Last week, in California Restaurant Association v. City of Berkeley, the Ninth Circuit ruled the federal Energy Policy and Conservation Act (EPCA) preempts local bans on the installation of natural gas infrastructure in new construction. Specifically, the Ninth Circuit held that EPCA’s preemption of local efforts to regulate the energy use of natural gas appliances is to be construed broadly, applying equally to regulations that affect the use of such appliances. In other words, because the City of Berkeley’s ban on natural gas pipes in new construction “render[ed] the gas appliances useless,” it had improperly infringed on the federal government’s exclusive power to regulate the use of gas appliances.
Like many jurisdictions throughout California, Berkeley adopted a ban on the installation of natural gas pipes in new construction. Per Berkeley Ordinance No. 7,672-N.S., as enacted in July 2019 and codified in Chapter 12.80 of the Berkeley Municipal Code, the stated goals of the ban were to “reduc[e] the environmental and health hazards produced by the consumption and transportation of natural gas.” The California Restaurant Association, representing restaurants who often rely on natural gas appliances, brought suit against the city. The district court dismissed the suit, holding that EPCA’s preemption power did not “sweep into areas that are historically the province of state and local regulation.”
On appeal, the Ninth Circuit disagreed. First, the court found that EPCA expressly preempts local regulations related to “energy use” for “covered products,” which includes common household kitchen appliances. Next, the court interpreted EPCA’s definition of “energy use,” ruling that “the quantity of energy directly consumed by a consumer product at point of use” must include scenarios where the quantity of energy is zero. Lastly, the court applied its reasoning to Berkeley Ordinance No. 7,672-N.S., holding that its ban on natural gas pipes in new construction would reduce the energy consumed by natural gas appliances to zero, and therefore was a use regulation preempted by EPCA.
Berkeley’s ban attempted to locally accelerate recent statewide efforts at electrification – or a shift from natural gas to electric appliances and heating. Under a building code update to the “Energy Code” approved by the California Energy Commission (CEC) in August 2021 and the California Building Standards Commission in December 2021, new homes and buildings beginning construction in 2023 or later are required to include electric supply panels and circuitry to support all-electric appliances and heating. Beginning in 2030, California will go one step further, as a California Air Resources Board mandate will ban the sale of natural gas appliances outright in the state. By phasing out natural gas appliances in favor of electric ones, this first-in-the-nation ban is designed to lower the “carbonization” of structures and improve indoor air quality.
In light of the Ninth Circuit’s decision in California Restaurant Association, ordinances and local building code amendments – subsequently approved by the CEC – that require all-electric construction instead of natural gas infrastructure may be invalid. As of February 14, 2023, the list of jurisdictions at risk includes 74 throughout California, including Los Angeles, Oakland, Sacramento, San Francisco, and San Jose. While it is unclear at this time if Berkeley will appeal the California Restaurant Association decision to the U.S. Supreme Court, there may be other pathways forward for impacted municipalities. For example, ordinances that target greenhouse gas (GHG) emissions rather than natural gas use are likely not preempted by EPCA, nor are ordinances that mandate electric infrastructure while remaining silent on, or equally endorsing, natural gas infrastructure.
EPCA expressly allows jurisdictions to adopt local building codes that set overall energy efficiency standards - short of an outright ban - that could favor electric over natural gas appliances. Other regulatory pathways may include (i) limits on indoor air quality and (ii) significance thresholds limiting total project emissions to achieve consistency with GHG reduction targets and avoid significant impacts under the California Environmental Quality Act. On the other hand, GHG reduction or “Climate Action” plans that rely heavily on regulatory natural gas prohibitions like Berkeley’s to achieve compliance with emissions reduction targets may be vulnerable to challenge, and the Ninth Circuit’s decision should be considered as local jurisdictions proceed to update their Climate Action plans in light of recently updated statewide GHG reduction targets.
As evidenced by California Restaurant Association, opposition to California’s electrification efforts will be significant. Additional legal challenges from natural gas producers, distributors, and users will likely emerge, especially as the 2030 state ban on the sale of natural gas appliances approaches. We will continue to monitor and report on local and state efforts to electrify California and reduce natural gas use, as well as any legal challenges to the same.