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Business Council Comments on DEC 'Green Building' Regulation

October 18, 2001

Mr. James Austin
Assistant Commissioner
New York State Department of
Environmental Conservation
625 Broadway, 3rd Floor
Albany, New York 12233

Dear Mr. Austin:

RE: Proposed 6 NYCRR Part 638/Green Building Tax Credit

These comments are being submitted on behalf of The Business Council of New York State, Inc. The Business Council is New York's largest statewide employer association. We represent nearly 4,000 private sector businesses and local business associations across New York State. The Business Council has many members that will be directly affected by this rule-making, including members in the building design and construction sectors, as well as manufacturers of building materials and furnishings.

In general, The Business Council supports the basic tenets of "green" construction – improved energy efficiency, improved indoor air quality, increased use of recycled or other "low impact" building materials.

And having served on the NYSERDA advisory group that assisted the Department in drafting these regulations, I recognize that this was an extensive and complex rule development process. The Department and NYSERDA should be commended for the extensive outreach work that went into the development of this rule.

Even so, The Business Council believes that this proposed rule has several significant flaws; some due to the underlying statute, some due to the Department's lack of adequate time and resources to adequately assess issues, and some due to decisions that were made outside of the rule-making process.

The Business Council urges the Department and the Administration to address these concerns as part of its ongoing efforts to implement the state's green building tax credit program.

  1. Application of Green Building Standards The Business Council has significant concerns about how broadly these proposed "green building" standards will be applied.

    When the green building bill was first considered in the state legislature, The Business Council raised many concerns about its broad scope, and its vague criteria for defining environmentally preferred materials. These concerns were heightened by our expectation that, once finalized, these "green building" standards would be applied outside the context of the tax credit program.

    Indeed, Executive Order No. 111 significantly broadened the applicability of these green building tax credit rules before the rules themselves were even finalized. In part, the Executive Order directs state agencies to follow the criteria set forth pursuant to the tax credit law "to the maximum extent practicable" in the construction of new state buildings.

    The effect of Executive Order 111 is significant, since, by giving these "green building" standards stature as state procurement standards, they cannot be considered "voluntary" in nature. They will affect any builder or manufacturer of building materials that attempts to do business with the State of New York.
    As such, the proposed rule will have far greater impact on the business sector than discussed in the regulatory impact statement presented as part of the Part 638 rule-making package. Considering that Executive Order 111 was issued June 10, 2001, well before the rule's State Register publication date of August 22, 2001, the impact of the Executive Order should have been recognized and assessed in the regulatory impact statement.

    To maintain consistency with the intent of the green building statute (in part, Section 19 of the Tax Law state that, "Regulations, standards or requirements adopted pursuant to this section shall apply only to" green buildings and green tenant space, as those terms are defined in the law), and to avoid conflicts with the requirements of the State Administrative Procedures Act, and to address additional concerns discussed below, The Business Council strongly recommends that reference to state's green building program (Section 19 of the State Tax Law) should be deleted from Executive Order 111.

  2. Standard-Setting Criteria Many of our specific concerns regarding draft Part 638 are in response to its proposed standards for building materials.

    At the beginning of the Department's rule-making process (i.e., at the commencement of the NYSERDA advisory committee process), the Business Council urged that the designation of "environmentally preferred" materials be based on consideration of (if not the actual calculation of) overall environmental benefits and impacts of products, and not on a single criterion (e.g., ozone depletion potential.) While a formal "life cycle analysis" for each material type in each product category was beyond the scope of this rule-making process, we thought it to be essential that multiple criteria be considered when a product has more than one important environmental attribute. Overall benefits and impacts of building materials should have been considered in the setting of "green standards," and the tax credit program should have recognized those products with significant "net benefits."

    Instead, no consistent methodology or criteria were ever established for assessing the environmental benefits or impacts of building materials. The result is a very inconsistent proposal, with some standards reflecting assessments made within other well-recognized green building programs, and some standards standing in direct conflict with these other, well-recognized programs. In some instances, a single environmental attribute served as the sole determinant of whether the product was included or excluded from the tax credit program, irrespective of that product's net environmental impact.

    If the application of these standards were limited to a narrow, "voluntary" tax credit program, there would be somewhat less concern among product manufacturers. However, if the effect of this rule is to establish de facto procurement standards, the regulated community will insist upon a more formal, more quantitative assessment of environmental effects.

