Archive for the ‘Construction’ Category

National Flood Insurance and Jersey Shore Demographics

Photo by U.S. Fish & Wildlife Service, some rights reserved.

Back in 1968, Congress stepped into the flood insurance market to provide coverage where private insurers would not. Today, taxpayers back $527 billion of assets in coastal flood plains insured by the National Flood Insurance Program. Run by the Federal Emergency Agency, the program paid out $16 billion of claims for Katrina; Sandy-related claims could reach $12 billion. The program is already $18 billion in debt, as sum the government acknowledges will probably never be covered by higher premiums.

Besides the program’s cost, what is the issue? In New York alone, 200,000 people live less than four feet above the high tide level. Nationwide, the number of people living in flood-prone areas has been increasing, so each natural disaster damages more property and displaces more people than the last. An op-ed in Thursday’s New York Times opines that the time for the federal government to subsidize the insuring of homes and businesses in high-risk flood zones is long past. If property owners cannot find flood insurance on the private market, which in many cases they cannot, they should bear that risk instead of transferring it to the federal government.

One of the implications of changing federal flood insurance would be increased cost of living in coastal areas. Another Times article covers how Sandy and the coming National Flood Insurance Program rate hikes will make “seaside living, once and for all, a luxury only the wealthy can afford.” Building requirements for homes in newly mapped flood hazard zones could effect a demographic shift in the northeast, because much of the development encouraged by subsidized insurance would only be affordable to wealthy buyers.

The wisdom of subsidizing status quo demographics on the Jersey Shore to the tune of $18 billion aside, the point of reducing or eliminating federal flood insurance would be to end the cycle of natural disaster and expensive rebuilding without internalizing the risks of development in flood-prone coastal areas, which in light of recent events are certainly expanding. This is a step toward affordable environmental risk-management most people can back in good conscience.

Supreme Court Decision in Sackett v. EPA

Yesterday, 3/21/2012, the Supreme Court handed down a decision in Sackett v. EPA, No. 10-1062, concluding that

“[…] the compliance order in this case is final agency action for which there is no adequate remedy other than APA review, and that the Clean Water Act does not preclude that review. We therefore reverse the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion.”

We first covered this story in June of last year. We’ve assembled a new Spotlight on the decision, compiling relevant news, opinions, blog posts, and law firm memos.

The Sackett Racket: Oral Arguments in the Supreme Court in Sackett v. EPA

Photo by d'n'c. Some rights reserved.

UPDATE:  Supreme Court Renders Decision in Sackett v. EPA

Our previous coverage of Sackett v. United States Environmental Protection Agency generated the most traffic of almost any other post on our blog. The people – including Chantell and Michael Sackett – want to know: “If EPA essentially seizes control of your property by labeling it as ‘wetlands,’ do you have a right to appeal to a court of law?”

In 2007, the Sacketts started construction on a small plot of land in Idaho without first obtaining a Clean Water Act permit. Shortly thereafter, the EPA determined that the parcel of land contained federally recognized wetlands, ordering the Sacketts to halt construction and restore the parcel to its previous condition. When the Sacketts were unsuccessful in petitioning the EPA for a hearing, they filed suit. The case has seen both a District Court and the Ninth Circuit Court of Appeals, and, so far, everyone has ruled in favor of the government. Now the case has landed in the Supreme Court.

Quoted above, unsurprisingly, is Damien M. Schiff, an attorney from conservative law firm and Sackett rights champion, Pacific Legal Foundation. Schiff argued on behalf of the Sacketts in front of the US Supreme court today, January 9th, asking for the Sacketts’ right to challenge the EPA’s decision in a federal court.

As the Huffington Post points out, things weren’t looking great for the EPA in the hearing:

Justice Samuel Alito called EPA’s actions “outrageous.” Justice Antonin Scalia noted the “high-handedness of the agency” in dealing with private property. Chief Justice John Roberts said that the EPA’s contention that the Sacketts’ land is wetlands, something the couple disagrees with, would never be put to a test under current procedure.

