The Future of Natural Gas in the Evergreen State

The battle continues for states and local governments with greenhouse gas (GHG) emissions reduction targets to quickly transition away from fossil fuels in order to meet their climate and energy goals. In 2019, the City of Berkeley, California, made headlines when it passed an ordinance to ban natural gas infrastructure and appliances in new buildings as a way of addressing public health concerns and reducing GHG emissions. Many cities and some states took notice and began to implement their own bans on the use of natural gas infrastructure and appliances in new buildings. Conversely, about half of the states passed legislation to prevent cities from implementing their own bans.

In 2022, the Washington State Building Code Council (WSBCC), the state agency tasked with implementing and updating the building codes used in Washington, adopted amendments to the commercial and residential provisions of the Washington State Energy Code (WSEC) that restricted the use of natural gas appliances in most new residential and commercial buildings, which were set to become effective on July 1, 2023. 22-14 Wash. Reg. 091 (2022); 23-02 Wash. Reg. 060 (2023). On April 17, 2023, however, the Ninth Circuit held that the City of Berkeley’s natural gas ban ordinance is preempted by the Energy Policy Conservation Act (EPCA). Cal. Rest. Ass’n v. City of Berkeley, 65 F.4th 1045 (9th Cir. 2023). The EPCA is a federal law that requires the Department of Energy to establish efficiency standards for some covered products, which includes appliances like refrigerators, freezers, water heaters, and heating, ventilation, and air conditioning (HVAC) systems. 42 U.S.C. § 6292(a).

A month after the Ninth Circuit’s decision, a coalition of homeowners, builders, suppliers, and utilities filed a lawsuit in federal district court challenging WSBCC’s amendments as also being preempted by the EPCA. However, in August 2023, the plaintiffs voluntarily dismissed the lawsuit without prejudice because the WSBCC delayed the restrictions and initiated a process to consider amendments in light of the Ninth Circuit’s decision. On November 28, 2023, WSBCC adopted amendments that no longer explicitly restrict the use of natural gas infrastructure and appliances in new residential and commercial buildings, but instead require such new buildings to achieve the same energy performance as buildings built with electric appliances. Wash. Admin. Code §§ 51-11C, 51-11R (2024); 24-03 Wash. Reg. 085, 084 (2024). Under these new amendments, which took effect on March 15, 2024, builders have the option to choose natural gas appliances, but they will need to find other ways to compensate for the efficiency losses. On May 15, 2024, another lawsuit was filed in federal district court consisting of a similar coalition of homeowners, builders, suppliers, and utilities once again challenging the adoption of the 2023 amendments to the WSEC, claiming that the amendments are preempted by the EPCA.

WSBCC’s 2022 and 2023 amendments to the WSEC are part of a multi-decade commitment made by the Washington legislature in 2009 that instructed the WSBCC to gradually reduce annual net energy consumption in residential and commercial buildings from 2013 to 2031 by 70% compared to the 2006 building code. Wash. Rev. Code § 19.27A.160 (2009). In 2010, a coalition of industry groups filed a lawsuit to stop the WSBCC from implementing the first phase of reductions in annual net energy consumption that the WSBCC adopted into the WSEC. Bldg. Indus. Ass’n of Wash. v. Wash. St. Bldg. Code Council, 683 F.3d 1144 (9th Cir. 2012). The WSBCC’s 2009 amendments to the WSEC required a 15% reduction and offered builders three methods for achieving the needed reduction in energy consumption, which included a mechanism for achieving credits for using certain methods or more efficient appliances to reduce energy consumption. The plaintiffs challenged the WSBCC’s 2009 amendments in federal district court, arguing that the revisions were expressly preempted by the EPCA and did not satisfy all seven statutory conditions that allow state and local building codes to be exempt from preemption. However, the district court held, and the Ninth Circuit later affirmed, that Washington’s amendments met the seven conditions of the EPCA’s preemption-exemption provision. The plaintiffs challenging the WSBCC’s 2023 amendments to the WSEC make similar arguments to those in the 2010 lawsuit, but it remains to be seen whether the court will find that Washington’s most recent amendments still satisfy the seven conditions to be exempt from preemption by the EPCA.

