California Court Upholds Local Ordinance Precluding Installation of Natural Gas Piping in New Construction

But that isn’t always the case, as the recent California federal district court decision in California Restaurant Association v. City of Berkeley illustrates. The court there rejected a preemption challenge to a California municipal ordinance banning the installation of natural gas piping in new construction. The decision demonstrates the need for the regulated community to engage on all levels — federal, state, and local. Federal law does not control every aspect of many regulatory areas. Rather, states and localities continue to have some ability to regulate areas touched by federal statutes and regulations.

Some background on the case:

In July 2019, the City of Berkeley passed an ordinance prohibiting natural gas infrastructure in new buildings, including the installation of fuel gas pipes and connecting to gas meters. The California Restaurant Association (CRA) filed suit against Berkeley on behalf of member restaurant owners and chefs interested in opening new restaurants in Berkeley using gas-fired equipment. CRA alleged that the federal Energy Policy and Conservation Act (EPCA) and three California state laws preempted Berkeley’s ordinance.

The court determined that EPCA did not preempt the local ordinance for two reasons:

First, the language of EPCA does not indicate that it intended to preempt local ordinances dealing with natural gas infrastructure. Instead, EPCA preempts only any state regulation “concerning the energy efficiency, energy use, or water use of [a] covered product.” (see here). The Berkeley ordinance does not impact either the energy use or energy efficiency of covered appliances; rather, it prohibits installation of all “natural gas infrastructure” in new buildings.

Second, courts evaluating preemption challenges must evaluate whether federal legislation exhibits an intent to preempt areas of “traditional state regulation.” In the case of the Berkeley ordinance, the court reasoned that “CRA’s expansive interpretation of the EPCA is remarkable for its sweeping breadth [which] would compel localities to continue to provide natural gas in all but the rarest of circumstances.” The court rejected CRA’s reading, noting “Congress has historically and explicitly deferred local natural gas infrastructure to states and localities” under statutes including the federal Natural Gas Act. The court explained that Congress intended and designed EPCA “to avoid a patchwork of state efficiency standards for certain covered appliances; [not] to require local jurisdictions to permit the extension of natural gas service.”

While it’s too early to draw conclusions based on a single trial court decision, the decision illustrates certain big-picture principles. First, the outcome of this case likely would have been different if a federal statute required localities to continue to provide natural gas as an option for energy consumers. In that case, express preemption would likely apply. But without a federal statute that includes that requirement, the reviewing court could conduct a deeper inquiry analyzing Congressional intent and the balance of powers between federal, state, and local laws relating to natural gas. After engaging in that analysis, the court rejected the arguments that the Berkeley ordinance was preempted by federal law after finding that the ordinance only indirectly impacts products regulated by EPCA.

We will keep an eye out for any developments in this case. Because preemption was at the core of the challenge to the Berkeley ordinance, an appeal of the trial court decision may be possible.