According to Huffington, the justices are expected to rule by summer. Keep up with law firm analysis of the case by checking out Knowledge Mosaic’s Law Firm Memo search page. Do a text search for Sackett to bring up relevant memos.

Two Updates in Building Betterment

Photo by Benson Kua. Some rights reserved.

Earlier in the summer, The Green Mien covered the President’s Better Buildings Initiative (BBI), highlighting a recently published independent study that lauded the Initiative as a major American jobs creator.

Driving the Initiative is a vision of a “clean energy economy” supported in large part by an energy efficient infrastructure. The President intends to hit the Initiative’s target – improving energy efficiency in commercial buildings by 20 percent by 2020 – with a series of incentives ranging from updated tax credits to increased financing opportunities. The administrative actions called for by the Initiative affect a range of agencies: the Treasury, the DOE, and the Department of Commerce all are specifically called out, while every agency is directed to undertake energy retrofits on Federal buildings.

All was relatively quiet on the BBI front over the fall, but early December brought a slew of developments. One intuits a renewed sense of urgency (and frustration?) from the White House when reading the December 2 Presidential Memorandum and Fact Sheet on the BBI, which announce that the administration is focusing “on steps we can take without waiting for Congress to make the critical energy efficiency investments we need.”

Following on the heels of these announcements came a GAO-issued report that identifies “current initiatives by federal agencies to foster green building in the nonfederal sector” as well as the known results of those initiatives. While not explicitly related to the BBI, the report covers a lot of the same territory – namely an inventory of incentives for “green” building. The scope of “green” building is fairly broad compared to the energy-efficient focus of BBI, but the GAO found that “energy conservation or efficiency” tops the list of “green” elements that existing initiatives are focused on.

While the GAO tallied up 94 federal initiatives – implemented by 11 agencies – that foster green building in the nonfederal sector, the report noted that “the overall results of most initiatives and their related investments are unknown” and that these agencies may be “missing opportunities” to work collaboratively with each other.

Let’s hope that the agencies can collaborate – and get results – when it comes time to implement the directives the BBI.

“Green Value” and Mortgage Collateral

Image by Oldmaison. Some rights reserved.

In a recent article, law firm Dewey & LeBoeuf addresses head-on how the only-recently-ubiquitous “green” metrics, terminology, and technology in real estate and development have affected building valuation, and, specifically, how one can hedge the risks when green value is lost.

The Dewey & LeBoeuf piece discusses two general ways that “green” that can add value to a building:

First, green “value genera­tors,” that is, green financial benefits, key directly to a building’s cash flow or capital value. Second, green “market enhancers,” such as green ratings or other green attributes, are perceived to add market value even if they do not key directly to cash flow or capital value.

The article then goes on to detail several specific examples, most of which center around the well-known and commercially acknowledged LEED standards. For instance, building owners should be happy to learn that some cities and states offer tax breaks for LEED-qualified construction (value generator), while potential buyers or tenants may be more likely to rent or buy LEED-certified buildings due to their perceived environmental friendliness or potential savings in utilities (market enhancers).

The flip side of these “green” values is that losing something like a LEED certification can be devastating to a building’s worth. As Dewey & LeBoeuf go on to explain,

Failure to achieve a green rating can reduce collateral value in ways “usual” defaults do not. Why? Typically loss of mortgage value follows a real estate market decline when borrowers and tenants go broke and vacancies or defaults wipe out cash flow.

Green defaults are different. The borrower may be paying debt service in a good market, but property value dives with loss of the green rating. Standard mortgage remedies do not protect against such a loss.

Dewey & LeBoeuf recommends due diligence as a lender’s first line of defense, but in the event that a green rating is lost, lenders are urged to “require a third-party guaranty for some or all of the cash flow” or “require the borrower to provide cash collateral or a letter of credit which burns off as the abatement declines.” For further details, check out the full article.

Obama’s Better Buildings Initiative Finds Encouraging Statistics

Photo by Jakob Montrasio. Some rights reserved.

