Legal Bulletins

Litigation Challenging Maryland’s Building Energy Performance Standards

Update: BEPS Reporting Deadline Extended

MDE has issued a “Compliance Advisory” effectively extending the June 1, 2025 Benchmark Reporting Deadline to September 1, 2025. Benchmarking reports received by that date will be considered timely. For further information contact Michael Powell, Max Cooke, or Nicole Folks.

A large and varied group of building owners have filed suit against the Secretary of the Maryland Department of the Environment (MDE) seeking to enjoin the Maryland Building Energy Performance Standards (BEPS). The group filing suit includes a number of business associations (such as MBIA, NAIOP and BOMA) as well as condominium associations (such as Leisure World and Elizabeth Condominium) and a utility gas company (Washington Gas Light). If successful, the litigation would prevent the Department from enforcing many of the BEPS requirements.

As regular readers of our bulletins know, Maryland has one of the most aggressive climate change programs in the country. Part of these programs include extremely aggressive mandates for owners of “covered buildings” – which includes most buildings over 35,000 square feet¹. Links to some of our earlier publications describing these mandates can be found at the end of this article.

Basically, the mandates will, over time, force owners of covered buildings to replace fossil fuel heating and water heating systems with electric heat pumps. An additional mandate will force buildings owners to reduce energy consumption by using only very high efficiency heat pumps, reduce electricity use by other building sources and, potentially, make structural changes to increase insulation and decrease heating demand. Note that currently, building owners will not receive any benefit through this program by installing rooftop solar on these buildings. The mandates are to be achieved by requiring covered building owners to report (or “benchmark”) their buildings by June 1st of this year (2025), phase out fossil fuel use starting in 2030 and reaching net zero in 2040. Owners also must achieve interim energy efficiency standards in 2030 and final standards in 2040².

The new litigation contends that BEPS is preempted by a federal law known as The Energy Policy and Conservation Act (EPCA)³. That Act sets national efficiency standards for appliances. Originally passed in 1975, EPCA was a response to the energy crisis of the 1970s.  It set more stringent conservation standards for appliances but, notably, also expressly preempted local and state standards that would set more stringent requirements unless specific exemptions were sought and obtained from the federal government.

The plaintiffs in this litigation contend that by limiting the types and quantities of energy used by buildings, MDE is effectively regulating the efficiency of the appliances in those buildings. For example, the plaintiffs contend, logically, that a building cannot achieve very strict conservation standards, similar to those required in BEPS, without using very efficient appliances.  A conservation standard so strict that it cannot be met with appliances that meet EPCA standards would, again logically, require appliances with higher efficiency than the federal standards require.

The Ninth Circuit Court of Appeals used this logic to strike down a building code provision forbidding the installation of natural gas piping in new buildings. In the City of Berkley⁴ case, the Court pointed out that forbidding natural gas hookups had the practical effect of forbidding the use of natural gas appliances in new buildings. The Court concluded that “States and localities can’t skirt the text of broad preemption provisions by doing indirectly what Congress says they can’t do directly.”

Simply put, the Ninth Circuit concluded that a law which forbade the use of natural gas appliances was equivalent to setting an energy efficiency standard of zero for those appliances: 

Thus, a regulation that imposes a total ban on natural gas is not exempt from EPCA just because it lowers the “quantity of energy” consumed to “zero.” In other words, a regulation on “energy use” fairly encompasses an ordinance that effectively eliminates the “use” of an energy source⁵.

Burning natural gas for heating or water heating necessarily produces greenhouse gases.  It seems apparent that a regulation which requires a building to reach net-zero greenhouse gas emissions has the practical effect of reducing the use of natural gas to zero. (The same argument should apply to heating oil and propane.) Therefore, the Ninth Circuit’s reasoning, if adopted by the federal court in Maryland, should preempt BEPS.

Somewhat complicating the issue is a subsequent City of Berkeley opinion that amended the original conclusion to limit the applicability of the original opinion to building codes – the type of provision specifically at issue in the City of Berkeley case. BEPS is not a traditional building code. In fact, it is applicable to all covered buildings whether new or not. However, the original conclusion that a provision effectively forbidding natural gas appliances is preempted may nevertheless apply.

One interesting wrinkle is that the Department of Justice (and the Maryland Attorney General) filed briefs in support of Berkley’s ordinance in the Ninth Circuit case. Given the change in administrations in Washington, the new Administration may not be as supportive.

It is important to note that the litigation seeks an injunction but, until and unless relief is granted, the regulations continue to apply. MDE intends to send notices to building owners this month (January 2025) and, as things stand, building owners must report 2024 benchmarking data by June 1, 2025 [UPDATE: On January 1, 2025, MDE issued an advisory extending the reporting deadline to September 1, 2025.].

MDE has estimated that there are approximately 9,000 covered buildings. However, the MDE also readily admits that this is a rough estimate rather than an actual census. Given the number of buildings impacted, the complexities of the issues and the very limited time window, it is important for owners of covered buildings to act quickly to compile data and prepare for compliance obligations.

Links to our earlier publications describing mandates mentioned above:
New Greenhouse Gas Regulations for Building Owners
MDE Proposes Revised BEPS Regulations 
Building Energy Performance Standards Published

¹The definition of a “building” for these purposes is complex. For example, multiple buildings must be aggregated if part of a common condominium association or if the buildings share a HVAC system. Buildings connected by a common party wall are, according to MDE, a single building as well.
²The General Assembly forced the Department to reconsider the original proposed efficiency standards (known as EUI) and repropose the numbers in 2027. However, MDE has stated that it will repropose numbers stringent enough to meet the original goals.
³42 U.S.C. §§ 6201-6422.
⁴Cal. Rest. Ass’n v. City of Berkeley, 65 F.4th 1045 (9th Cir. 2023), amended and superseded by Cal. Rest. Ass’n v. City of Berkeley, 89 F.4th 1094 (9th Cir. 2024).
⁵City of Berkley at page 15.
 

Michael Powell
410-576-4175 • mpowell@gfrlaw.com