SYNOPSIS
Trade associations representing home builders, manufacturers, hotels, apartments, and restaurants, as well as the pipefitters trade union, sued the South Coast Air Quality Management District (“SCAQMD”) in California, arguing that its newly adopted zero-emission nitrogen oxide (“NOx") standard for water heaters is preempted by the federal Energy Policy and Conservation Act (“EPCA”).
WHY IT MATTERS FOR PUBLIC HEALTH
The combustion of natural gas in appliances emits hazardous air pollutants such as nitrogen dioxide, a precursor to smog, as well as carbon monoxide and benzene. The SCAQMD found that its new rule would reduce about 5.6 tons per day of NOx in its district, or about 10% of the emissions reductions needed for the region to achieve the federal ozone standard.1
BACKGROUND
The SCAQMD is the air pollution agency responsible for regulating stationary sources of air pollution in a large region of Southern California covering Orange County and portions of Los Angeles County, San Bernadino County, and Riverside County. The area has a significant smog problem.
In June 2024, the SCAQMD issued updates to its Rule 1146.2 – titled “Emissions of Oxides of Nitrogen from Large Water Heaters and Small Boilers and Process Heaters” – creating a zero-NOx standard for certain building water heaters.2 Compliance occurs over three phases starting in 2026 with the last phase starting in 2033, depending on the appliance type and whether the building is new or existing. For example, Phase I for new buildings requires Type 1 units (certain water heaters meeting a specified heat input capacity threshold) to meet a NOx standard of 14 nanograms per joule prior to 2026 and 0 nanograms per joule after.3 For existing buildings, the rule requires that appliances that do not meet the NOx standards be phased out upon replacement or after a certain length of time: either 15 or 25 years, depending on the type of appliance and building.4 Small businesses and small residential structures are exempt from some of these requirements, such as the 15 or 25 year phase outs.5
The plaintiffs sued the SCAQMD arguing that Rule 1146.2 violates EPCA’s preemption of local regulation of covered products and does not qualify for an exception. EPCA generally preempts state or local governments from enacting energy efficiency or energy use standards for covered consumer products, like furnaces or water heaters.6 The plaintiffs rely on the recent decision by the Ninth Circuit in California Restaurant Association v. Berkeley, which found that Berkeley’s ordinance prohibiting gas hookups in most new construction was preempted as effectively reducing the “energy use” of covered products to zero.7 The plaintiffs here argue that: “Just as EPCA prohibited Berkeley from banning gas appliances indirectly by banning gas piping, so too does it prohibit the District from banning those appliances indirectly by prohibiting their NOx emissions.”8
This is the first time that a challenge has been brought under EPCA to a NOx regulation of this type, so it will be a question of first impression for the court. Regulations like Rule 1146.2 are governed under another federal law, the Clean Air Act, presenting a potentially distinct legal preemption analysis from the Berkeley decision. For PHLC’s analysis of why we believe EPCA preemption challenges to zero-NOx appliance rules are unlikely to succeed, see our briefing paper.
LITIGATION STATUS
This case was filed on December 5, 2024. Three organizations—the People’s Collective for Environmental Justice, Sierra Club, and Industrious Labs—joined the case as intervenors on SCAQMD’s side on February 26. The parties filed motions for summary judgment and, on July 18, 2025, Judge Percy Anderson ruled in favor of SCAQMD.
The plaintiffs appealed this decision to the Ninth Circuit on August 13. The plaintiffs also filed motions asking Judge Anderson and the Ninth Circuit to block the rule from going into effect during the appeals process, both of which were denied. The American Gas Association and Navien (a manufacturer) have filed amicus briefs supporting the plaintiffs, and PHLC, NESCAUM, and CARB have filed amicus briefs supporting the defendants. Oral argument was held February 5, 2026 and can be viewed here.
On July 2, the Ninth Circuit affirmed the district court and upheld the SCAQMD rule. The panel majority found that Berkeley does not apply to regulations like Rule 1146.2, which regulates pollution pursuant to the federal Clean Air Act. One judge dissented.
On July 6, the plaintiffs submitted a motion for a 28-day extension of time to petition for panel rehearing or rehearing en banc to August 13, which was granted. The petition for rehearing en banc was filed on August 13, which was denied on September 9.
1 SCAQMD Press Release, “South Coast AQMD Approves Rule to Accelerate the Transition to Zero-Emission for Building Water Heaters,” (June 7, 2004), available at https://www.aqmd.gov/docs/default-source/news-archive/2024/1146-2-June-7-2024.pdf.
2 South Coast Air Quality Management District, Rule 1146.2 (Amended June 7, 2024) available at https://www.aqmd.gov/docs/default-source/rule-book/recent-rules/r1146_2-060724.pdf?sfvrsn=8.
3 Id. at Tables 1-3.
4 Id. at Table 2.
5 Id. at 1146.2(k)(4)-(5)
6 42 U.S.C. § 6297(c).
7 Cal. Rest. Ass’n v. City of Berkeley, 89 F.4th 1094 (9th Cir. 2024).
8 Plaintiff Compl. 4, Rinnai Am. Corp. et al v. S. Coast Air Quality Mgmt. Dist., No. 2:24-cv-10482 (C.D. Cal. Dec 05, 2024).