Ninth Circuit Overturns Natural Gas Ban

Can cities and states really ban natural gas hookups? On January 2, 2024, the Ninth Circuit handed down a decision in California Restaurant Association v. City of Berkeley finding that Berkeley’s natural gas ban was preempted by federal legislation and struck the ordinance down.

In 2019, the City of Berkeley adopted first-of-its-kind legislation amending the city’s building code to prohibit the use of natural gas in virtually all newly constructed buildings, with some limited exceptions. Berkeley’s ordinance was originally enacted with the goal of curbing greenhouse gas emissions and encouraging all-electric infrastructure in the city. Soon after its enactment, however, the California Restaurant Association sued, arguing that the ordinance was preempted by the federal Energy Policy and Conservation Act (EPCA). The EPCA, enacted by Congress in 1975, provides a comprehensive scheme for federal energy regulation. For the purposes of this lawsuit, however, the statute also governs federal regulation of consumer goods using natural gas. Under the EPCA, these consumer goods are referred to as “covered products.” Under the EPCA, once a federal energy conservation standard is adopted for a covered product, state and local governments are prohibited from further regulating the product with some minor exceptions.

The district court, which first heard the case back in 2019, was largely favorable to Berkeley’s arguments that the ordinance was not preempted by federal law. After rejecting the city’s motion to dismiss the California Restaurant Association’s suit, the district court interpreted the EPCA narrowly so that the Act would not “sweep into areas that are historically the province of state and local regulation.” [i] The district court concluded that the EPCA was not preempted because the ordinance did not explicitly regulate or mandate the installation of any particular product or appliance, and because the ordinance’s effect on consumer products was “at best indirect.” [ii]

The majority for the Ninth Circuit disagreed with the lower court, explicitly abandoning the district court’s limited reading of the EPCA’s preemption statue. As the majority at the Ninth Circuit observed, following the plain language of the EPCA, once the federal government adopts an energy conservation standard for consumer products covered by the EPCA, state and local governments are limited in their ability to further regulate those products. At the appeals court, Berkeley had argued that the EPCA’s concern with covered products should be understood narrowly to exclude the distribution of natural gas. But the court was unpersuaded.

An inherent aspect of regulating covered consumer products under the EPCA, the majority observed, is whether those products can access natural gas at all. Therefore, the EPCA must preempt local and state regulations like Berkeley’s natural gas ban affecting natural gas supply to those covered products. But, as the court opined, the EPCA’s scope is not infinite and the statute may not preempt state or local regulation of a utility’s distribution of natural gas.

At the appeals court, Berkely had also argued that a finding that the city’s natural gas ban was preempted by the EPCA would necessarily repeal the Natural Gas Act, a comprehensive ban and federal regulatory scheme for the sale of natural gas. The Court, however, did not find any implied preemption because the Natural Gas Act only restricts the Federal Energy Regulatory Commission’s ability to regulate local distribution of natural gas, and therefore did not implicate the EPCA.

This ruling leaves other California jurisdictions with similar natural gas bans, such as San Francisco, San Jose, and Los Angeles, in an awkward position and will likely temper efforts by other jurisdictions to adopt similar bans. The case, though, is widely expected to be appealed to the Supreme Court, which may address the extent of the EPCA’s preemption of local gas regulation in the years to come.

[i] Cal. Rest. Ass’n v. City of Berkeley, 547 F. Supp. 3d 878,891 (N.D. Cal. 2021).

[ii] Id.