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The New EPA Rules: Opportunity and Risk

While to some companies less stringent EPA regulations can be an advantage, submitting to the lowest environmental standards carries costs of its own.

Q2 2018
Intercept Pharmaceuticals at 10 Hudson Yards, which has earned a LEED Platinum certification, is the first commercial office building in New York City to earn this status since the LEED v2009 rating system went into effect.
Intercept Pharmaceuticals at 10 Hudson Yards, which has earned a LEED Platinum certification, is the first commercial office building in New York City to earn this status since the LEED v2009 rating system went into effect.
Since the change of administration in the Environmental Protection Agency (EPA) in 2017, a series of alterations and rollbacks to regulations have prompted a wave of questions in the construction community about strategy and opportunity. Can builders take advantage of these revised regulations?

A Wave of Deregulation
The first step is identifying exactly what new opportunities there are for construction firms. The major changes that have occurred in the last year are the update to the New Source Review (NSR) rules for required permitting and a cancelled Obama-era Executive Order known as Waters of the United States. These and other memoranda have generally created a more permissive federal atmosphere where carbon emissions and expansions are concerned.

The New Source Review changes target the process by which reviews are determined to be needed. Not only has the EPA been ordered to take owner calculations into account much more heavily, but they’ve been asked to not “second-guess” those numbers unless there are obvious, serious errors. This has been implemented in order to reduce the number of NSR reviews and push more projects forward. In effect, projects that are much more likely to generate carbon emissions or make expansions that generate carbon emissions face fewer federal environmental reviews or checks.

In addition, the reversal to the Waters of the United States rule means that there are fewer regulations in terms of water safety, and much less oversight in terms of water quality and water pollution in the inland U.S. The 2015 proposal would have limited the use of chemicals near or in smaller streams or bodies of water throughout much of the United States. The EPA blocked this proposed rule before it could go into effect, making it easier to build in flood plains, to introduce potential pollutants into smaller water systems, and to avoid reporting potential risks to most federal authorities. The clear message for the industry is that the current EPA leadership is interested in rolling back regulations and making projects easier to approve and build.

But what’s the takeaway for builders? The opportunities arising from these regulatory cuts mostly involve building in ways in areas that are going to be less environmentally protected. While to some companies that can be an advantage, the specific environmental targeting of the rollbacks introduces some optical risk. Advancing industry norms suggest that although there are edge cases where these regulatory rollbacks could be useful for the industry, submitting to the lowest environmental standards carries costs of its own, independent of federal regulations.

A New Era with New Expectations
Increased exposure in terms of PR and public perception is an important factor to consider when taking on projects. This is an era of maximum information, and organizations that use this to their advantage are generating significant positive press, and those who aren’t are getting more negative attention. The current administration is also generating news about its policies at an unprecedented rate, and the EPA is getting a lot of coverage about its regulatory action. This is coinciding with — and is sometimes in opposition to — an increase in environmental consciousness across the U.S and a demand for green construction that’s growing just as quickly. Carefully consider the consequences of the policies you take advantage of. Building on freshly unregulated flood plains won’t prevent the lawsuits from rolling in when they flood — regardless of federal rules that no longer protect them.

LEED and WELL
There’s more incentive to build in environmentally friendly ways than ever before. The voluntary LEED (Leadership in Energy and Environmental Design) and WELL Building Standard certifications have become important parts of the construction puzzle, and they’re generating a lot of value as their adoption increases. Adoption of the LEED standards has become an accepted differentiator for the industry. Advantages in terms of lease-up rates have been reported to be up to 20 percent above average, and almost 20 percent lower maintenance costs have driven the green building sector in its doubling every three years. In addition, the partnership between LEED and the U.S Green Building Council has been driving down the times and costs of these certifications to meet rising demand. These factors are making LEED a must, and WELL a standard to get involved with as soon as possible.

The opportunities arising from these regulatory cuts mostly involve building in ways in areas that are going to be less environmentally protected. The WELL Building Standard is a building principle focused on human wellness in the structures themselves, promoting through their requirements different factors that specifically benefit those working and living in the structures. WELL focuses on seven concepts of human wellness: air, water, nourishment, light, fitness, comfort, and mind. Since its inception in 2014, WELL has registered or certified more than 450 projects and remains a standard that has high value for PR. Typical costs in pursuing and implementing WELL certification are approximately 1-2 percent (source: Linesight’s USA Handbook 2018). Ultimately, it’s becoming a very competitive way to attract companies to fill those buildings at a higher rate.

Though not currently as cemented as the LEED standard, WELL is being rapidly recognized by more organizations and being subjected to the same kinds of attention as the rest of the green building industry. Additionally, it presents an even more visceral PR opportunity in the specificity of its mission. With WELL, you’re building in a way that makes the lives of those leasing your space more comfortable, and that’s an opportunity for a premium price if ever there was one!

Green Momentum
Green building has been on the rise for many years, and the trend seems to only be increasing in momentum as time goes on. Despite the rise, fall, and potential re-introduction of federal regulation, the gains being made by companies investing in green building techniques have been relatively constant. The current administration has clear priorities where environmental regulations are concerned, but a tumultuous policy history and the ever-encroaching possibilities of the next administration mean that buying into low environmental standards can be a costly mistake when new regulations kick into effect. While it’s important to pay attention to the possibilities afforded by regulation rollback, it’s becoming more and more critical to follow standards like LEED and WELL because of the PR and business advantages being derived from them.
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