    The Business Council proposes three steps to remedy these important concerns:

    • as discussed above, the application of Part 638 should be limited to the tax credit program set forth in Article 19 of the Tax Law;

    • the Department should actively encourage additional input on the environmental attributes of building materials and furnishings, for use in developing reports to the legislature mandated in the Tax Law, and for further refining the building material standards included in Part 638 (note that the statute specifies that the building material standards should be reviewed and updated every two years); and

    • in addition to the recommendations provided below regarding specific materials, The Business Council strongly recommends that a provision be added to Part 638 allowing the Commissioner to accept additional products into the green building tax credit program, upon application or petition, where such products are shown through life cycle assessments or other relevant data as having significant net environmental benefits.

  3. Net Program Benefits If adopted as proposed, the draft rule will establish an extensive and complex set of requirements on those who apply for a green building tax credit. In addition to a wide range of substantive design and construction requirements, it will impose significant record-keeping and reporting costs on the program participant.

    Throughout the rule development process, The Business Council has questioned whether this green building standard will be seen by the project development community as a reasonable, appropriate, and cost-effective set of building criteria. Evidence to date suggests that it will not.

    The regulatory impact statement issued as part of this rule-making discusses issues related to the front-end and long-term construction, maintenance and operating costs of "green buildings." It suggested that, in general, "green buildings," may produce long-term economic benefits due to factors such as energy efficiency. While that may be true, most existing standards on which the RIS assessment is based are far less demanding than the program set forth in draft Part 638. If those programs (e.g., the LEEDs program) are only marginally cost-effective, we cannot see how the program set forth in Part 638 can possibly produce net economic benefits.

    Some members of the development community have said that they would be unlikely to consider the use of these standards in the design and construction of a building unless there is an up-front guarantee that tax credits will be available to qualified projects. These comments were directed at level of state resources dedicated to the tax credit program ($25 million total, spread over a ten-year period). However, they are also a strong indication that Part 638 is not seen as a cost-effective set of standards by project developers.

    We recognize that the prime goal of this program is to produce environmental, not economic benefits. However, concerns about the cost-effectiveness of the program are of significant concern for two reasons.

    First, the excessive costs that will be imposed by Part 638 should call into question the appropriateness of the underlying statute. Much of the environmental and public health benefits from "green building" can be gained through a far more streamlined approach that focuses on improving energy efficiency; addressing significant contributors to indoor air quality problems (including building operations); and promoting the use of recycled, recyclable, and more durable materials, finishes and furnishings. Some of the most well-recognized and broadly supported green building programs set forth a far more streamlined approach than that mandated by Section 19 of the Tax Law, and further defined in (and complicated by) the draft Part 638.

    Second especially in light of the state's current economic and fiscal situation it is unreasonable to expect the state to provide significant additional financial resources to subsidize use of these green building standards.

    The state needs to consider a more sustainable approach to promoting the construction of green buildings, one that focuses on core issues and cost-effective solutions.

    For these reasons, The Business Council recommends against any expanded applicability of these standards, or the devotion of additional funding to this program, until Part 638 is finalized and implemented for the purpose of granting tax credits, and the cumulative impact of the standard can be assessed.

  4. Additional Recommendations The remainder of these comments addresses specific provisions of the draft Part 638. They are presented sequentially, and the section of Part 638 being addressed is provided.

    • Part 638.3 The draft rule fails to provide a definition for several terms that are necessary to establish clear compliance criteria with regard to the building material standards. See, for example, Part 638(j)(1)(ii)(b)(1), which makes reference to "recycled fiber, recyclable components, and reusable or biodegradable materials . . ." [emphasis added.] Part 638 does not provide a definition of any of these key terms. In part, this problem can be addressed by adopting the definitions for "recycled," "recyclable," and "reusable" set forth in 6 NYCRR Part 368. Using the Part 368 definition of "recycled" would also establish minimum recycled content standards in instances in Part 638 where no specific limit is specified. The Business Council is not aware of any current state regulatory definition of the term "biodegradable."

    • Part 638.7(j)(1)(i)(a)(2) The Business Council strongly questions whether this preference for "rapidly renewable materials" represents a true environmental benefit, or merely a product favored by a specific constituency. Many in the forest product industry see the effect of this provision as giving a preference to tree plantations over certified forestry practices that rely on natural regeneration. If so, we strongly question whether this provision represents an environmentally beneficial outcome. Tree plantations often are on former forest or farm land and can have significant greater impact on plantation land than sustainable forestry practice has on forestry land. Again, this is an example of a proposed standard based on a single criterion (rapid renewability), rather than a range of environmental factors. Absent a clear rational for giving preference to the practice of growing "rapidly renewable" materials, The Business Council recommends that this provision be deleted.

