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New Ninth Circuit Ruling: City of Berkeley’s Gas Ban Preempted by U.S. Energy Policy & Conservation Act

On Monday, April 18, the Ninth Circuit Court of Appeals issued a ruling in California Restaurant Association v. City of Berkeley, overturning a lower federal district court’s ruling to revoke the City of Berkeley, California’s ban of natural gas infrastructure in newly constructed buildings.

Berkeley’s prohibition against natural gas was seen as the first city-level law aimed at forcing developers and building owners to switch to building all-electric new buildings. Berkeley’s Ordinance No. 7,672-N.S. was passed unanimously by Berkeley’s City Council in December 2019 and has been in effect since January 2020. It prohibits natural gas infrastructure, which typically is used to provide water and space heating, cooking and other uses, in new buildings of all types, residential and nonresidential.

Since it was enacted over three years ago, more than 70 different city and state governments have adopted their own versions of Ordinance No. 7,672-N.S. by either outright requiring all-electric or fossil-fuel-free new buildings, or strongly encouraging them. Going all electric is a main component of the United States’ efforts to reduce or eliminate carbon dioxide emissions from the environment, and government ordinances such as these may be the key to getting there. Before enacting them, however, local governments are encouraged to read the Ninth Circuit’s decision to understand the potential legal ramifications of doing so.

The lawsuit at issue began shortly after Berkeley passed its natural gas prohibition, when a restaurant-owners trade group, the California Restaurant Association, filed suit against the city. The lawsuit made both federal and state claims. However, the U.S. District Court for the Northern District of California focused mainly on the plaintiff’s federal claims, asserting preemption by the federal 1975 Energy Policy & Conservation Act (“EPCA”), which sets federally mandated minimum efficiency standards to a multitude of consumer products and industrial equipment including furnaces, HVAC equipment, and hot water heaters. In most instances, state and city governments are preempted from setting energy standards for pieces of equipment also covered by the EPCA.

In 2021, the Northern District held that the EPCA did not preempt local ordinances, like Berkeley’s, that do “not facially address any of those [energy conservation or energy use] standards.” The District Court concluded that EPCA preemption should be interpreted as limited in order to avoid “sweep[ing] into areas that are historically the province of state and local regulation.”

The Ninth Circuit’s decision overturned the Northern District of California’s ruling, thereby invalidating Berkeley’s natural gas ban and holding that it was preempted by EPCA, specifically EPCA Section 6297(c).

The Ninth Circuit interpreted EPCA’s preemption provision to have a broader scope than asserted by both Berkeley and the U.S. Department of Energy, which is the federal entity in charge of implementing the EPCA. In the Department of Energy’s supporting brief to the Ninth Circuit, they argued that the EPCA preemption does not “prevent States and localities from adopting health and safety regulations that indirectly affect the quantity of energy or water used by” an EPCA covered-appliance. The Ninth Circuit, held differently, however, and ruled that the EPCA preempts state and city standards that interfere with “the end-user’s ability to use installed covered products at their intended final destinations.” The Ninth Circuit went on to hold that “by using the term ‘concerning,’ Congress meant to expand preemption beyond direct or facial regulations of covered appliances.”

The proverbial ball is now in the City of Berkeley’s court as to whether it will appeal the Ninth Circuit’s decision. Currently, the Ninth Circuit’s holding applies only to those states within its circuit map, which includes Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington, Guam, and the Northern Marina Islands west of Guam. State and local governments elsewhere are not affected by Monday’s ruling.

The Ninth Circuit’s holding only applies to this particular Berkeley ordinance or others that are structured like it. However, state and local governments still wishing to switch to an all-electric infrastructure are also not without options. Those local governments that retain building code authority will find guidance in the outline of the building code exception built into the EPCA preemption provisions. In New York, for example —which retains building code authority and uses its air pollution authority to electrify buildings — the EPCA does not preempt because it does not pertain to air emission standards.

While the Ninth Circuit’s ruling might not affect all states and local governments, the California Restaurant Association v. City of Berkeley decision provides important guidance when choosing which electrification method to pursue.