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HomeMy WebLinkAbout06-27-22 Public Comment - M. Lilly - Natural Gas ConditionFrom:tcunningham@mcn.net To:Agenda; Jeff Mihelich; Greg Sullivan Subject:FW: Natural gas condition Date:Monday, June 27, 2022 7:27:00 PM Attachments:Second Memo.docx CAUTION: This email originated from outside of the organization. Do not click links or open attachments unless you recognize the sender and know the content is safe. Forwarding this from my personal email. The commenter has asked that it be forwarded to the sustainability department and the sustainability board. Terry From: Michael J. Lilly [mailto:mikelilly@berglawfirm.com] Sent: Monday, June 27, 2022 12:29 PM To: Terry Cunningham <tcunningham@mcn.net> Subject: Natural gas condition Terry: Since I prepared my last memo to you on this topic, I learned that there were some concerns about the topic that I had not addressed. As a result, I have prepared a follow-up memo addressing those concerns. It is attached. Could you forward it to the Commission and Sustainability Advisory Board. Thank you for your continued interest in this idea. MEMORANDUM TO: Bozeman City Commission/Sustainability Advisory Board FROM: Mike Lilly RE: Natural Gas Subdivision Condition DATE: June 27, 2022 INTRODUCTION In my prior Memorandum dated April 20, 2022, I argued that the City Commission could, and should, condition its approval of major subdivisions on the use of electricity as their energy source. Since that time, I have learned that there are three concerns that were not addressed in that Memorandum. Those concerns are: 1) the cost of such a condition, 2) the potential of a legal challenge to such a condition, and 3) the potential for a legislative amendment stripping cities and towns of the power to impose such a condition. This Memorandum will address each of these concerns. The Cost The first concern is that conditioning the approval of a major subdivision on its use of electricity would increase the cost of housing in the development. This concern was addressed by the Bozeman Climate Plan, 2020 (“Climate Plan”). It concluded that it is cost effective to electrify new residential construction, but not cost effective to retrofit existing residential buildings.1 This conclusion was supported by a 2018 study conducted by the Rocky Mountain Institute (“RMI Study”).2 1 Climate Plan, p. 53 2 Billimoria, Sheri, Mike Henchen, Sheri Guccione, &Leah Louis-Prescott, The Economics of Electrifying Buildings: How Electric Space and Water Heating Supports Decarbonization of Residential Buildings, Rocky Mountain Institute, 2018, http://www.rmi.org/insights/reports/economics-electrifying buildings The RMI Study evaluated the construction costs of new buildings using electricity vs. construction costs of new buildings using natural gas in five metropolitan areas with differing climates, with Chicago being the area with a climate most similar to Montana’s. The RMI Study found that it was cost effective to construct new buildings using electricity.3 Consequently, the RMI Study made the following recommendation: 2. Stop supporting the expansion of the natural gas distribution system, including to new homes.4 In making this recommendation, the RMI Study observed that the electrification of buildings is essential to meeting the goal of decarbonizing all buildings by 2050 (a goal of many municipalities, including Bozeman), and that in meeting that goal, natural gas infrastructure built today will become obsolete and a stranded asset.5 The U.S. Department of Energy has developed a tool to compare the costs of various energy sources in each state and county.6 Using that tool, one can compare the utility costs of a home heated by natural gas and one heated by electricity. That tool reveals that the annual financial burden of utility costs placed on a Gallatin County household is 2% of its annual income and that the average cost for utilities in Gallatin County is $1,906.7 That tool also indicates that the average cost for utilities in a low- income home using natural gas is $1,815 compared to a cost for utilities in a low income-home using electricity is $1.809.8 Consequently, this tool demonstrates that cost should not be a factor deciding to impose an electrification condition upon a new major subdivision. A survey of appliance costs at Lowes further dispels the notion that the cost of new homes heated by electricity is greater than the cost of new homes heated by natural gas. Gas stoves vary in price between $584 and $1774. By comparison, electric induction stoves vary in price between $599 and $1619. Gas furnaces vary in price between $1,119 and $3,513. By comparison, electric furnaces 3 Id. p. 20 4 Id. p. 52 5 Id. 6 http://www.energy.gov/eere/slsc/maps/leed-tool 7 Id. 8 Id. vary in price between $1,374 and $1,932. Gas water heaters vary in price between $519 and $1,039. By