On September 27, 2024, the New York City Department of Buildings (DOB) issued its third proposed rulemaking package to implement Local Law 97 of 2019 (LL97). LL97 requires most large buildings in NYC to meet increasingly stringent greenhouse gas (GHG) emissions limits starting in 2024. The proposed regulations establish a new GHG emissions offset program tied to building electrification in New York City affordable housing developments, open the application period for two types of adjustments to building emissions limits, and create a GHG emissions coefficient for cogeneration facilities, among other provisions. DOB is accepting public comments on the proposed rules through November 7 and will hold a public hearing online that morning.

GHG Emissions Offsets

One of the most consequential provisions of the proposed regulations is the establishment of a GHG emissions offset program. Building owners would be able to purchase GHG emissions offsets from the newly established New York City Affordable Housing Reinvestment Fund (AHRF) and use them to reduce a building’s emissions by up to 10% of the building’s annual emissions limit.

The offset price and purchasing process will be established by the to-be-designated third-party administrator of the AHRF. The proposed regulations do not identify how many offsets will be available, nor do they specify whether the offsets must be purchased in the same compliance year to which they will be applied. If so, it is doubtful that the offsets will be available in 2024, given that the comment period on the proposed regulations closes in early November and guidance on the offset price and purchasing process will need to be released. The LL97 statutory language limits use of offsets to the first compliance period (2024-2029), but the proposed regulations do not speak to this temporal limitation.

The AHRF will be used to finance qualifying electrification projects at buildings subject to “affordable housing regulatory agreements in New York City.” The proposed regulations do not define which types of affordable housing will qualify but do impose numerous restrictions on the qualifying electrification projects. For example, projects must be additional—i.e., not otherwise required for emissions reductions by international, federal, or local law at the generating affordable housing building. Project designs must be validated and verified by an independent, qualified third party in consultation with the NYC Department of Housing Preservation and Development (HPD). It would be prudent for owners of buildings subject to affordable housing regulatory agreements, even those buildings that are otherwise subject to LL97 emissions limits (e.g., those with fewer than 35% rent stabilized units), to evaluate the potential for undertaking a qualifying, additional electrification project.

Adjustment Applications

The proposed regulations also open the application periods for two of the four emissions limit adjustments established under LL97: (1) for buildings with certain legal or space constraints and (2) for building owners experiencing financial constraints. The adjustment application for legal or space constraints is due by May 1 for the prior calendar year and may be effective for a maximum of three calendar years. The adjustment application for financial hardship may be effective for a maximum of one calendar year; the proposed regulations do not include an application deadline. For both adjustments, the building must have been in existence, or a construction permit must have been issued, prior to November 15, 2019.

As anticipated based on the LL97 statutory language, the proposed regulations include demanding application requirements for both adjustments. In summary, building owners seeking the legal or space constraints adjustment would be required to: (1) describe the law or physical condition preventing compliance; (2) explain the building’s efforts to comply with the annual building emissions limit; (3) provide an affidavit from an entity funded by the City to provide compliance resources (guidance forthcoming) stating that the building owner availed itself of all incentive programs for decarbonization and energy efficiency; and (4) provide evidence that the building owner has purchased the maximum available amount of GHG offsets or renewable energy credits authorized under LL97.

Building owners seeking the financial hardship adjustment would be required to provide one of the following, in summary: (1) for the calendar year prior to the adjustment application, (a) an affidavit from an entity funded by the City to provide compliance resources (guidance forthcoming) stating that the building owner availed itself of all incentive programs for decarbonization and energy efficiency; (b) evidence that the building owner has purchased the maximum available amount of GHG offsets or renewable energy credits authorized under LL97; and (c) specific, detailed financial documentation from a certified public accountant – or (2) for the combined two calendar years prior to the adjustment application, an attestation that the property is included on the Department of Finance’s annual New York City tax lien sale list because the building either had arrears of property taxes or water or wastewater charges or the building had outstanding balances under the HPD’s emergency repair program.

The other two adjustments—for buildings with certain energy-intensive uses and for non-profit hospitals—have application deadlines of January 1, 2025, and DOB filing guidance is available here.

Cogeneration and GHG Emissions Coefficients

The proposed regulations would revise the GHG emissions coefficient for cogeneration systems (also known as combined heat and power, or CHP, systems). Currently, the emissions attributable to cogeneration systems are calculated based on the fuel source of the systems, which is typically natural gas. In recognition of the efficiency benefits of cogeneration, the proposed regulations would allow building owners to instead calculate the emissions based on the systems’ electric output (using the GHG coefficient for utility electricity) and heat output (using the GHG coefficient for district steam). To use the GHG coefficient of the outputs, a building owner would have to demonstrate that the cogeneration system meets certain energy efficiency and nitrogen oxide emissions standards established in the proposed regulations.

Finally, the proposed regulations would set a GHG emissions coefficient for biofuels and make a minor amendment to the GHG emissions coefficient calculation for campus-style electric systems.

While this blog post summarizes the most significant components of the proposed regulations, readers should consult the text of the proposed regulations for details and contact Sive, Paget & Riesel with any questions. For more information about SPR’s LL97 work, please visit our website.