Rinnai America Corp. v. South Coast Air Quality Management District

The Ninth Circuit Court of Appeals affirmed the federal district court for the Central District of California’s decision allowing the South Coast Air Quality Management District (SCAQMD) to prohibit the manufacture, sale, and installation of natural gas-fired water heaters, boilers, and process heaters that emit more than zero nitrogen oxides (NOx). SCAQMD instituted the rule in an effort to remedy its “extreme” nonattainment status for federal ozone pollution standards established by the Clean Air Act (CAA). Several manufacturers of gas appliances and industry groups challenged the rule as preempted by the Energy Policy and Conservation Act (EPCA) and as facially invalid. The Ninth Circuit affirmed the district court’s determination that the rule was not preempted by EPCA because it does not concern the energy use of regulated appliances, but instead regulates NOx emissions pursuant to obligations under the CAA. While EPCA does preempt state-level energy use standards for covered appliances, its text does not mention emissions regulations and nothing in the legislative history suggests that it was intended to preempt state-level emissions standards consistent with the CAA. The court distinguished the present case from California Restaurant Association v. City of Berkeley, which struck down Berkeley’s ban on installing natural gas piping in new buildings; the Ninth Circuit reasoned that SCAQMD’s rule does not regulate the energy use of appliances covered by EPCA and does not present a physical barrier to the use of natural gas appliances writ large but instead it simply sets a NOx emissions limit of zero. The court rejected the facial challenge to the rule because process heaters are not covered by EPCA standards, meaning that even if the law were invalid with regard to water heaters and boilers, it would not be unconstitutional in all its applications.

The federal district court for the Central District of California ruled that the Energy Policy and Conservation Act did not preempt the South Coast Air Quality Management District’s rule setting a zero-nitrogen oxide (NOx) emission standard for certain categories of natural gas appliances. Although the court agreed with the plaintiffs that the rule would effectively ban use of covered gas-fueled boilers and water heaters, the court concluded that because the rule concerned pollution emitted by the appliances, and not how much energy they use, it was outside the scope of the Ninth Circuit’s holding that EPCA preempted the City of Berkeley’s ordinance prohibiting installation of natural gas piping in new buildings.

A lawsuit filed in the federal district court for the Central District of California sought to enjoin a South Coast Air Quality Management District (SCAQMD) rule that phased in zero-emission limits for nitrogen oxides (NOx) from certain water heaters, boilers, and process heaters. The plaintiffs—which included manufacturers of natural gas appliances; building, manufacturing, real estate, lodging, and restaurant industry groups; and a labor organization—asserted that the federal Energy Policy and Conservation Act preempted the rule and asked the court to enjoin the defendant from enforcing or attempting to enforce the rule’s emissions limits. The California Air Resources board identified zero-emission standards for appliances as a component of the 2022 Scoping Plan for Achieving Carbon Neutrality and mentioned SCAQMD’s proposal for zero-emission NOx limits for space and water heating.