Oregon is implementing a new regulatory framework for energy efficiency that will significantly impact the commercial and multifamily real estate sectors. As part of this new framework, the Oregon Department of Energy (ODOE) recently finalized rules regarding an incentive program for early compliance with Oregon’s new Building Performance Standards (BPS).

HB 3409, signed into law in 2023, included the establishment of an Energy Performance Standard policy for commercial buildings. This is otherwise referred to as the BPS. The goal of the program is to reduce energy use and emissions from existing commercial buildings requiring many large commercial buildings to enhance energy management practices and implement various efficiency measures over the next several years.

Applicability and “Tier” System

The program applies to buildings classified as either “Tier 1” or “Tier 2”; the type of building determines its respective compliance requirements and deadlines.

Tier 1 includes large nonresidential, hotel, or motel buildings with at least 35,000 square feet of gross floor area. Tier 1 buildings must collect and report 12 months of energy usage data, calculate their building’s “energy use intensity” (EUI), and meet performance targets set by the ODOE. If a building fails to meet its target, the owner must conduct an energy audit and develop a plan to implement cost-effective energy efficiency improvements.

Tier 2 includes buildings with a gross floor area (excluding parking garage area) of at least 35,000 square feet that are used as multifamily residential, hospital, school, dormitory, or university buildings. Tier 2 also includes buildings where the gross floor area for hotel, motel and nonresidential use is between 20,000 square feet and 35,000 square feet. Tier 2 buildings are not yet subject to performance targets but must report energy and emissions data starting in 2028.

Some buildings are exempt. For example, historic buildings, certain buildings qualifying for exemption under “financial hardship,” some agricultural buildings, and some buildings with less than 50% occupancy may be exempt from these compliance requirements.

The following graphic from ODOE provides a high-level overview of how ODOE has categorized buildings for purposes of the BPS:

Important Compliance Deadlines

HB3409 required ODOE to establish a BPS to meet performance targets; the ODOE finalized the initial standard in December 2024 based on a national standard, with Oregon-specific amendments.

Compliance deadlines for Tier 1 buildings are phased based on size:

• Buildings greater than or equal to 200,000 square feet have until June 1, 2028.
• Buildings with 90,000–199,999 square feet have until June 1, 2029.
• Buildings with 35,000–89,999 square feet have until June 1, 2030.

Tier 2 buildings must submit their first data report by July 1, 2028, and every five years thereafter. ODOE will use this data to recommend future standards for Tier 2 buildings by 2030.

For those who do not comply, the ODOE is authorized to impose civil penalties for noncompliance, with fines up to $5,000, plus an amount to be determined for the duration of a continuing violation, which is capped at $1 per square foot of gross floor area (Tier 1 buildings only).

New Incentive Program Rules Released by ODOE

To encourage early participation, ODOE is launching an incentive program where building owners can apply to receive incentives for voluntarily meeting the program standards before the statutory deadlines.

To be eligible, a building must meet certain energy use requirements. Exempt buildings are not eligible for the incentive program.

• The incentive amount can be up to $0.85 per square foot for compliance for Tier 1 buildings, and $0.35 per square foot for compliance for Tier 2 buildings.
• Tier 1 buildings can receive up to $50,000, while larger Tier 2 buildings can receive a maximum of $35,000. There is also a limit of two awards per building owner, subject to increase based on funding.

To apply for this program, applicants must submit building data, energy use, utility territory, and compliance actions as outlined in the rules. This is anticipated to be a competitive review with priority being for high EUI buildings, multi-tenant buildings not in qualified utility territories, rural buildings, and multifamily affordable housing.

Deadlines for early compliance are one year before the regular compliance deadline:

• Tier 1 Buildings greater than or equal to 200,000 square feet: by June 1, 2027.
• Tier 1 Buildings with 90,000–199,999 square feet: by June 1, 2028.
• Tier 1 Buildings with 35,000–89,999 square feet: by June 1, 2029.
• Tier 2 (all sizes): by July 1, 2027.

These rules are effective August 5, 2025. The ODOE is expected to publish an opportunity announcement for the incentive program soon, with the application period open for 45 days.

BPS programs are an emerging policy solution in the United States for facilitating energy efficiency and greenhouse gas emission reductions. For real estate professionals, Oregon’s BPS program introduces new compliance responsibilities—but also opportunities. Early knowledge of these standards and prompt action can mean buildings owners can benefit from incentives and avoid penalties for noncompliance.

