What is “Green Construction”?
It depends on who is using the term. Broadly speaking, green construction means reducing or minimizing the environmental impact of a building; both in the building’s construction, and in its operation and use. Green construction focuses on one or more of the following environmental principles: employing integrated design principles; optimizing energy performance; protecting and conserving water resources; enhancing indoor environmental quality and reducing the environmental impact of materials.
Since green construction is a relatively new phenomenon, no government standard exists for green construction. However, there are various voluntary certification programs. The following provides an overview of certain voluntary programs; background on what is driving green construction; and the legal issues that arise in green building projects.
Leadership in Energy and Environmental Design (LEED)
LEED is a green building rating system that was developed by the U.S. Green Building Council (USGBC) in 2000. USGBC is a non-profit organization committed to expanding sustainable building practices. USGBC is composed of more than 13,500 organizations from across the building industry. Members include building owners, real estate developers, architects, engineers, contractors, and government agencies.
LEED certification is available for all various building types, including: new construction and major renovations; existing buildings; commercial interiors; core & shell; schools and homes. LEED systems for neighborhood development and retail, and for health care, are under development.
LEED is a point based rating system. The six categories where points may be earned are: sustainable sites; water efficiency; energy & atmosphere; materials & resources; indoor environmental quality, and; innovation & design. Some categories have prerequisites that must be met. For example, in the materials and resources category, a new construction project must provide for storage and collection of recyclables. The categories are not treated equally in regard to their point allocation. For example, energy & atmosphere has a maximum of 17 points that may be earned, while water efficiency has only 5 points that may be earned. LEED certification is available in 4 levels, and the levels and required points are as follows: Certified (26-32 points), Silver (33-38 points), Gold (39-51 points), and Platinum (52-69 points).
A project obtains a LEED certification through third party verification. The certification steps are; 1) register the building with USGBC; 2) identify and implement operational improvements and equipment upgrades necessary to obtain the certification; 3) prepare the application by documenting building performance data and operational procedures; 4) submit certification application to the USGBC, via online website, and provide supplemental information required by the reviewers; and 5) receive a final LEED certification review from USGBC.
To date, over 3 billion square feet of construction space has been involved with the LEED rating system. An example of a LEED certified project in the Omaha area is the Carl T. Curtis Midwest Regional Headquarters of the National Park Service. This project, a part of Omaha’s downtown riverfront redevelopment, is certified LEED Gold and was developed by Noddle Development Company.
Energy Star is a joint program of Environmental Protection Agency (EPA) and the Department of Energy (DOE). Energy Star started in 1992 as a voluntary labeling program to promote energy efficient products. Computers and monitors were the first labeled products. The program was expanded to over 50 product categories, including major appliances, office equipment, and home electronics.
The program has also been extended to commercial and industrial buildings, and new homes. Commercial and industrial buildings account for approximately one-half of all the energy consumption in the U.S., at the cost of more than $200 billion per year. Commercial buildings, which have been covered under Energy Star since 1999, include offices, bank branches, financial centers, retailers, court houses, hospitals, hotels, K-12 schools, medical offices, supermarkets, dormitories, and warehouses. Industrial facilities, which have been part of the program since only 2006, are a smaller category, but the category will continue to grow. Currently, the category includes auto assembly plants, petroleum refineries, cement plants, and wet corn mills.
How does the rating system work? First of all, a facility has to rank in the top 25% to earn the Energy Star rating. The rating is determined by evaluating energy performance for the whole building (rather than specific pieces of equipment). Second, the rating reflects actual energy consumption at the building (rather than predicted or simulated energy use). Third, operating constraints of the building are normalized (e.g. hours of operation, etc.). Finally, the rating is compared to a peer group. To obtain the peer group information, DOE conducts a survey every 4 years. Regression analysis is used to refine the data, which includes analysis for weather, hours of operation, and number of workers, among other factors.
Examples of Energy Star buildings in the Omaha area include a First Data Corporation office building (in the Aksarben area), the Terrace Plaza office complex (114th and Center, and managed by The Lund Company), and Rohwer Elementary (177th and F Streets, Millard Public Schools).
The Energy Star program is currently developing a water efficiency program. Commercial buildings consume close to 20% of the U.S. drinking water supply, and there are also significant costs involved in heating water. Thus, the savings potential can be substantial by focusing on water efficiency.
National Green Building Standard
This standard is being developed by the National Association of Home Builders (NAHB), which is an association that represents builders of approximately 80% of the country’s new homes. The standard is in draft form. NAHB completed the public comment period on 02/04/08. This standard is being developed in conjunction with the American National Standards Institute. The standard applies to residential buildings, including single family homes, multi-family units, and subdivisions. The 4 ratings, including the minimum points required for each, are: bronze (222), silver (406), gold (558), and emerald (697). Various categories are used to determine a rating. These include: lot design, preparation and development; resource efficiency; energy efficiency; water efficiency; indoor environmental quality, and; operation, maintenance, and building owner education.
