have the Energy Star rating for the most recent year. There is a limited exception for agencies that cannot find a qualified building that meets its functional requirements, or for space of less than 10,000 sf, or that wish to remain in existing space, or for moves to buildings with “historical, architectural or cultural significance.” In those instances, the agency may move to the non-Energy Star rated space, but only on the condition that the building be renovated within the first lease year “for all energy efficiency and conservation improvements that would be cost effective over the course of the life of the lease.”
3.3.7. EISA Subpart C also addresses storm water requirements, the acceleration of cost effective technologies at space overseen by GSA and training, measurement, and audit requirements for the programs.
4. Summary. A basic understanding of federal requirements is necessary for any practitioner advising a landlord or tenant on green leasing. Even if one never leases to or from a federal agency, the requirements propagated by executive orders and federal legislation over the last two decades lead the curve of private and commercial standards. If one advises clients who contract with federal agencies, one should consistently check for updates to the federal requirements as they continue to evolve.
Resources
High Performance Federal Buildings database
Renewable Energy Requirement Guidance for EPACT 2005 and Executive Order 13423, Department of Energy, Office of Energy Efficiency and Renewable Energy, Federal Energy Management Programs (January 28, 2007)
Guidance on the Acquisition of Environmentally Preferable Products and Services
Federal Requirements, Greening EPA (February 9, 2009)
WaterSense Program, Environmental Protection Agency,
Identifies and promotes higher performance products and programs
Federal Leadership in High Performance Sustainable Buildings Memorandum of Understanding (2006)
Sustainable design criteria
Fact Sheet, Executive Order 13423
WholeBuilding Design Guide
72 FR 3432 (January 25, 2007) and Section 9 of EO 12866 (as amended by EO 13420),
OMB Agency Good Guidance Practices Bulletin,
Bulletin No. 07-02
10 CFR 436, Subpart A, 10 CFR 436.18 (a), (b) and (c), and 436.20 and 436.21,
Life cycle costs calculation, and measurement of cost effectiveness