In April, a three-judge panel in the Ninth Circuit Court of Appeals held that the City of Berkeley’s ordinance prohibiting natural gas infrastructure in new buildings was preempted by federal law.  In June, Berkeley asked the Ninth Circuit for an en banc rehearing of the case.  The Biden administration submitted an amicus brief supporting Berkeley’s petition for a rehearing.  If a majority of the judges on the Ninth Circuit vote in favor of rehearing the case, then eleven judges—including the Chief Judge and ten other randomly-selected Ninth Circuit judges—will rehear the case and issue a new opinion.

Background

Berkeley passed an ordinance entitled “Prohibition of Natural Gas Infrastructure in New Buildings” back in July 2019 (the “Ordinance”).  The goal of the Ordinance is to “eliminate obsolete natural gas infrastructure and associated greenhouse gas emissions in new buildings where all-electric infrastructure can be most practicably integrated, thereby reducing the environmental and health hazards produced by the consumption and transportation of natural gas.”

The Ordinance prohibits, with some exceptions, natural gas infrastructure in all newly constructed buildings.  “Natural gas infrastructure” is defined in the Ordinance to include fuel gas piping, other than service pipe, in or in connection with a building, structure or within the property lines of premises, extending from the point of delivery at the gas meter as specified in the California Mechanical Code and Pumping Code, and “newly constructed buildings” is defined to include buildings that have never before been used or occupied for any purpose.  Certain newly constructed buildings are exempt from the prohibition or if the exemption is in the public interest or if the prohibition is not feasible.

Four months after the Ordinance was passed, the California Restaurant Association (the “Association”) sued Berkeley on the grounds that the Ordinance was preempted by the federal Energy Policy and Conservation Act (“EPCA”). The EPCA is a federal statute that regulates the use of certain consumer products, sets energy conservation standards for those products, and provides for certain test procedures and labeling and manufacturing requirements. The EPCA does not directly regulate piping, and it does not regulate fuel distribution or delivery.

The EPCA includes an express preemption provision.  The relevant preemption language in the EPCA reads, “no State regulation concerning the energy efficiency, energy use, or water use of such covered product shall be effective with respect to such product.” 42 U.S.C. § 6297(c). “Covered products” include consumer products such as refrigerators, air conditioners, furnaces, dishwashers, kitchen ovens, faucets.  42 U.S.C. § 6291(2), 6292(a). “Energy use” means the quantity of energy directly consumed by a consumer product at point of use.

The district court dismissed the claims, and the Association appealed to the Ninth Circuit.

Ninth Circuit Case

The Ninth Circuit held that the EPCA preempts states and municipalities, including Berkeley, from prohibiting the installation of natural gas infrastructure in newly constructed buildings.[1]

The decision was largely premised on the court’s interpretation of what falls within the category of “energy use” and therefore cannot be regulated by states and municipalities pursuant EPCA’s preemption clause. The court determined that regulation of “energy use” included regulations effectively eliminating the use of a certain energy source. It held that the Ordinance’s prohibition on natural gas piping in new buildings effectively eliminated the use of natural gas in those buildings, and was therefore an impermissible regulation under the EPCA.

The court also chided Berkeley, stating that the Ordinance was an effort to side-step Congress. It stated that Berkeley could not bypass the EPCA’s preemption clause by banning natural gas piping in buildings, rather than banning natural gas products themselves. This, in the court’s view, amounted to an attempt to regulate indirectly on a matter that Congress had prohibited Berkeley from regulating directly.

Berkeley submitted its petition for rehearing on May 31, arguing that the court had misinterpreted the EPCA, and that the decision “disrupts the coherent and effective administration of an important federal statute, overrides many existing measures similar to Berkeley’s, and improperly denies States and municipalities authority to address matters ‘at the core of traditional state authority.’”[2]

The United States submitted an amicus brief on June 12 in support of Berkeley, arguing that the court should grant a rehearing in this case to “correct a panel opinion that destabilizes the long-settled understanding shared by the Department, the States, municipalities, and the courts over the allocation of regulatory authority in this area; threatens to preempt broad swaths of State and local health and safety law; and throws a wrench into the federal government’s administration of the [EPCA].”[3]

The Ninth Circuit has not yet revealed whether it will re-hear the case en banc.

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The Ninth Circuit is so far the highest court to address the natural gas ban. Its jurisdiction is limited to Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. So, the decision is not binding on any other state—but it may be persuasive for other courts.

The case has been nationally significant, because several states and municipalities have passed—or are considering—similar bans modeled after the Ordinance after it was passed in 2019. Perhaps most notably, New York, which is in the Second Circuit passed legislation in May banning fossil-fuel powered appliances by prohibiting the installation of natural gas infrastructure in certain new buildings by 2026 and all new buildings by 2029. The legislation appears to fall squarely within the type of regulation that the Ninth Circuit would consider preempted.

Whether other circuits will adopt the Ninth Circuit’s reasoning or will take a different approach resulting in a circuit split remains to be seen, but we certainly expect to see similar challenges popping up soon in other jurisdictions that have passed similar natural gas bans.

[1] Cal. Rest. Ass’n v. City of Berkeley, No. 21-16278, 2023 WL 2962921 (Apr. 17, 2023).

[2] City of Berkeley’s Petition for Rehearing En Banc, at 6, Cal. Rest. Ass’n v. City of Berkeley, No. 21-16278.

[3] Brief for the United States as Amicus Curiae in Support of petition for Rehearing, at 22, Cal. Rest. Ass’n v. City of Berkeley, No. 21-16278.