Anna Reutin is an associate member of the firm’s Real Estate group in Portland, Oregon. Mario Nicholas is a partner in the firm’s Construction group. Contact Anna at anna.reutin@stoel.com or Mario at mario.nicholas@stoel.com for legal guidance on Oregon’s Building Performance Standard’s Incentive Program.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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Founded in 1907, Stoel Rives remains Oregon’s largest law firm with a real estate practice dating back 140 years.

As Oregon confronts its housing crisis, the firm has emerged as a pivotal legal force behind major affordable housing developments across the state. It recently represented Related Northwest in a transformative 13.7-acre redevelopment project in Milwaukie. The multi-phase initiative will convert low-density, single-family homes into a 500-unit affordable housing neighborhood with parks and common areas. Stoel Rives also continues its two-decade partnership with Home Forward, Oregon’s largest affordable housing provider. For rural communities, Stoel represented Chisman Development in financing five affordable housing projects last year, including the 100-unit Cypress Hill Apartments in The Dalles, Cascade Locks and Reedsport.

The firm’s work on the Portland Art Museum renovation project prompted Gareth Nevitt, chief financial officer with PAM, to nominate the firm for All-Star recognition. Stoel represented PAM on the construction and development of the project, which adds nearly 100,000 square feet of exhibit and public space. It is one of the largest capital investments in the arts in Oregon’s history. Stoel attorneys assisted PAM on drafting and negotiating the construction contracts for the new building and spaces, and they continue to assist with change order negotiations and ongoing construction-related issues.

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With more than a century of experience, Schwabe, Williamson & Wyatt has built a legacy as a leader in construction and real estate law. Known for its forward-thinking approach, the firm helps clients navigate the evolving landscape of construction challenges, from complex disputes to innovative development projects.

At the heart of Schwabe’s success is its ability to provide comprehensive legal solutions that balance risk management with opportunity. The firm’s attorneys handle everything from large-scale construction litigation to intricate zoning and land use matters, ensuring projects move forward with confidence. Whether advising on environmental compliance or managing contract negotiations, Schwabe is a trusted partner at every stage of construction and real estate development.

A notable example of the firm’s expertise is its representation of ICTSI Oregon Inc. in a landmark labor case. In 2019, a jury awarded ICTSI $93.6 million in damages due to illegal labor slowdowns that led to the shutdown of Terminal 6 at the Port of Portland. Schwabe’s attorneys played a key role in securing this outcome, demonstrating the firm’s strength in high-stakes litigation.

With a commitment to collaboration, innovation and industry leadership, Schwabe remains a key player in shaping the future of construction and real estate law.

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For more than 30 years, Jordan Ramis PC has provided legal services to clients in the construction and real estate sectors. The firm’s attorneys offer strategic counsel on construction disputes, contract negotiation, and regulatory compliance, helping developers, contractors, architects and property owners navigate industry challenges.

With extensive experience in construction litigation, Jordan Ramis has prosecuted, defended and resolved claims related to professional liability, construction liens, bond disputes, and project delays. The firm represented a joint venture general contractor in one of Oregon’s largest manufacturing plant disputes, demonstrating its ability to handle complex cases efficiently.

Jordan Ramis also advises clients on real estate transactions, land use, zoning and environmental law. Recognized by Chambers & Partners for its real estate law expertise, the firm helps clients mitigate risk and ensure compliance throughout every stage of a project.

Beyond legal representation, Jordan Ramis is actively involved in industry education. Shareholder Jamie Howsley has presented key Washington case law updates to the Building Industry Association of Washington’s Legal Committee, reinforcing the firm’s commitment to industry advocacy.
By combining legal expertise with a client-focused approach, Jordan Ramis remains a trusted partner in the evolving construction and real estate landscape.

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With a legacy spanning decades, Davis Wright Tremaine LLP has established itself as a leader in the construction and real estate legal sectors, delivering strategic counsel to clients nationwide. The firm’s attorneys bring extensive expertise to complex projects, offering a full spectrum of services, from contract negotiation to dispute resolution.

Renowned for its innovative approach to legal challenges, Davis Wright Tremaine is dedicated to crafting practical solutions that help clients achieve their goals while managing risk. The firm collaborates closely with developers, contractors, and property owners, ensuring that every legal step – whether it’s land acquisition or project completion – is executed with precision and foresight.

