A group of Colorado’s largest building owners and managers sued in federal court Monday to block separate greenhouse gas reduction rules passed by Denver and Colorado governments, arguing the rules illegally go beyond federal guidelines in requiring costly building renovations to cut carbon .

If Denver and Colorado rules on retrofitting older buildings are allowed to take effect, rents will rise sharply for all multifamily residents and hotel guests and worsen the affordable housing stock shortage for lower-income Coloradans, according to the U.S. District Court for Colorado lawsuit by the Colorado Apartment Association, the Colorado Hotel and Lodging Association and others.

The building owners and managers asked the federal judge to declare the Denver and Colorado rules preempted by the federal Energy and Policy Conservation Act and therefore unenforceable, and to permanently block state and local government from implementing the rules.

In voting for Rule 28 requiring greenhouse gas emission reductions from buildings over 50,000 square feet, the state Air Quality Control Commision “was estimating that the conversion cost was something like $3.6 billion,” said Drew Hamrick, senior vice president of government affairs for the Apartment Association of Metro Denver, a party to the suit. “Now, we think it’s far higher than that. But you don’t have to get into the argument whether our eight-ish billion dollar figures are right or if their three-ish billion dollar figure is right. That’s a boatload of money for the amount of carbon reduction it achieves.”

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The lawsuit argues that the Denver and Colorado regulations are so strict that the only possible way landlords could meet the reduction targets is through giving up all natural gas appliances such as water heaters or furnaces, and replacing them with expensive clean electric models.

“The federal government has decided what is and what is not an acceptable energy efficient appliance,” Hamrick said. “And they allow the citizens of the United States to use those appliances and don’t give the state and federal government the ability to second guess that.”

The arguments reflect local policy disputes in recent years where environmental groups have lobbied for state and local governments to bar natural gas connections altogether in new developments, though most Colorado entities have not yet gone that route. Instead, they are setting overall emissions limits and providing federal and local monetary incentives to buy electric appliances powered by solar or wind renewable energy.

In Colorado and other states, oil and gas interests have pushed back against the electrification movement by proposing ballot issues barring governments from in effect “choosing” electric over natural gas fuel through rulemaking.

The Colorado Oil and Gas Association “does not have an official position on the recent litigation, however, affordability should be a shared concern and priority as our state leaders grapple with the high cost of living and housing issues in Colorado,” COGA president Dan Haley said.

Suit blocks progress, green groups say

Environmental groups that backed both the Denver and state of Colorado building efficiency standards said Wednesday the building owners and the oil and gas trade groups are on the wrong side of the cleanup debate.

“Instead of just making their buildings more efficient to benefit air quality and cut energy bills, these groups would rather put their money to attorneys to fight popular regulations,” said Sarah Tressedor, Building Electrification Field organizer at Colorado Sierra Club. “It’s telling that corporate landlords and real estate groups are paralleling the oil and gas industry, which fights energy efficiency and clean energy solutions to protect their profits over local interests of working families, small businesses and those suffering from chronic health conditions exacerbated by air pollution.”

Colorado officials said they do not comment on ongoing litigation.

Sierra Club and others also disputed the landlords’ dismissal of the carbon cut targets as minor.

“Buildings are an enormous emitter of pollution. They can call it ‘small emissions,’ but it’s not according to Colorado’s Greenhouse Gas Inventory — it’s one of Colorado’s top climate pollution sectors,” Sierra Club spokesperson Noah Rott said.

When the Air Quality Control Commission debated statewide rules last summer, staff said the rules would impact more than 8,000 buildings across Colorado. The rules target cuts of building-related greenhouse gas emissions of 7% by 2026 and 20% by 2030.

The rule’s authors and advocates said heating, cooling and lighting big buildings is the next logical large target for greenhouse gas cuts, after Colorado has spent years going after coal-fired power utilities, oil and gas production, fossil fuel powered cars and trucks, and other industries. Large buildings are responsible for up to 20% of greenhouse gas emissions, the state says, and that’s separate from the emissions created by the utilities serving the buildings.

The proposed rules were meant to lock in place the intent of legislation passed in 2021. Building owners have spent the time since then measuring and reporting their “benchmark” emissions that will set the starting line for their required cuts.

“The legislature was clear that these are reductions over and above the greening of the grid,” the Colorado Sun was told by Clay Clarke at the time, from his role as supervisor of the climate change unit at the Air Pollution Control Division. “So you can’t just essentially ride the coattails of Xcel or whoever your electric provider is.”

Hamrick and other landlord representatives have argued that the benchmarking energy audits alone cost a single building into the tens of thousands of dollars or more. Required retrofits of appliances, windows and other features in a building just a few stories tall immediately runs into the millions of dollars, Hamrick said.

Incentives touted by backers of federal pro-electrification laws like the Inflation Reduction Act are not nearly enough to offset the costs of building owners, who will in turn be forced to raise rents or room rates. Even if the incentives helped, Hamrick said, the billions in spending is not the best use of anyone’s resources if the environmental returns are small.

“Where these regulations so overstep is they’re talking about everything that’s been built before,” Hamrick said. “The state government and local government had their opportunity to say how an apartment building was built in 1956. And now they’re wanting to revisit that and say, OK, we want to tell you how it should have been built in the first place. And that’s ungodly, expensive and has the potential to be greatly wasteful.”

Multifamily housing, with shared floors and walls and efficient heating systems, are the most environmentally economical housing units, Hamrick said. Yet even some newer LEED-certified efficient buildings will require major retrofits. “The perfect becomes the enemy of the very, very good,” he said.

The Denver and Colorado rules provide building owners all sorts of manageable ways to reduce their greenhouse gas footprint, environmental groups responded.

“This lawsuit is a baseless attack on innovative programs to tackle pollution from buildings, the number-one source of carbon pollution in Denver,” said Jessica Goad, vice president of programs at Conservation Colorado. “Both Colorado and Denver’s programs provide incredible flexibility and support for building and business owners. This lawsuit is a cynical attempt to undermine what Coloradans want and deserve – healthy communities and a safe future for ourselves and our kids.”