2024 is starting off with some rough news for building decarbonization: This week, the Ninth Circuit decided not to review its decision in California Restaurant Association v. City of Berkeley, which struck down a Berkeley ordinance prohibiting gas infrastructure in most new buildings. This means that the Ninth Circuit’s decision from April 2023 will probably remain in place, limiting the power of Western state and local governments to restrict gas in new buildings. This setback comes with a silver lining, though: The original panel also amended its April opinion in a way that limits its scope, clarifying that state and local governments still have many options to protect their residents’ health and safety and promote clean energy. On top of that, a group of Ninth Circuit judges filed a dissent to the decision not to review the April opinion, laying out in clear terms why that opinion was mistaken; this will help limit the spread of this theory to other jurisdictions.

Background on the CRA v. Berkeley Litigation

This decision comes after nearly five years of litigation, so it may help to start at the beginning: In 2019, the City of Berkeley passed an ordinance barring developers from including gas infrastructure in most new buildings. The California Restaurant Association (CRA) challenged the ordinance on the ground that it was “preempted”—barred—by the decades-old Energy Policy and Conservation Act (EPCA). Their argument hinged on a phrase in EPCA that says state and local governments can’t pass laws “concerning the…energy use” of any appliance that the law covers. This had previously been understood as preempting state and local efficiency requirements that might conflict with the federal standards. But the CRA’s lawyers—apparently funded by a gas utility—came up with a much broader reading: they argued that bans on gas infrastructure also “concern[]…the energy use” of EPCA-covered appliances, because they prevent the use of those appliances altogether, and therefore reduce their “energy use” to zero. In 2021, a district court rejected that argument.

However, the CRA appealed to the Ninth Circuit, where, last April, a three-judge panel reversed the lower court’s decision, finding that EPCA bars state and local “building codes that regulate natural gas use,” including the Berkeley ordinance. In May, the city asked the Ninth Circuit to review the case “en banc,” meaning that a group of eleven Ninth Circuit judges would take a second look at the panel’s opinion and potentially overturn it. En banc requests are rarely granted, but many building-decarbonization advocates were hopeful that the Ninth Circuit would act in this case because of the importance of the case and the extreme position taken by the panel. (Some also considered the unlikely composition of the panel—a Reagan appointee and two Trump appointees, one of whom was a Court of International Trade judge sitting by designation—as an argument for review by a more representative group of judges.)

The Amended Opinion

After several months of waiting, the Ninth Circuit has now announced that it will not rehear the case. However, the original three-judge panel has amended its opinion in important (if small) ways, removing some of its sweeping pronouncements against local regulatory authority and emphasizing the limited nature of its ruling.

Perhaps most importantly, the panel deleted its broad statement implying that EPCA preempts any “building codes that regulate natural gas use,” which could have been read as barring any regulation of any particular type of energy. The amended opinion has a more limited statement specifically preempting “building codes” that “prohibit[] natural gas piping in new construction buildings [sic] from the point of delivery at the gas meter.” The panel’s reformulation emphasizes its intent to address regulations like Berkeley’s: specifically, regulations that (1) are “building codes” for new construction and (2) target gas infrastructure between the gas meter and the appliance. Both of these elements are reemphasized throughout the amendments to the opinion, and are worth examining in more detail.

The focus on “building codes…in new construction” comes from the special exemption from preemption that EPCA provides for more flexible “building code[s] for new construction.” The original opinion noted the point in passing as further confirmation that EPCA applies to the Berkeley ordinance. The amended opinion places much more emphasis on this argument, moving it to the front of the relevant section and calling it “critical[ly] importan[t],” as well as clarifying that several statements in the opinion apply only to “building codes,” and not regulations more broadly. These amendments provide a strong argument that regulations that are not “building codes…in new construction”—regulations of existing buildings or regulations that do not apply to buildings at all—are unaffected.