comparison, electric water heaters vary in price between $549 and $939. The RMI Study observed that a cost savings exists when electrifying a new building – the installation cost of the gas main and service lines.9 In Gallatin County, NorthWestern Energy requires a developer to pay a fee for those lines. The developer passes that cost on to lot purchasers. The electrical lines serving a subdivision and the homes within it remain the same regardless of whether gas is used. Consequently, they do not require any additional cost to upgrade. The Potential of a Legal Challenge The second concern is that the imposition of such a condition would subject the City Commission to litigation. If the Commission were to condition the approval of a subdivision upon its use of electricity, the developer could challenge the imposition of that condition. Conversely, if the City Commission were to refuse to impose such a condition, a member of the public could challenge that refusal. Consequently, the potential outcome of litigation should be evaluated for both scenarios. The Montana Subdivision and Platting Act (“Act”) authorizes a city commission to condition the approval of a major subdivision upon reasonable steps designed to mitigate its impact on the environment. Section 76-3-608, M.C.A. provides in pertinent part: (4) The governing body may require the subdivider to design the proposed subdivision to reasonably minimize potentially significant adverse impacts identified through the review required under subsection (3). The governing body shall issue written findings to justify the reasonable mitigation required under this subsection (4). A developer may bring an action in district court for damages caused by a city commission’s decision to conditionally approve its proposed subdivision. Section 76-3-625(1), M.C.A. If the developer is successful, its sole remedy is damages. Likewise, a landowner with property contiguous to the proposed subdivision, or a landowner within the city can bring an action if he/she can show the “likelihood of material injury to the landowner’s property or its value;” Section 76-3-625(2) & (3) M.C.A. The City Commission has already 9 Id. p. 52 demonstrated the injury that will be suffered by all Bozeman resident in the Climate Plan. The consequences of climate change are now well known and documented – extreme weather, drought, flooding, wildfires, etc. In light of the Climate Plan’s findings, the City Commission would be hard pressed to argue that landowners cannot show the “likelihood of material injury to the landowner’s property or its value;” Significantly, Section 76-3-625 does not provide NorthWestern Energy with the right to challenge a city commission’s decision. It, of course, is the party most likely to object to a condition requiring a major subdivision to use electricity, and not natural gas. It has made, and continues to make, substantial investments in natural gas infrastructure and does not want those assets to become stranded. A City Commission’s decision “must be sustained by the district court unless the decision being challenged is arbitrary, capricious, or unlawful.” Section 76-3-625(1) M.C.A. provides: (1) … The governing body’s decision, based on the record as a whole, must be sustained unless the decision being challenged is arbitrary, capricious, or unlawful. The Montana Supreme Court has observed that this Section provides two grounds for determining if a city commission’s decision must be sustained: 1) was it arbitrary and capricious or 2), was it unlawful.10 A city commission’s decision must not be reversed unless it is “random, unreasonable, or seemingly unmotivated”.11 The district court is not to determine if a city commission’s decision was correct. It is to determine if a city commission considered all the evidence and “largely acted in conformance with that information. 12 Given this standard, a developer would have a very heavy burden in securing a damage award from the City Commission if it were to condition the approval of a subdivision upon a design that used electricity. The Climate Plan provides significant, and compelling, evidence to support such a condition. Given this evidence, it could not be seriously argued that such a decision was arbitrary or capricious. Moreover, it could not be argued that the condition was unlawful since Section 76-3-608(4) M.C.A. 10 Citizens for Responsible Development v. Board of County Commissions for Sanders County, 2009 MT 182, P8, 341 Mont. 40, 208 P.3d 876 11 Richards v Cnty. of Missoula, 2012 MT 236, P 18, 366 Mont. 416, 288 P.3d 175 12 Id. at P 17 & 18 specifically authorizes a city commission to attach reasonable conditions to its approval to a subdivision to minimize its adverse environmental impacts. In addition, a developer would have a very difficult time proving any actual damages caused by such a condition. It must prove that