The rating system requires homes greater than 4000 square feet to have more points to achieve a rating. The rating system is designed to be flexible, depending on the region of the country. For example, the ratings will require a higher water efficiency in the southwest. The cost for obtaining a rating or certification has not yet been determined. However, NAHB is striving to keep the cost low, to include as many builders as possible.
What is Driving Green Construction?
State and Local Initiates
In the past few years, several states and cities have implemented green building programs targeted at public, and sometimes private, construction projects. These initiatives often require that new or renovated public buildings meet certain green standards. The green standard choice appears to be the LEED rating system.
For example, Florida’s governor signed 3 executive orders in July 2007. The common goals of these three orders are to reduce statewide greenhouse gas emissions, advance the use of alternative fuels and power sources, increase state energy efficiency and conservation levels, and promote green construction for state projects. One order requires new state construction projects to comply with the LEED rating system, and that all new state construction projects must strive to meet the LEED platinum level certification.
In January 2007, New York City passed the Green City Buildings Act. This Act requires new municipal buildings, and additions and renovations to existing buildings, to meet green standards. Non-residential capital projects with an estimated capital construction cost of $2 million or more must achieve a LEED rating of silver or better. Other buildings, such as schools or hospitals, must only achieve a LEED certified rating.
In December 2006, Washington D.C. passed the first ordinance that requires both public and private buildings to meet green building standards. City owned commercial projects funded in 2008 have to meet LEED standards. Commercial development of 50,000 square feet or more would have to meet LEED standards beginning in 2012. Other cities, such as Atlanta and Seattle, have enacted similar ordinances.
The federal government also has green building initiatives, but no single comprehensive building standard. However, there are several federal policies which require agencies to use green building concepts. One such policy is based upon the Resource Conservation And Recovery Act, and requires agencies to give preference in their purchasing to specific EPA designated recycled content products. These can include insulation, carpet, concrete, and structural fiberboard.
In January 2007, President Bush signed Executive Order 13423, titled Strengthening Federal Environmental, Energy, and Transportation Management. The Order supersedes several previous orders and extends sustainable building and development goals. The Order requires each federal agency to reduce building energy consumption 30% per square foot by 2015 (relative to a 2003 baseline); reduce greenhouse gas emissions 30% relative to facility energy used by 2015 (relative to a 2003 baseline); and reduce water consumption by 2% a year through 2015.
The Order requires that new construction, or major renovations to existing buildings comply with the Federal Leadership High Performance and Sustainable Buildings Memo of Understanding. The principles of this memorandum of understanding include employing integrated design principles; optimizing energy performance; protecting and reserving water resources; enhancing indoor environmental quality; and reducing environmental impact on materials. Several agencies, including the General Services Administration and the Department of Veteran Affairs, have used LEED as a measuring stick to establish that the Executive Order requirements are being met.
Various factors, in today’s business environment, may motivate a company to utilize green construction. One factor is energy cost. Energy cost can be significant in the operation of a building, and these costs continue to rise. The company that is considering using green construction for a particular project, may review what extra construction or capital cost might be involved in green construction, and then compare this to anticipated energy savings in operating the building, and make a decision accordingly. A company, such as a real estate management company or residential homebuilder, may look at green construction and decide whether this offers a marketing advantage, which allows them to successfully differentiate themselves from competition in today’s business environment. Another factor is that some companies have a corporate citizenship or sustainability program. These type of programs have an environmental component, which focuses on reducing the environmental impact of a company’s operations. Green construction can easily dovetail with such programs. Some of these companies, such as Walmart, are requiring their suppliers to have sustainability programs as a condition of being a supplier. Yet, another factor is greenhouse gas emissions, which are impacted by various factors, including energy usage. Legislatures and regulators are considering laws and regulations to control these emissions. Thus, companies may look at green construction as part of a strategy to get out in front of possible future regulation.
Since green construction is a fairly new phenomenon, there is very little legal analysis regarding green building disputes. The parties involved in green building projects, including owners, contractors, and consultants, may not fully recognize that there are differences between the “normal” construction project and a green building project. Consequently, standard contracts do not necessarily address the issues and risks unique to green building projects. If these risks are not dealt with, this creates the potential for disputes and litigation down the road. Thus, addressing these risks, including any necessary contract terms, is one key to a successful green building project.
Some of the green building project risks that parties should address include the following:
- Defining who is responsible for applying for a green certification, administering the process, and obtaining the certification, which can be an involved process.
- Identifying who is responsible if the project does not achieve the green certification, and what damages apply in the event the certification is not obtained.
- Reviewing warranties and guarantees to confirm that green construction procedures and materials do not void the warranty or guarantee for a product or a subcontractor.
- Addressing length of warranty issues and performance objectives upon completion of construction.
- Incorporating into the project schedule the time involved in applying for and obtaining the green certification.
- Investigating the availability of green construction materials and their costs.
- Addressing any intellectual property issues that may result from a green certification, including use of construction methods or materials.
These examples show that parties in a green building project have a number of issues to address. Recognizing these issues up front, defining performance expectations, and tailoring the construction contracts improve the odds of a successful project and avoiding disputes.