Legal Bulletins

Readers of our earlier bulletins know that the Maryland Department of the Environment (MDE) published draft regulations requiring owners of covered buildings to reduce greenhouse gas emissions from on-site use of fossil fuels. The same draft regulations also required owners to meet extremely stringent energy use (EUI) standards.  Recent language inserted by amendment in the state budget will delay the finalization of the EUI standards.

The EUI provisions apply even to buildings that do not use fossil fuels on site. The standards are designed to force buildings to use less energy through measures such as replacements of HVAC systems, improvements to building insulation and eliminating activities that consume energy.   Estimates of the cost of complying with the draft regulations ranged from 15 to 25 billion dollars. 

The budget passed by the General Assembly this legislative session forbids MDE from expending funds for the purpose of “adopting, establishing or enforcing” site EUI standards until MDE complies with a list of specific requirements.   Prominent among the requirements is that MDE must certify that the standards were based upon MDE’s analysis of benchmarking data to be submitted by buildings at the end of 2025.  This has the effect of delaying the promulgation of EUI standards until at least 2026.  

It should be noted that the draft standards were not planned to be enforced until 2030 in any case, but the delay may allow building owners to demonstrate the difficulty of meeting the draft standards and, perhaps, obtain more reasonable provisions instead of the draft EUI standards.  Among the specific requirements imposed on MDE is an obligation to issue a report assessing the cost of compliance with EUI requirements and an evaluation of mechanisms other than EUI for meeting greenhouse gas emission targets.  

Of particular note, the report must also make a recommendation for an alternative compliance fee for buildings that do not meet EUI standards.  MDE’s current interpretation of the law is that building owners can pay a fee in lieu of meeting net greenhouse gas reduction requirements but are subject to a penalty for each day that a building fails to meet EUI standards.  At the Department’s discretion, the penalty for failing to meet EUI standards could be as high as $25,000 per day of noncompliance.

Another important part of the budget language is that MDE is required to comply with specific provisions in the Climate Solutions Now Act concerning particular situations or types of buildings.  The draft regulations did not address these requirements, instead suggesting that MDE would examine the situations through workgroups convened after the regulations were promulgated in final form.  The situations include “special provisions or exceptions” for “building age, regional differences and the use of district energy systems and biofuels.”  MDE will also be required to “consider the needs of owners of covered buildings who are not responsible for or do not have access to or control over building energy systems of tenants.”

Building owners should recognize that the EUI standards have not been repealed. The budget language delays the final promulgation, but MDE can still propose standards that will become enforceable in 2030.  The impact of the budget language is, basically, threefold.  First, owners will have an opportunity to demonstrate that the proposed standards are economically unreasonable. Second, owners will be able to argue for a reasonable alternative fee to limit the economic impact of the standards (as opposed to the potential $25,000 daily fee for noncompliance).  Finally, the extension permits building owners the time to establish whether their buildings should receive special consideration because of unique circumstances, building age or other reasons.

Building owners are encouraged to monitor developments closely and assure that their issues are presented to the Department as it prepares a study for submission to the General Assembly.  Long term planning should assume that some version of EUI standards will likely apply starting in 2030.  Feel free to contact Michael Powell, Max Cooke, Bob Enten, or Jason Weintraub for further information or updates.