The firm’s experience covers various sectors, including residential, commercial, and public infrastructure, supported by a comprehensive understanding of the regulatory frameworks that govern construction law. Clients rely on the firm’s ability to navigate complex legal matters and its track record of success in litigation, arbitration, and settlement.

Davis Wright Tremaine continues to be a trusted partner for construction and real estate professionals, providing legal counsel that helps clients achieve their objectives and manage risk effectively throughout the lifecycle of their projects.

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Aldrich & Goldstein has established itself as a leading law firm in the construction and real estate industries, providing expert legal services across a range of projects. With extensive experience in construction disputes, contract negotiation and real estate law, the firm offers strategic counsel to developers, contractors, architects and property owners throughout the Pacific Northwest. The firm has represented clients in hundreds of complex construction cases, including securing multimillion-dollar recoveries for clients involved in large-scale disputes.

Focused on delivering practical solutions, Aldrich & Goldstein works closely with clients to navigate complex legal challenges, from large commercial developments to residential projects. The firm’s deep understanding of both the legal landscape and the construction process ensures effective and efficient representation. The firm has a strong track record handling claims against contractors, developers, design professionals, bonding companies and insurance groups, offering protection and advocacy at every stage.

Whether handling litigation, arbitration or advising on regulatory compliance, Aldrich & Goldstein is committed to protecting clients’ interests. The firm’s proactive approach and attention to detail have helped it build lasting relationships with industry leaders in construction and real estate. By emphasizing communication and collaboration, Aldrich & Goldstein continues to be a trusted partner for clients seeking expert legal guidance in the evolving construction landscape.

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Cosgrave Vergeer Kester LLP has been a cornerstone in construction and real estate law for more than 30 years, providing exceptional legal services across the Pacific Northwest. Known for its deep expertise in construction litigation, regulatory compliance, and contract disputes, the firm offers tailored solutions to developers, contractors, and property owners navigating the complex construction landscape.

A standout example of the firm’s litigation expertise is its representation of a general contractor in a $30 million construction defect suit, the largest of its kind in Oregon’s history. The case, involving a condominium project in Government Camp, Oregon, saw Cosgrave strategically allocate responsibilities among 24 parties, achieving a favorable outcome for the client. The firm is also highly regarded for its work on real estate transactions, having assisted clients managing more than 25 million square feet of property in Portland alone. This includes contract review, leasing, financing, and litigation.

Cosgrave Vergeer Kester is committed to managing risk and avoiding disputes through strategic legal guidance. The firm’s attorneys are recognized for resolving conflicts through negotiation and offering vigorous representation in court when needed. With a client-first philosophy and expertise at every stage of a project, the firm remains a trusted advisor in the construction and real estate industries.

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By Ryan C. Hall, Miller Nash LLP

More than two years removed from the first reported case of Covid-19 in the United States, the construction industry continues to cope with the pandemic’s lasting effect on the costs of new construction projects. These impacts include soaring construction material costs, a diminishing supply of construction labor, and lingering disruptions to supply chain channels. Together, these forces resulted in skyrocketing construction costs across both the commercial and residential construction landscape.

As a consequence, project owners and construction contractors have exercised a new degree of vigilance, closely monitoring and documenting claims for increased project costs. This new landscape has often fostered an adversarial dynamic on projects, with both owners and contractors facing unprecedented pressures to track construction spending and cut costs where possible. More than ever, cost concerns have become an issue of contention before, during, and after project completion.

This dynamic between owner and contractor will face new challenges ahead as costs become less predictable, potentially returning to near pre-pandemic levels. Recent trends concerning construction material costs demonstrate extraordinary volatility, with the cost of lumber dropping from $1,400 per 1,000 board feet in March 2022 to $640 per 1,000 board feet in May 2022. This decrease comes on the heels of lumber prices reaching an all-time high, topping $1,500 per 1,000 board feet in May 2021.

Although unpredictable material costs have the potential to create animosity between an owner and contractor, they can also be an opportunity for the parties to pursue mutually beneficial cost savings on projects where the contractor is paid for the cost of the work plus the contractor’s fee. This can be accomplished through the addition of a shared savings clause to the parties’ contract.

A shared savings clause is an agreement between the owner and contractor providing that the contractor will be paid a percentage of the difference between the actual construction costs incurred, plus the contractor’s fee, and the guaranteed maximum price. These clauses can be either simple or detailed, depending on the parties’ needs. While the language of a shared savings clause should be specifically tailored to the needs of both the parties and the project, an example of a basic clause is as follows:

* Upon final completion of the Work, if the total Contract Sum is less than the final Guaranteed Maximum Price (GMP), then the difference between the GMP and Contract Sum (the “Savings”) will be divided among Owner and Contractor as follows: (a) 50% of the Savings will be retained by Owner, and (b) 50% of the Savings will be paid to Contractor.

