The Same Court That Killed Berkeley's Gas Ban Just Upheld a Bigger One. The Difference Is One Federal Law.

On July 2, a divided 9th U.S. Circuit Court of Appeals upheld a zero-emission rule for water heaters, boilers, and process heaters across four Southern California counties, covering roughly 17 million people and eliminating an estimated 10% of nitrogen oxide emissions from the South Coast Air Basin, which is designated as the nation's most severely polluted ozone region and has been unable to meet federal air quality standards despite five decades of regulation.

Two years earlier, the same court struck down Berkeley's ban on natural gas infrastructure in new buildings. Same circuit, same subject, opposite outcomes.

Builders pulling permits in California right now face an obvious question: what is the law? It depends entirely on which federal statute the local regulation invokes, and most builders have never heard of either one.

Two Federal Laws, Two Answers

EPCA, the federal Energy Policy and Conservation Act, sets national energy efficiency standards for appliances and preempts state regulations that conflict with them. When Berkeley banned gas hookups in new construction, the 9th Circuit held that the ban effectively regulated "energy use" and was preempted under CRA v Berkeley, 89 F.4th 1094 (2024). Berkeley tried to call it a building infrastructure regulation, but the court saw through the framing: reducing gas appliance energy consumption to "zero" is a quantity, regardless of what a city council wants to call it.

South Coast AQMD took a different route entirely, one that bypasses EPCA altogether. Rule 1146.2 does not regulate energy use; it regulates nitrogen oxide emissions under authority granted by a second federal statute, the Clean Air Act. That law explicitly preserves state authority to adopt emission standards stricter than federal ones, a provision Congress has never revoked and that no court has read narrowly enough to bar what the AQMD did. Judge Lucy Koh, writing for the 2-1 majority, held that voiding the rule would amount to an "implied repeal" of the Clean Air Act, and challengers could not demonstrate that Congress ever intended that outcome.

So here is the map: a gas ban routed through energy regulation is dead under EPCA, while a gas ban routed through emission regulation under Clean Air Act authority survives. For the builder standing in a permit office, the practical effect is identical, because neither path allows gas appliances in new construction, yet everything hinges on which law the regulator chose to cite when drafting the ordinance.

Washington Is on Both Sides

Six months before the South Coast ruling, DOJ filed suit against Morgan Hill and Petaluma, two California cities that had adopted all-electric building ordinances through municipal authority without invoking the Clean Air Act. Under Koh's reasoning, they are fully exposed to EPCA preemption.

Consider what that means in practice. Federal prosecutors are suing California cities to overturn gas bans at the same time that a federal appellate court is upholding a different gas ban 400 miles south, because the legal vehicle differs. One executive order says "Unleashing American Energy" while another says "Protecting American Energy from State Overreach," and neither mentions the Clean Air Act exception that just survived judicial scrutiny.

A builder in Morgan Hill has to decide whether to spec gas or electric while DOJ lawyers and 9th Circuit judges work out whose legal theory wins, and nobody is going to call that builder to explain when it's settled.

What Guessing Wrong Costs

For a custom home builder in Los Angeles County specifying a commercial-grade tankless water heater, the compliant electric alternative is a heat pump water heater, and the installed cost delta runs $2,800 to $6,500 depending on the unit size, electrical panel capacity, and whether 240V service already reaches the mechanical room, a premium that is manageable on a new build where you control the design from day one.

Retrofits are where budgets collapse. A builder who specs gas today and faces a 2029 compliance deadline for existing buildings will need to rip out the gas system, run new electrical service, and install a heat pump unit at two to three times the cost of doing it right initially, and on a 10-unit multifamily project the retrofit penalty can exceed $50,000, which is not a rounding error in any pro forma.

But flip the risk the other direction. A builder in Morgan Hill who over-invests in electrical infrastructure for a gas-free design faces $1,200 to $3,000 per unit in 200-amp panel upgrades and additional circuits that may never have been legally required, dead capital sitting in the walls if the ordinance eventually falls.

Paralysis is the rational response, but paralysis also costs money through delayed permits, deferred project starts, and carrying costs on land that sits idle while courts decide. Nobody publishes that number, but any builder who has held a vacant lot for six months while waiting on a jurisdictional question knows exactly what it is.

Why Most Cities Cannot Copy the AQMD

Jurisdictions rushing to replicate South Coast's strategy should slow down considerably before drafting ordinances. Clean Air Act authority to adopt stricter emission standards exists only in areas designated as nonattainment for federal air quality standards, and South Coast qualifies because it has the worst ozone in the country, a designation that took decades of failed compliance to earn.

Portland cannot invoke the same authority, and neither can Denver, Austin, or most cities with gas ban ambitions. If EPA has not designated your air basin as nonattainment for the relevant pollutant, the legal foundation simply does not exist, and EPCA preemption remains the binding constraint for most of the country. Berkeley's ghost still haunts every municipal gas ban outside a Clean Air Act nonattainment zone.

Even within California, the landscape fragments by air district because each one operates under different attainment designations and different regulatory authority. Bay Area AQMD, San Joaquin Valley APCD, and Sacramento Metropolitan AQMD are all in fundamentally different legal positions than South Coast, despite sharing a state legislature and a governor who has made electrification a signature priority. A gas appliance rule that survives judicial review in Los Angeles could be struck down if adopted by a Bay Area city that chose the wrong legal vehicle to accomplish the same policy goal.

A Dissenting Judge's Warning

Judge Kenneth Lee's dissent called the South Coast case "strikingly similar" to Berkeley, accusing the majority of creating an end-run around EPCA that Congress never authorized. If en banc review or the Supreme Court agrees with his reasoning, the Clean Air Act pathway collapses and every gas restriction in the country faces preemption risk regardless of how it was drafted.

NAHB has not announced whether it will seek en banc review, but the 2-1 split all but guarantees this question reaches the Supreme Court within two to three years, given the circuit-level disagreement and DOJ's aggressive posture. Builders cannot wait that long; they are making mechanical system decisions right now on projects breaking ground this quarter.

What To Do This Week

Pulling permits in the South Coast Air Basin? Spec electric for covered appliances, full stop. Rule 1146.2 is law, upheld four days ago, and the retrofit cost of guessing wrong dwarfs the upfront premium by a factor of two or three.

Pulling permits in a California city with a municipal all-electric ordinance? Morgan Hill, Petaluma, San Jose, and roughly 70 others fall in this category, and the right call is to spec electric anyway while budgeting for the possibility that the ordinance is struck down. Exposure is the cost of electrical infrastructure you might not have needed, which beats ripping out gas systems by every measure that matters.

Pulling permits anywhere else? Check your jurisdiction's attainment status at EPA's Green Book before making any mechanical decisions. If you are in a Clean Air Act nonattainment area and the local air district has adopted zero-emission standards, those standards are likely to survive appellate review. If your city passed a gas ban through municipal ordinance without Clean Air Act authority, Berkeley puts it squarely at risk, and DOJ may come knocking with a complaint that looks a lot like Morgan Hill's.

One more thing: do not spec dual-fuel as a hedge. Running a gas line that never connects to an appliance wastes $1,500 to $3,000 on a residential build, invites liability if the line leaks, and creates code compliance uncertainty if regulations change mid-project. Make a decision, document your reasoning, and move on.