January 01, 2018

Literary Resources

JoAnne L. Dunec

PERIODICALS

Sustainability

Cara A. Carmichael, Laurence G. Preble, Evan L. Randall, and Beat U. Steiner, Sustainability Gets Serious: Drafting Multi-Tenant Office Leases for Net Zero Energy Buildings, Probate & Property, September/October 2017, Vol. 31 No. 5, begins with the following observation:

“Net zero energy” has a nice ring to it. These three words capture the imagination and fire the soul of many innovators in the building and energy industry.

But what is it? “Net zero energy (NZE),” the authors explain, “means the project will produce as much electricity from an on-site photovoltaic system as the project uses over the course of the calendar year.” However, they admit, “[a]spiring to net zero is a lofty goal; achieving net zero can be a very difficult task unless all parties are aligned” and pose the following questions:

In a competitive office market that is threatened by change, why would anyone endure the extra effort required for an NZE project? What’s in it for the developer, landlord, and tenant? How does the marketplace react? Is NZE an advantage in leasing and operating the project?

“One analysis describes the initial motivations as follows,” the authors note:

One of the most common goals for the individuals undertaking net zero projects was to showcase and demonstrate “the art of the possible” in terms of achieving high energy and sustainability performance in buildings. . . . Most projects were driven by a mix of traditional factors and concerns—long-term cost and resource savings, occupant well-being, and environmental responsibility—combined with the desire to illustrate the effect of combining today’s technologies and with the right ideas and innovations.

“As a result,” the authors explain, “many early NZE projects were developed by or for a single occupant, . . . [n]ow, NZE projects are moving into the mainstream market of traditional multi-tenant office buildings.” Leasing such buildings poses complications for both the landlord and tenant, particularly if the building is newly constructed and does not yet have an energy “track record.” The authors explain that there may be several reasons a multitenant office building does not achieve NZE, such as:

(1) Incorrect design or operation of the project and its common areas; (2) a tenant may not comply with its plug loads or energy budget; (3) there may be weather variables or other force majeure events beyond the control of the landlord; and (4) there may be project elements (retail or restaurant uses, for example) outside the scope of the NZE requirements.

The authors suggest a potential solution for “shortfalls between generation and use” could be the purchase of renewable energy certificates (RECs). “RECs,” the authors explain, “represent the environmental attributes of the power produced from renewable energy projects and are sold separate from commodity electricity.” The terms of the lease would specify which party obtains the RECs and “who pays for them (directly or as a pass-through), . . . depending on the cause of the noncompliance.” The lease, the authors note, should include:

(1) the standards for measuring, monitoring, and reporting performance by, for example, providing energy-use data (the more specific, the better) to the tenant on a periodic basis throughout the lease term, (2) the right of the tenant to audit the project’s energy use, (3) if NZE is not being achieved, the steps required to be taken to achieve NZE, and (4) remedies of the tenant against the landlord for the landlord’s failure to achieve or maintain NZE.

After further discussion of landlord’s and tenant’s remedies, the authors address lender concerns, which may be significant. “Of particular concern,” the authors observe, “will be NZE obligations that the lender cannot quantify the cost to perform or the damages that might arise from the landlord’s failure to perform.” They continue,

Likewise, a lender will not want the tenant to have a right to offset rent because of the landlord’s failure to achieve NZE.

If the lender gets over those hurdles in its underwriting, it might nonetheless accept the landlord’s NZE obligations but require that the lender not be obligated to assume them if it takes over the project. Thus, such obligations may not survive a foreclosure. . . . Getting a lender to agree that the NZE clauses of the lease will survive the lender’s taking over the project is a tall order.

The authors conclude,

Multi-tenant NZE office buildings are poised to compete in the marketplace with conventional buildings. A few lessons for the first time one undertakes negotiating a lease for an NZE project for the landlord or the tenants: nothing new is easy. You need energy experts to help you. Flexibility and creativity will be rewarded.

Environmental Protection

Robinson Meyer, How the U.S. Protects the Environment, From Nixon to Trump: A Curious Person’s Guide to the Laws that Keep the Air Clean and the Water Pure, The Atlantic, March 29, 2017, available at www.theatlantic.com/science/archive/2017/03/how-the-epa-and-us-environmental-law-works-a-civics-guide-pruitt-trump/521001, provides a brief explanation of the origin and application of our major federal environmental laws.

The author, perhaps following Lewis Carroll’s character’s lead, “begins at the beginning” and introduces his guide as follows:

A little less than 50 years ago, President Richard Nixon united with a Democratic Congress to pass laws that altered the everyday experience of almost everyone living in the United States. These laws arose from a flurry of legislating—nearly all emerged in the same two-year period—and they had astonishingly large goals. They sought to restrict toxic air pollution nationwide, clean up hundreds of streams and rivers, and erect a permanent, federally empowered Environmental Protection Agency.

Here is the most astonishing thing about these laws: They worked. Although they contained flaws, the laws accomplished their goals with greater success than critics predicted; and their rules cost businesses less money to implement than even hopeful supporters forecast.

In straightforward terms, through posed questions and answers, Meyer provides “a brief guide to how it works.” For example,

What are the most important laws governing the EPA?