Shared savings clauses have many benefits. First, they incentivize the contractor to monitor and control construction costs, as the contractor has the opportunity to recognize a direct financial benefit from any cost savings realized on the project. The greater the percentage of the cost savings that the contractor will receive, the more likely that the contractor will be motivated to pursue cost savings. This demonstrates another key benefit of a shared savings clause: it provides flexibility by allowing the parties to negotiate the percentage of the cost savings that will flow to the contractor. During contract negotiations, a contractor may be willing to concede its position on other contested contractual provisions in exchange for an increase in its share of the cost savings, and the same is true for the owner.

Lastly, and perhaps most importantly, a shared savings clause ensures that both the owner and contractor are working toward the same goal: the delivery of a completed project that is within, if not below, budget. This not only increases the likelihood of cost savings on the project, but it also can help reduce claims between the owner and the contractor and ensure that they maintain a cooperative, amicable working relationship. Given the constantly evolving pressures in today’s construction industry, this is an invaluable benefit.

That is not to say that a shared savings clause is without its drawbacks. While a shared savings clause may help foster a collaborative working relationship between the owner and general contractor, it may also motivate the general contractor to take a more forceful approach with its subcontractors, given that a subcontractor’s failure to complete its scope of work on time and on budget may negatively impact the general contractor’s ability to share in any cost savings. Likewise, disagreements may arise as to the calculation and timing of payments under a shared savings clause, prompting the need for careful drafting and clear expectations between the parties.

Project owners and construction contractors should therefore have legal counsel review their construction contracts and evaluate whether a shared savings clause would be appropriate under the circumstances. While such a clause may not be necessary on every project, it can be highly beneficial if utilized and drafted correctly.

Ryan C. Hall is a construction and insurance recovery attorney with Miller Nash LLP. He focuses his practice on commercial construction litigation and insurance recovery disputes, and he also has experience with both transactional and general business matters. Ryan can be reached by phone at 503-205-2394 or by email at ryan.hall@millernash.com.

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A joint venture of Skanska‘s Seattle office and Hunt Construction won a legal victory last week as a judge ordered it was improperly terminated from a massive Seattle project.

The matter may now go to trial, delaying construction of the $1.4 billion expansion of the Washington State Convention Center.

The WSCC had terminated its negotiated contract with Skanska-Hunt as the parties were coming to terms for the impending brick-and-mortar phase.

In a ruling issued Wednesday in King County Superior Court, Judge Beth Andrus said WSCC now may either reinstate Skanska-Hunt and proceed with the project, or abandon the GC-CM alternative procurement method and convert the project to traditional low-bid.

“It may not start the GC/CM competitive selection process over,” Judge Andrus wrote.

If the parties don’t settle, the order stipulates they must go to trial within 120 days.

In a statement, Skanska praised the decision.

“We are obviously very pleased with this decision, and the citizens of Washington State should be, as well,” the statement reads. “Hopefully, today’s decision drives WSCC and its advisors to finally move forward with construction discussion that are aimed at resolving this matter and doing what is best for the taxpayers.”

The GC-CM method incorporates the general contractor into the earlier stages of the construction process. It’s favored by public agencies on large and/or complex projects where it’s considered important to have the builder involved during design. In Washington, public owners must apply with a state advisory board to use it.

In January 2015, the WSCC obtained that approval by Washington’s Capital Projects Advisory Review Board. Skanska-Hunt submitted a bid proposal in April, and two months later, was named winner of the bid over two other short-listed finalists.

The joint venture provided preconstruction services to the project’s developer, Pine Street Group of Seattle, from June 2015 to March of this year, when the project’s board of directors voted to terminate its agreement with Skanska-Hunt.

In an interview last month with the 91��Ƶ, Pine Street principal Matt Griffin said Skanska-Hunt hadn’t proved to be a good fit for the project. But in evidence submitted with the lawsuit, Skanska-Hunt alleged the WSCC was actually interested in working with a less-expensive firm.

Reached by phone Thursday, Griffin called that a “misrepresentation.” He said he didn’t know if the board of directors would settle or go to trial.

“We need to decide what our next steps are,” he said.

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