    • Part 638.7(j)(1)(i)(a)(4) This provision requires the recycling or salvaging of at least 50 percent of construction wastes. In this context, the meaning of "recycled" is unclear. Rather than requiring the taxpayer to "recycle" construction wastes, this provision should require the taxpayer to source-separated construction wastes assure that it is delivered to a bona fide scrap vendor or end user.

    • Part 638.7(j)(1)(i)(b)(4) We recognize that inclusion of a "local material" provision is consistent with the LEED standard. However, we question its appropriateness in both programs. Specifically, this provision requires that 20 percent of building materials be manufactured within 500 miles of the building, and of this amount, 50 percent use materials that are extracted, harvested or recovered within 500 miles of the building site. Ostensibly, the intent of this provision is to reduce the environmental impact from material transportation. Whether it will produce a net increase or decrease in environmental impacts is, literally, anyone's guess, especially since this local preference option gives the "transportation" factor precedence over all other relative environmental benefits exhibited by competing products. Finally, on an even more practical point, even if this "local content" criteria would stay in the rule, it is unclear how the taxpayer would be able to discern or verify the source of recycled content material used in the building. This provision is of dubious environmental benefit, and should be dropped from Part 638.

    • Part 638.7(j)(1)(ii)(a) The draft rule has no specific standard for recycled steel. Most steel has some recycled content. Based on our most recent information, industry averages for steel produced in basic oxygen furnaces is 28 percent (which also reflects limits to technological feasibility), with 16 percent post consumer content. For electric arc furnaces, the numbers are 100 percent and 77 percent, respectively. Consistent with the overall intent of the rule, there should be preference for steel products, or at the very least structural steel, that is at or above industry averages for recycled content.

    • Part 638.7(j)(1)(ii)(b)(1)(i)(A) This provision would prohibit the use of recycled cement that contains fly ash from facilities that have used "hazardous waste materials" (another undefined term) as fuel. The Department of Environmental Conservation has already issued "beneficial use determinations" that specifically allow the use of fly ash from hazardous waste combustors in concrete products. Pursuant to Departmental regulations, BUD determinations must include a finding that the proposed use will have no adverse human health or safety, environmental or natural resource impact. This practice has been found by the Department to be protective, promotes the state's long-standing hierarchy for managing hazardous wastes, and results in the reuse of a waste material. For these reasons, the use of fly ash from hazardous waste combustors should not be precluded under these regulations. Likewise, if additional BUDs are approved by the Department for fly ash from kilns or other combustion units using hazardous wastes as fuels, or if such fly ash is not classified as hazardous waste under RCRA exemptions, its use should also be allowed in recycled cement and other approved applications.

    • Part 638.7(j)(1)(ii)(b)(2)(iv) This provision promotes the use of "plastic" or "composite" lumber for outdoor and certain indoor applications. During the NYSERDA advisory committee process, this preference was based on a goal of promoting the use of recycled plastic, but did not include a consideration of any specific environmental benefit (other than as a substitute for pressure treated lumber.) The Business Council questions the validity of this preference, especially for indoor applications. By what criteria is plastic lumber considered more environmentally preferable than "certified wood," as that term in defined in this rule (or noncertified wood for that matter? To our knowledge, that key assessment has not been completed as part of this rule-making process. At most, use of plastic lumber should be placed on an equal footing with certified wood products.

    • Part 638.7(j)(1)(ii)(b)(2)(ii)(c) This provisions promote the use of wood/fiberboard made in part from agricultural wastes. Since the purpose is to promote the reuse of fibrous waste materials, it has been recommended that his provision allow the use of fiberboard containing other similar recycled waste materials, including but not limited to pallet waste.

    • Part 638.7(j)(1)(ii)(b)(3)(ii)(B) This provision requires that spray polyurethane insulation be installed with a non-ozone depleting foaming agent. This is a clear example of our concern that proposed material standard are based on a single environmental criterion, rather than a product's overall environmental attributes. If this rule-making process were to considering the R value (i.e., energy efficiency) of various materials and the volume of material used, as well as practical application issues in addition to ODP, a different conclusion would be reached. The Business Council strongly recommends that the rule should not preclude use of ODP materials specifically HCFC-141b as a foaming agent for spray polyurethane insulation. HCFC-141b is the typical foaming agent for this application. It has a low ODP of .17 and a lower global warming potential (GWP) than its principal alternative, HFC134a. It also has higher R value than water blown insulation (approximately fifty times higher), so less material is used to achieve the same R value. Further, use of HFC-134a is not always practical since, as a gas, it cannot be shipped to construction sites in drums. The manufacture of HCFC-141b is to be phased out in the U.S. by 2003; HFC 245fa is the most likely replacement. Considering a range of environmental issues, rather than ODP alone, HCFC 141b should be adopted as environmentally preferable material for interim use under this legislation. The Department can effectively deal with these material phase-outs through the mandated two year review and updating of these material standards. This approach is also consistent with the widely-recognized LEED 2.0 green building standard, which does not impose restrictions on HCFC-blown insulation.