the value of the subdivision is less because of the imposition of the condition. This proof would require evidence that a subdivision lot is worth less if it is not served by natural gas. In light of the cost savings associated with the elimination of the gas main and service lines, this proof may not be available. On the other hand, an affected landowner would have a powerful argument to challenge the City Commission’s decision to not impose such a condition. By failing to impose such a condition, the City Commission would have to ignore the Climate Plan, a plan it adopted. The City Commission would be put in a place in which it would have to defend its action by arguing the Climate Plan’s conclusions and recommendations were not reasonable. An affected landowner would also have an additional argument. It could argue that the City Commission’s decision to not impose such a condition upon its approval of a subdivision breached its constitutional duty to “maintain and improve a clean and healthful environment for present and future generations” provided for in Article IX, Section 1 of the 1972 Montana Constitution.13 The Montana Supreme Court has concluded that section is “both anticipatory and preventative”.14 It held that “Our constitution does not require that dead fish float on the surface of our state’s rivers and streams before its farsighted environmental protections can be invoked.” 15 This description could not be more appropriate when considering action to combat climate change. Action taken now to address climate change is action taken for the benefit of “future generations”. The Climate Plan acknowledges the reality of climate change, humanity’s contribution to it, and the need for immediate, and dramatic action to combat it. The Climate Plan identifies the electrification of all buildings by 2050 as an important step to address climate change. The time is now, not some unknown date in the future, to begin the process of electrifying all buildings. The City Commission cannot wait until 2050 to begin that process. It does not have the power to mandate that all buildings be electrified on a specific date. As the Climate Plan observed, it is more cost effective to electrify new 13 Section 1, Article IX, 1972 Montana Constitution 14 Mont. Envitl. Information Center v. Dept. Of Environmental Quality, 1999 MT 248, P77, 296 Mont. 297,988 P.2d 1236 15 Id. construction rather than retrofit existing buildings with electric heat. Consequently, the City Commission must begin that process now to fulfill its duty to “future generations”. The proposed subdivision condition must be step in that process. Potential for a Legislative Amendment The third concern is that if such a condition was imposed on a subdivision, the Montana Legislature would amend the Act by stripping a city commission of the power to impose that condition. That concern is a real one given that is the approach the 2021 Legislature took when confronted with the potential that local governments might address the environmental problems posed by single use plastics. House Bill 407 amended Section 7-5-131, M.C.A. to prohibit local governments from enacting an ordinance that addressed single use plastics. If the Legislature were to amend the Act to prohibit local governments from imposing an electrification condition, I would argue that amendment was unconstitutional. It would violate Article IX, Section 1 of the 1972 Montana Constitution which provides: The state and each person shall maintain and improve a clean and healthful environment in Montana for present and future generations.t An electrification condition amendment would run afoul of this section in two ways. First, it would prevent local governments from fulfilling their constitutional duty to “maintain and improve a clean hand healthful environment”. Second, it would be a breach of the State’s constitutional duty to “maintain and improve a clean and healthful environment”. Conclusion The three concerns raised are serious ones. However, they do not provide a basis for failing to condition the approval of a major subdivision upon a design that uses electricity as its energy source. The increase in cost, if any, of limiting the energy source of new subdivisions to electricity is minimal compared to the cost of ultimately retrofitting all buildings to electrify them in the future. The City Commission has a far stronger case in defending such the imposition of such a condition than in defending a decision to not impose such a condition. Finally, while the possibility of the Legislature stripping the City Commission of the power to impose an electrification condition, that possibility would not likely survive a constitutional challenge. For these reasons, I continue to urge the City Commission to condition approval of major subdivisions on their use of electricity, and not natural gas. As their energy source.