There are two crucial ones, passed by Congress within a two-year span of Richard Nixon’s presidency:

The Clean Air Act of 1970 tells the EPA to set standards for what kinds of toxic air pollutants can be released into the “ambient air,” either from factories or cars and trucks.

The Clean Water Act of 1972 tells the EPA to set standards for what pollutants can be released into lakes, streams, and rivers, and it forces polluters to get permits to do so.

. . .

There are two more laws that don’t directly affect the EPA as much, but which come from the same period and expanded the government’s environmental power:

The National Environmental Policy Act of 1970 (NEPA) requires the federal government to conduct a lengthy environmental-impact study every time it wants to build, approve, or renovate something.

The Endangered Species Act of 1973 lets NOAA and the Fish and Wildlife Service protect species at risk for extinction, granting the U.S. government huge powers in the process. (This is partly because it was drafted by environmentalists and quickly signed by Nixon, who sought to give the press a Christmastime distraction from the Watergate scandal.)

The guide goes on to describe the constitutional basis for authority, the congressional delegation of authority to EPA, and the general rulemaking and regulatory process and continues,

Let’s go back to Congress for a moment. Were there any new environmental laws after Nixon left office?

Yes, but they mostly tinkered around the edges. In 1976, Congress authorized the EPA to regulate toxic chemicals. In 1977, President Jimmy Carter and a Democratic Congress amended the Clean Air Act to ensure that cleaned-up air would stay clean. In 1980, Carter and Congress passed the bill which created a federal “Superfund” for toxic-waste cleanups.

In 1990, under President George H. W. Bush, Congress again amended the Clean Air Act to address new pollutants and the risks of acid rain. And that’s pretty much it—although, last year, Congress updated the toxic-chemicals law.

Meyer continues with a general description of the effect of judicial interpretation of the environmental laws and additional laws governing federal public lands. He concludes with thoughts on “What’s next for environmental law?” ending the guide with the following observations from Jonathan Cannon, general counsel of EPA from 1995 to 1998:

Cannon hopes that people remember how much the EPA has done. “What people forget is that those acts, which basically established the authority of the EPA, were adopted by large majorities in both parties of Congress,” [Cannon told the author].

“The programs have been a victim of their own success. People take the quality of the environment for granted and can’t see the mechanisms in place” to keep it that way, [Cannon] said. “I mean, nobody likes regulations, right? You only accept regulation when you believe the benefits are worth it. And when you don’t see the benefits, you assume that it is the baseline state.”

Green Infrastructure

Theodore S. Eisenman, Frederick Law Olmsted, Green Infrastructure, and the Evolving City, J. of Planning History (2013), explores the influence of Frederick Law Olmsted, known as the “Father of Landscape Architecture,” on contemporary concepts of green infrastructure.

We have reason to believe, then, that towns of late have been increasing rapidly on account of their commercial advantages, are likely to be still more attractive to population in the future; that there will in consequence soon be larger towns than any the world has yet known, and that the further progress of civilization is to depend mainly upon the influences by which men’s minds and characters will be affected while living in large towns.

—Frederick Law Olmsted, 1870

“Over the past decade,” Theodore Eisenman observes, “green infrastructure has emerged as a topic of significant interest in urban and regional planning.” Green infrastructure, as defined by EPA,

is a cost-effective, resilient approach to managing wet weather impacts that provides many community benefits. While single-purpose gray stormwater infrastructure—conventional piped drainage and water treatment systems—is designed to move urban stormwater away from the built environment, green infrastructure reduces and treats stormwater at its source while delivering environmental, social, and economic benefits.

“The foundation of green infrastructure networks,” the author explains, “are natural elements that work together to ensure the availability of ecosystem services, which refers to the supporting, provisioning, regulating, and cultural benefits people derive from ecosystems.” Eisenman continues,

Unlike conventional open space conservation that often occurs after the implementation of gray infrastructure such as transportation networks, and water, sewer, and electrical utilities, green infrastructure planning serves as an organizing framework for urban form and growth, according natural lands the same status as other physical urban elements, to be protected, managed, and restored in concert with or before land development. This has important implications for city and regional planning; yet, this discussion is not entirely new. In fact, significant elements can be traced to the work of Frederick Law Olmsted, Sr., in the nineteenth century and the professional emergence of landscape architecture and urban planning.

To illustrate this point, Eisenman frames three aspects of Olmsted’s written and built work within contemporary green infrastructure theory and practice: ecosystem services and human well-being, environmental restoration, and comprehensive planning. This is followed by a discussion of Olmsted’s belief in the civilizing agency of cities and the relevance of his farsighted, systemic, and public-spirited thinking upon contemporary urbanism.

In his conclusion, the author observes,

Indeed, in much the same way that Olmsted and the nineteenth-century parks movement responded to the ills of industrial urbanization, green infrastructure may be integral to the evolution of the twenty-first century city.

JoAnne L. Dunec

Ms. Dunec is vice president, underwriting counsel with Old Republic Title Company in San Francisco, California, and a member of the Natural Resources & Environment editorial board. She may be reached at jdunec@ortc.com.