    • Part 638.7(j)(1)(ii)(b)(3)(iv)(A) and (D) These provisions preclude the use of any ODP substance in the manufacturer of "rigid/semi-rigid board/expanded polystyrene board" and "rigid polyisocyanurate board," respectively. These provisions raise concerns similar to those expressed in the section above. For example, polyiso board is manufactured with HCFC-141b, a material with a high R value and low off gassing characteristics, and which will also be replaced with an HFC over the next several years most likely HFC 245fa. In addition, this section proposes substitution of a material with fairly low ODP with a material that is both a VOC and highly flammable (i.e., pentane). Again, The Business Council recommends that Part 638 promote the more energy and material efficient insulation board for interim use.

    • Part 638.7(j)(1)(ii)(b)(4)(i)(A) This provision gives preference to "natural linoleum" for use as resilient flooring. In doing so, it would replace other products, such as vinyl flooring. This is another clear example where a single factor restricted use of chlorine-based products was used in developing a proposed standard. Vinyl flooring meets most of the implicit criteria employed in this rule-making for defining "green materials" little if any indoor air impact, durability, recycled content and recyclable. Considering the full range of environmental factors associated with this product, it is not appropriate to exclude vinyl flooring, or establish a preference for "natural linoleum." This provision is inconsistent with the LEED 2.0 standard, which contains no such preference, and inconsistent with the findings of the U.S. National Institute of Standards and Technology product rating system, which gave high marks to vinyl flooring based on a product life cycle assessment.

    • Part 638.7(j)(1)(ii)(b)(9) The section on "new furniture" raises a number of concerns.

      Since the entirety of Part 638(j) applies to both base buildings and tenant space, it is unclear how these "new furniture" requirements would be applied if a taxpayer seeks "whole building" certification prior to the building being [fully] occupied. One interpretation is that these standards would only apply to furniture in the base building and tenant space on the date of certification. This issue needs to be clarified. One approach would be to apply these furniture standards only to those tenant spaces under the direct control of the taxpayer receiving a "whole building" tax credit.

      There is also the question of whether these provisions apply to additional furniture brought into a building after it is initially occupied, and its green building status is determined. It seems impractical to expect a taxpayer that received "whole building" credit to assure compliance with respect to furniture used by building tenants.

      These provisions are also unclear as to who is responsible for demonstrating achievement of the various material standards set forth therein. The rule should make clear that the taxpayer is able to rely on product manufacturer certification.

      Finally, the rule needs a definition of what is considered "furniture." For example, do these provisions only apply to non-stationary or non-fixed interior furnishings? Does it apply to wall mounted book cases, work stations, or file cabinets? Ironically, one of the standards cited in this section the California Department of General Services procurement guidelines does not generally apply to furniture products. Instead, it only applies to work stations. One approach would have this definition refer to non-stationary, or non-fixed interior furnishings. As part of this definition, the rule should provide clear criteria as to what constitutes exempt "furniture used for process."

    • Part 638.7(j)(1)(ii)(m)(1)(ii) and (iii) These proposed rule generally requires the use of a non-ozone depleting refrigerant in new air conditioning units. However, for a two-year period, it makes the use of a specific ozone-depleting refrigerant (HCFC-123) eligible for the full tax credit benefit. In addition, it allows the Department to extend the eligibility window for HCFC-123 if the Commissioner determines that HCFC-123 has overall environmental attributes that are equal to or greater than non-ozone depleting refrigerants. The practical effect of these provisions is to award tax credits for all new air conditioning units, turning this incentive program into a subsidy program.

Again, I commend the efforts of NYSERDA and Departmental staff in soliciting input from interested parties, and in working to develop a workable implementation rule.

I look forward to the opportunity to provide you with additional information regarding any of the issues addressed in these comments.

Sincerely,

Signed: Kenneth J. Pokalsky
Director of Environmental and Regulatory Programs