The amendments also reduce the opinion’s impact on state and local regulation of gas distribution, that is, the last-mile infrastructure that moves gas from large-scale transmission pipelines to the point of use. The original opinion implied that any “regulation that bans the delivery of natural gas” is preempted by EPCA, raising the possibility that all regulation of gas distribution—the traditional domain of state and local governments—would be preempted. The amended opinion specifies that it applies to regulations “that ban[] the installation of piping that transports natural gas from a utility’s meter on the premises to products that operate on such gas.” What the panel seems to be saying is that state and local governments can still regulate any part of the gas-distribution system up to the meter—for example, removing gas infrastructure at the block level—and that the Ninth Circuit is only removing local control over building-level infrastructure. This distinction was made in parts of the April opinion, but seemingly contradicted elsewhere; the amended version more clearly protects local regulation of the majority of the distribution network.

Impacts on Building Decarbonization Policies

This opinion is a substantial setback for jurisdictions in the Ninth Circuit that were part of the growing movement toward safer and greener buildings. Assuming that the Supreme Court does not end up reviewing the case (more on that below), the City of Berkeley, along with many other cities in the Ninth Circuit that passed laws based on the Berkeley ordinance, will likely need to rewrite those laws to fit within the smaller scope of local authority. Other regulations may need to be reexamined to ensure that they do not run afoul of the new interpretation of EPCA, although the limitations added in the opinion amendments provide more clarity and a wider scope for local action than the others.

However, it is also important to note the limitations of the opinion: First, this opinion applies in the Ninth Circuit only (that is: Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, the Northern Marianas, Oregon, and Washington). There’s some risk that judges elsewhere will follow the Ninth Circuit but, as discussed further below, the powerful dissent that came along with this decision makes this less likely.

Even within the Ninth Circuit, the amendments to the opinion make it clear that the panel only intends it to apply to regulations that are similar to the Berkeley ordinance. The panel specifically disavows the applicability of its opinion to regulations that are not “building codes” (or analogous to building codes), or that do not regulate appliances or energy infrastructure on the building side of the meter. There are a host of other actions that state and local governments can still take to protect the health of their residents and combat climate change: for example, building performance standards, which reduce the emissions of all buildings over time; neighborhood-scale electrification, which would remove multiple buildings at a time from gas-distribution systems; stringent energy codes that allow the limited use of fossil fuel equipment but reward electric appliances; or subsidies to encourage voluntary efficiency and electrification retrofits.

What Comes Next

The City of Berkeley has ninety days to decide whether to ask the Supreme Court to review the Ninth Circuit’s opinion. That appeal would be risky for building-decarbonization policy, because if the Supreme Court agreed with the Ninth Circuit’s decision, it would apply nationwide. In any case, there is no guarantee that the Supreme Court would take it up; the Court granted only 1.4% of requests for review in 2022. If another circuit issued an opinion disagreeing with the Ninth Circuit (see below) that would make Supreme Court review more likely, but that could take years to come about.

Another issue to watch is copycat lawsuits in other jurisdictions, which is where the dissent in CRA v. Berkeley will be most important. The firm that represented the CRA—whose legal research on the issue was reportedly funded by the gas industry—has made nearly identical arguments in a challenge to New York’s restrictions on gas in new buildings. New York federal cases fall under the jurisdiction of the Second Circuit, meaning that the judges in that case, called Mulhern Gas v. Rodriguez, don’t have to follow the Ninth Circuit’s decision. Opinions from another circuit do carry weight, though, so judges in Mulhern Gas and similar cases will likely draw on both the panel opinion and the dissent. The dissent’s straightforward reasoning, as well as the fact that it won the support of eleven Ninth Circuit judges, may be even more persuasive than the panel opinion itself.

Finally, the federal government could step in to replace or make up for the state and local authority eliminated by this decision. The U.S. Department of Energy can allow specific state or local laws to take effect even if EPCA would ordinarily bar them, though only on for “unusual and compelling” reasons. Congress could also solve this problem by amending the provision of EPCA under dispute. The current state of federal politics makes this unlikely, but, on the other hand, the CRA v. Berkeley decision represents a massive expansion of federal power at the expense of state power—the sort of issue that has traditionally been able to garner bipartisan support.

Clearly this decision is a blow to both building decarbonization and to local control, but it only stops one type of regulation, in one part of the country. It will be crucial for policymakers and advocates to understand the limits of this opinion as well as its impacts, so as not to unnecessarily delay badly needed health and climate regulations.

Daniel Carpenter-Gold, Staff Attorney
January 3, 2024