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Environmental, social, and governance risks and opportunities

BEPS on Hold in Maryland

A revised regulatory scheme, ideally not regulating EUI and not banning gas stoves

On Monday, January 29, 2024, the Maryland legislature’s Joint Committee on Administrative, Executive, and Legislative Review (AELR) put a “hold” on the proposed regulations to create the Maryland Building Energy Performance Standards (BEPS) as required by the Climate Solutions Now Act of 2022.

A stated goal of the 2022 Act is to reduce net direct greenhouse gas emissions from Maryland’s building sector for buildings that are 35,000 square feet or larger to net zero before 2040. The now, on hold proposed regulations from the Maryland Department of the Environment require covered building owners to measure and report net direct GHG emissions (kg/CO2e/sq ft), beginning with data from 2024, to MDE. The regulations further require that covered building owners not only reduce net direct GHG emissions but conform to energy use intensity (EUI) standards (kBtu/sq ft), something that one multi family building owner has characterized as, criminalizing a tenant for turning their lights on or using their electric stove. The proposed regulation of EUI does not conform to the statute or the legislative intent of the Act and ignores that such a state regulation over energy is constitutionally barred as preempted by the federal Energy Policy and Conservation Act.

With the 2022 Act, the Maryland legislature enacted the most rigorous state law in the country reducing GHG emissions, which statute became law without the Governor’s signature. That more than 100 page statute, an amalgamation of several past bills, the passage of which was of the magnitude of the Great Compromise of 1877, was premised on the idea that “the State has the ingenuity to reduce the threat of global warming and make GHG reductions a part of the State’s future,” but critiques from residents to business suggest have articulated that these proposed regulations stray too far seeking to claw back many ideas that were not included in the enacted statute.

The regulations were published in the December 15, 2023, issue of the Maryland Register and we blogged a dozen specific comments about what we perceived as deficiencies in the proposed regulatory scheme in Maryland Building Energy Performance Standards Effective January 1.

As we described in another of our earlier blog posts, the regulations were characterized by a Maryland business owner as looking like a misguided kamikaze run.

In providing oversight of the regulatory activities of State agencies for the General Assembly, the primary function of AELR, composed of 10 Senators and 10 Delegates, is to review proposed regulations to determine whether they conform to the statutory authority of the unit and the legislative intent of the statute under which the regulations are proposed. At any time, the committee may formally vote to oppose the adoption of a proposed regulation. In this instance, notice of the opposition was sent to the Governor and MDE, and further negotiations ensue. The Governor may instruct MDE to withdraw or modify the regulations. However, once the committee has opposed the adoption of the regulation, it may not be adopted unless approved by the Governor.

In this instance, the AELR hold letter said, “The purpose of the requested delay is to provide the committee with an opportunity to examine more closely a number of issues relating to the economic impact of the regulations. The committee also wishes to ensure that concerns raised by stakeholders about the regulations are addressed. To this end, the committee encourages the department to work together with the stakeholders to resolve the issues they have raised concerning these regulations.

Among others, the legislature heard quite the hue and cry from residential condominium owners who will be burdened by the regulations.

The hold is effective for renewing 30 day periods until released by AELR.

The Climate Solutions Now Act of 2022 remains the law, and building owners should continue to track their GHG emissions. But there will no doubt be a revised regulatory scheme, ideally not regulating EUI and not banning gas stoves, but rather hopefully with regulations premised on the articulated by the legislature that idea of techno optimism creating opportunities where ingenuity and science, properly applied, can ensure a future that is inclusive, net zero, and nature positive.

We have been and are continuing to work with building owners including determining the best building specific strategies for calculating and reducing their GHG emissions. And we will blog when more information is available.

A live webinar “With the Maryland BEPS regulations on “HOLD” what is a Building Owner to do?” 30 talking points in 30 minutes, Tuesday, February 20 at 9 am EST presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.

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