Background
The South Coast Air Basin, encompassing portions of Los Angeles, Orange, Riverside, and San Bernardino counties, has the worst ground-level ozone pollution in the nation and is in “extreme” nonattainment with all federal air quality standards. The South Coast Air Quality Management District (District), established in 1976 to address this critical environmental problem, adopted Rule 1146.2 in June 2024. The amended rule phases in prohibitions on the manufacture, sale, or installation of gas-fired water heaters, boilers, and process heaters that emit more than zero nitrogen oxides (NOx) over the next decade, with the first compliance deadline taking effect January 1, 2026.
The District determined that widespread adoption of zero-emissions technology across all stationary sources was the only viable way to achieve the 124 tons-per-day reduction in NOx emissions necessary to bring the Basin into compliance with the 2015 federal 8-hour ozone standard by 2038. Emissions from appliances account for nearly 20 percent of the stationary source emissions the District regulates.
Manufacturers of gas appliances and various industry groups, including the California Restaurant Association, National Association of Home Builders, and the Plumbing-Heating-Cooling Contractors of California, challenged Rule 1146.2 as preempted by the federal Energy Policy and Conservation Act (EPCA). They argued that EPCA’s preemption clause bars state regulations concerning the “energy use” of covered products, and that NOx emissions standards necessarily implicate appliance energy use.
The Court’s Holding
The Ninth Circuit affirmed the district court’s grant of summary judgment for the District, holding that EPCA does not preempt Rule 1146.2. Judge Koh’s majority opinion concluded that nothing in EPCA’s text, structure, or legislative history suggests Congress intended to interfere with states’ ability to regulate appliance emissions under the Clean Air Act framework. EPCA was enacted in 1975 to address energy conservation and was expanded in 1987 to counteract the patchwork of state energy efficiency standards that had emerged. Its preemption provision expressly addresses “energy efficiency” and “energy use”—concepts narrowly defined in the statute as relating to energy consumption measured according to federal test procedures—not emissions regulations.
The court noted that the EPA, not the Department of Energy, holds authority over state emissions standards under the Clean Air Act. The court emphasized that since at least the 1970s, states have regulated appliance emissions as part of their obligation to implement “all reasonably available control measures” to achieve federal air quality standards. The EPA has routinely approved state appliance emissions standards in State Implementation Plans, including for Texas, Utah, and California. The Bay Area adopted zero NOx standards for commercial water heaters and furnaces in March 2023 without legal challenge.
The court further held that even if EPCA’s preemption provision applied broadly, plaintiffs’ facial challenge fails because the rule regulates process heaters, which are not listed as “covered products” under EPCA and for which the Department of Energy has issued no federal energy conservation standards. Additionally, the court rejected plaintiffs’ reliance on California Restaurant Ass’n v. City of Berkeley (89 F.4th 1094 (9th Cir. 2024)), noting that case explicitly declined to address whether EPCA preempts regulations enacted pursuant to another federal statute like the Clean Air Act. Ironically, the California Restaurant Association—a plaintiff in this case—had conceded in Berkeley that regulations of NOx emissions do not concern energy use and are not barred by EPCA.
Key Takeaways
- EPCA’s preemption provision is limited to state regulations concerning energy efficiency and energy use as defined in the statute; it does not extend to state emissions standards enacted under the Clean Air Act.
- States have a long-established, EPA-approved practice of regulating appliance emissions to comply with federal air quality standards, and EPCA contains no language suggesting Congress intended to eliminate this authority.
- The Department of Energy’s authority over appliance energy conservation standards is separate from and does not encroach upon the EPA’s authority over emissions standards under the Clean Air Act.
- Even if the scope of EPCA preemption were broader, a facial challenge to Rule 1146.2 fails because the rule covers process heaters, which fall outside EPCA’s definition of covered products.
Why It Matters
This decision validates California’s aggressive approach to meeting federal air quality standards through zero-emissions appliance regulations and removes a significant legal obstacle to such regulations nationwide. With 35 other jurisdictions—ranging from Texas to Utah—having already adopted similar low or zero NOx emissions standards for appliances, and over 60 California cities and counties considering comparable policies, this ruling provides strong legal support for a regulatory trend that manufacturers must now accommodate. The decision clarifies that the tension between energy conservation statutes and environmental protection laws must be resolved in favor of the statute that directly addresses the environmental harm—here, the Clean Air Act.
For states facing “extreme” nonattainment designations, the ruling confirms that appliance emissions regulations remain an essential tool in achieving federal compliance, particularly as EPA pressures nonattainment areas to adopt increasingly stringent measures. The court’s emphasis on the distinct statutory mandates and agency authorities of EPCA and the Clean Air Act establishes that preemption doctrines will not collapse environmental protection into energy policy, even where regulations affect appliance design and manufacturing. The dissent’s narrower view—that California Restaurant Ass’n controls—was rejected, leaving open the possibility that regulations enacted in service of one federal statute may coexist with separate federal regulatory schemes absent clear congressional intent to preempt.