On January 25th, as a part of his State of the Union Address, President Obama championed the renewable energy movement as “our generation’s Sputnik moment,” and vowed landmark environmental changes like doubling the share of electricity from clean energy sources by 2035 and making commercial buildings (schools, offices, stores, hospitals, government buildings, etc.) 20 percent more energy efficient  by 2020 (As a side note: yesterday, the Department of Energy and the the Appraisal Foundation announced a partnership that would help insure this figure is met. Read more about that here).

On February 3rd, Obama followed up on these promises by unveiling the Better Buildings Initiative, a new component of the American Recovery and Reinvestment Act of 2009. The Obama White House was enthusiastic in expecting big results from the initiative; goals laid out in the press release, aside from the two mentioned above, include:

– reducing American companies’ and business owners’ energy bills by $40 billion annually.

-reworking outdated tax incentives for building efficiency, which would in turn encourage building owners to make environmentally-friendly adjustments. One specific incentive is in Section 179D, a tax deduction that encourages company’s to cut their total energy usage (click the hyperlink for details on that section). The revised rates proposed in the BBI press release are $.60/ sq ft. reduction for a 20% to 29% reduction in usage, $.90/sq ft. for a 30% to 49% reduction, and  $1.80/sq ft. for a reduction of 50% or more. A letter sent to the Senate and signed by 86 organizations representing real estate owners, builders, contractors, building managers, architects and engineers, energy and environmental advocates, etc. applauded these modifications to Section 179D, and encouraged adding an additional provision that would encourage existing building retrofits.

Of course one of the things that was discussed in broad strokes when the Initiative was first announced was the possibility of job creation – it played heavily into Obama’s State of the Union, but only in vague terms and without any actual figures. Well, an independent study conducted by the Political Economy Research Institute and released yesterday examined the particulars of the Initiative, and concluded that the BBI will create over 114,000 jobs, over 77,000 of which would come from reworked tax incentives like those in Section 179D that encourage building retrofits, which would in turn spark more job creation and private investment in green building technology.

Obviously this is great news for American workers and environmental activists both. These figures are, of course, subject to change as the Initiative gains or loses support, but with the right application of momentum, it could be just the thing to, as the PERI concludes at the end of their study, “jumpstart the new retrofit economy in the country’s largest buildings.”

A Sliver of an Exemption Left in Silviculture Rule

Photo by ッ Zach Hoeken ッ. Some rights reserved.

40 CFR 122.27 (the EPA’s “silviculture rule”) exempts from NPDES permitting all discharges from silvicultural (forestry) activities such as thinning, prescribed burning, pest and fire control, harvesting operations, surface drainage, or road construction and maintenance resulting from natural runoff.

But recent opinions from the U.S. Court of Appeals for the Ninth Circuit have restricted the interpretation of this exemption.

In Northwest Environmental Defense Center (NEDC) v. Brown, 617 F.3d 1176,  the Northwest Environmental Defense Center brought suit against Oregon State Forester and members of the Oregon Board of Forestry in their official capacities and various timber companies for their failure to obtain permits for discharges from systems of ditches, culverts, and channels that receive stormwater runoff from two logging roads in the Tillamook State Forest. The Defendants argued that these discharges are “point source” discharges under the Clean Water Act (CWA) and that they therefore require permits under the National Pollutant Discharge Elimination System (“NPDES”).

The Ninth Circuit agreed, filing their original opinion in the case on August 17, 2010. According to Perkins Coie’s Update on the case, the silviculture rule’s exemption for natural runoff “ceases to exist as soon as the natural runoff is channeled and controlled in some systematic way through a ‘discernible, confined and discrete conveyance’ and discharged into the waters of the United States.”

On October 5, 2010, the defendants filed petitions (here and here) for rehearing and rehearing en banc, but just two weeks ago, the Ninth Circuit issued an order and opinion denying the petitions, and environmentalists everywhere rejoiced.


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