Future-proof your portfolio with this SB 375 update

A few weeks ago, we blogged about how real estate practitioners may inadvertently “penalize’ the green business case through understating the true costs and risks associated with continuing business as usual.

And the latest happenings related to California’s SB 375 underscore that message.

Here’s some specific download,  courtesy of an excellent write-up by Jonathon Redding of Wendel Rosen (below ->details on getting the write-up), on how land use changes related to California’s landmark AB32 can increase the risks of doing business as usual for developers and investors in California who do not incorporate the new ways in which regional authorities are regulating environmental compliance, in fulfillment of their responsibilities under SB 375.

SB 375 is one of the keystones of California’s regulation of greenhouse gas emissions. From its mandate, regional authorities are required to adopt plans to limit greenhouse gas emissions by forcing projects through an “enhanced” environmental review process (read: tortuous) if the projected greenhouse gas emissions of their proposed projects exceed determined thresholds.

Redding lays out the landscape for practitioners planning projects in Northern California, where the Bay Area Air Quality Management District (BAAQMD) has just proposed the threshold of 1,100 metric tons per year of maximum greenhouse gas emissions for any project in its jurisdiction. This proposal, which will be finally reviewed for approval on 21 October 2009, is also the most sensitive threshold for GHG emissions proposed.

If the above thresholds are adopted by the BAAQMD in the next month or so, any projects which have not undergone environmental review will be subject to these thresholds.

You have four main options if your project exceeds the new GHG annual emissions thresholds:

(1) perform an expensive analysis to establish the project is below the adopted thresholds;

(2) apply technologies or best management practices to mitigate GHG emissions below significance thresholds;

(3) purchase verifiable offsets or reduction credits to the extent allowed by law; or,

(4) provide information to support the lead agency finding that it is impossible to mitigate the project’s impacts and adoption of a Statement of Overriding Considerations. In the fourth scenario, they will need to explain why the public benefits of the project outweigh the significant and unavoidable adverse impacts associated with the project.

The gist is this, if you have wholly overlooked this new regulation, or have designed a new project in BAAMQD’s jurisdiction that does not quite meet the threshold, compliance “after the fact” will cost you big: dollars and headaches.

Of course, you can spend time isolating SB 375-related costs and adding them to your cost of doing business as usual, to determine the “value-add” of sustainability via avoiding them with good green design that complies with the thresholds.

From our experience, the value of avoiding an unduly long, messy “enhanced” environmental review by itself is — to paraphrase a famous advertiser — priceless.

(Note: we couldn’t get a direct link to Jonathon Redding’s write-up for you, but will happily forward this great information if you request it.

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