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.