During the 2023 legislative session, before the Ninth Circuit’s decision in California Restaurant Association v. City of Berkeley, some Washington legislators attempted to codify a ban on natural gas usage in new residential and commercial buildings. House Bill 1589 (HB 1589) was reintroduced during the 2024 legislative session and amended to remove the ban. H.B. 1589, 68th Leg., Reg. Sess. (Wash. 2024). The new version of the bill, which was signed into law by Governor Jay Inslee on March 28, 2024, instructs all large combination utility companies that provide both electricity and natural gas to develop plans to “achieve all cost-effective electrification of end uses currently served by natural gas,” including “geographically targeted electrification,” among other requirements. Id.; Wash. Rev. Code § 80.86.020. The bill is largely a planning bill that requires large utility companies in Washington to provide plans for how they will efficiently transition the remaining natural gas services to electric. However, the passage of this bill has drawn criticism from some environmental justice (EJ) groups because their calls to repeal portions of the bill were ignored. According to the EJ groups, Section 7 of HB 1589, which requires the Washington Utilities and Transportation Commission (UTC) to approve accelerated depreciation for existing investments in natural gas infrastructure by 2050, will result in significant short-term rate increases that will disproportionately affect moderate- and low-income households. Understandably, moderate- and low-income households in a state like Washington, which consistently ranks among the most expensive states to live in, could suffer greatly from even a small rise in monthly energy expenses. In Washington, residents making less than 80% of the area median income (AMI) spend about 3% of their income on energy costs, while residents making less than 60% of the AMI spend about 5%, according to the American Community Survey five-year estimates for 2018–2022. Section 7 of HB 1589 does allow the UTC to approve proposals by utility companies to merge their electric and gas rate bases if the proposal will result in a net benefit to customers, which could help spread out some of the costs for those currently using natural gas. In 2022, 33.9% of occupied housing units in Washington used utility gas for heating. That same year, residential consumers used 93,930 million cubic feet (mcf) and commercial consumers used 63,093 mcf, together accounting for approximately 44% of the natural gas used in the state. Given the impact that transitioning residential and commercial buildings away from natural gas could have on Washington’s natural gas industry, it is no surprise that there has been strong opposition in response to the recent changes coming from the legislature and the WSBCC.

In addition to the lawsuit challenging Washington’s energy code, voters in Washington passed a citizen ballot initiative in the November 2024 general election that sets out to prohibit the state and local governments in Washington from restricting access to natural gas. It also prohibits the WSBCC from banning, penalizing, or discouraging the use of natural gas for any form of heating or other uses related to any appliance or equipment in any building. Washington Initiative 2066, Natural Gas Policies Measure (2024). However, several environmental organizations and local governments have since filed a lawsuit challenging the constitutionality of the initiative. There also has been movement at the federal level to protect access to natural gas. During the 2024 legislative session, U.S. Representative Jeff Duncan (R-SC) introduced the Pipeline Safety, Modernization, and Expansion Act of 2024, which would prohibit states and local governments from adopting or enforcing “a law, regulation, or standard that has the effect, directly or indirectly, of limiting or prohibiting the transportation or distribution for sale or resale of an energy source that is sold in interstate commerce and transported using a pipeline facility.” H.R. 7655, 118th Cong. (2024). Undoubtedly, a ban at the state or federal level would undo a significant amount of the work that Washington has done to try and reduce current and future GHG emissions.

States and cities that have committed themselves to reducing GHG emissions, like Washington has, appear to be focused on phasing out natural gas in residential and commercial buildings. Washington has been able to reduce GHG emissions in new residential and commercial buildings for many years by tightening energy efficiency standards in new buildings. Undoubtedly, this approach will make it easier to transition away from natural gas in the future, as new homes and commercial buildings will be built without such infrastructure. However, these changes require a long-term commitment and do little to address the natural gas used in the millions of existing homes and buildings. Additionally, it remains to be addressed how cities and states will equitably transition away from fossil fuels without increasing costs on low-income households and small businesses. Such efforts by cities and states to reduce GHG emissions by restricting or disincentivizing natural gas appliances have an uncertain future as legal challenges to such actions continue across the country. If a different circuit court disagrees with the Ninth Circuit on the preemptive effect of the EPCA, Supreme Court review of the question would be likely.