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).
In Brief:
- Oregon finalizes building performance standards under HB 3409
- Tier 1 and Tier 2 buildings face phased compliance deadlines
- ODOE launches incentive program for early compliance
- Penalties of up to $5,000 and $1 per square foot for violations
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:
(Graphic courtesy of the State of Oregon: Save Energy – Building Energy Performance Standards)
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.
Originally published to the Oregon Daily Journal of Commerce on September 2nd, 2025.
