Half of the states, however, have moved in the opposite direction, preempting the passage of local government ordinances that prohibit or restrict natural gas use. The preemptions are driven by legislatures’ desire to let consumers choose their energy purchases and to minimize market disruptions and interference among competing energy technologies. Cost implications are also a reason given for the preemptions because, as we discuss below, utility bills could increase when switching to electric appliances.
The courts are beginning to weigh in on the legality of local ordinances that restrict natural gas use. One of the country’s first such local ordinances was in Berkeley, California, in 2019, which banned natural gas connections in new buildings beginning January 1, 2020. In April 2023, in California Restaurant Ass’n v. City of Berkeley, a three-judge panel of the Ninth Circuit U.S. Court of Appeals overturned the U.S. District Court for the Northern District of California’s decision that upheld the Berkeley ordinance. The panel found that Berkeley’s ordinance was preempted by the Energy Policy and Conservation Act (EPCA) because the U.S. government has jurisdiction for regulating energy use for many common building appliances such as furnaces, air conditioners, and water heaters. In May 2023, the City of Berkeley filed a petition demanding rehearing en banc, which has yet to be granted or denied. The Ninth Circuit’s preemption decision is already impacting local ordinances in those states and territories within its jurisdiction. Additionally, on October 12, 2023, a group of businesses, trade associations, and labor unions filed a federal lawsuit challenging the legality of New York’s statewide natural gas restrictions on similar grounds as the Ninth Circuit, asserting that such laws are preempted by EPCA and that it is the federal government’s sole jurisdiction to set national energy policy.
In this article, we examine policy objectives, costs, and legal perspectives of local and state governments’ natural gas restrictions. In section I, we describe the “state of play” of natural gas restrictions; present information on the number of jurisdictions that have implemented natural gas restrictions; and describe the characteristics of, and the main policy goals envisioned by, the restrictions. We also present information on the number of state preemptions of local governments and the stated policy reasons behind them. In section II, we evaluate the likely benefits and costs of natural gas restrictions, including the expected environmental and health benefits from restricting natural gas in buildings and the likely costs of such policies for consumers. In section III, we discuss California Restaurant Ass’n and its impact on local governments’ natural gas restrictions. We also discuss the possible relevance of the state-action immunity doctrine, which, under certain conditions, exempts states and localities from liability under federal antitrust laws.
I. Natural Gas Restrictions
A. State of Play and Characteristics
In 2019, the City of Berkeley, California, became the first city in the U.S. to ban natural gas connections in new buildings beginning January 1, 2020. Shortly thereafter, several other jurisdictions within California followed suit. As of January 2023, the number of jurisdictions with natural gas restrictions in California alone was estimated to exceed 70. Today, jurisdictions within seven states (California, Colorado, Maryland, Massachusetts, New York, Vermont, and Washington) and the District of Columbia have enacted restrictions on natural gas use in new construction, and that number is likely to continue to grow. These states and the District of Columbia accounted for approximately 27.2 percent and 25.3 percent, respectively, of residential and commercial natural gas deliveries in the U.S. in 2022.
Currently, only New York has a statewide natural gas restriction. In May 2023, New York became the first state in the U.S. to restrict natural gas and other fossil fuels in most new buildings. The provision, which is effective for buildings not more than seven stories high in 2026 and for taller buildings in 2029, was approved as part of the state’s budget. This restriction also provides exceptions for large commercial and industrial buildings, as well as buildings used as manufacturing facilities, hospitals, laundromats, and restaurants and for certain other uses.
A divergence in public policy on natural gas restrictions among the states has emerged, however, as 25 states have passed laws that prohibit local governments from restricting natural gas use. These states account for more than one-third of U.S. natural gas deliveries in the residential and commercial sectors.
The details of natural gas restrictions vary by local governments, reflecting differences in community priorities. They may be enacted as ordinances, building codes, or other means. The restrictions are rarely one-dimensional, such that they typically do not ban natural gas use in all buildings within the geographic area. Rather, natural gas restrictions typically require new buildings to be “all-electric” or ban natural gas use by certain appliances, such as furnaces, water heaters, or stoves, and often provide exemptions for certain building types (e.g., residential or commercial), sizes, or other attributes. Commercial restaurant exemptions are common in many municipalities because many restaurants rely heavily on natural gas stoves.
The following examples are some of the types of restrictions found in local ordinances:
- Effective January 1, 2022, Santa Barbara, California, required all new buildings to be all-electric. An exemption was offered for restaurants, clean rooms, laboratories, and projects where electrification is not possible.
- Montgomery County, Maryland, banned natural gas as a source of heat in new buildings effective the end of 2026. The ban exempts certain buildings, such as restaurants and manufacturing facilities, and phases out gas by the end of 2027 for public housing, schools, and residences more than four stories high.
- In May 2022, Washington D.C.’s Construction Codes Coordinating Board voted to require all new residential and commercial construction of “covered buildings” to be all electric by 2026, with covered buildings referring to those where the city’s environmental regulations apply.
There are other energy policies that local governments have imposed that lower natural gas usage in buildings but do not consist of the types of restrictions discussed above. These policies include New York City’s code on carbon dioxide emissions; the state of California’s code on the use of highly efficient electric heat pumps as a baseline technology; and the city of San Anselmo, California’s requirement of higher energy efficiency for mixed-fuel projects. These other types of energy policies may play a more prominent role in the future given the Ninth Circuit’s recent decision in California Restaurant Ass’n, as discussed further below.
B. Public Policy Goals
The main policy goals of natural gas restrictions are to reduce GHG emissions and health hazards associated with the indoor use of natural gas appliances. Cities within California have adopted climate action plans and/or natural gas policies to reduce GHG emissions. For example, the City of Berkeley found that its natural gas ban ordinance was “reasonably necessary” because of “climatic, geologic and topographical conditions,” including Berkeley’s vulnerability to sea-level rise, drought, wildfires, fire seasons, and firestorms (which, the city noted, are affected by increases in worldwide average temperatures due to releases of GHGs), as well as “health and safety concerns . . . associated with poor indoor and outdoor air quality exacerbated by the combustion of natural gas.” Berkeley’s location along the Hayward fault also puts it at risk for earthquakes, which could damage natural gas infrastructure and cause fires. In addition, the city noted that “[s]ubstitute electric heating and cooling infrastructure in new buildings fueled by less greenhouse gas intensive electricity is linked to significantly lower greenhouse gas emissions.”
Even in small towns like Crested Butte, Colorado, where a natural gas restriction was made effective in January 2023, local officials have shown strong support for these types of policies motivated by environmental concerns. A member of the town council argued, “It is bold to talk about the cost to the environment and use that as part of a decision. . . . It’s an investment in the future. Going forward people will see this as the way to cleaner living.”
Statewide climate action plans acknowledge the role that local governments can play in achieving statewide energy goals. For example, California’s 2017 Climate Change Scoping Plan to reduce its GHG emissions 40 percent from 1990 levels by 2030 states that “Regional, Tribal, and local governments and agencies are critical leaders in reducing emissions through actions that reduce demand for electricity, transportation fuels, and natural gas, and improved natural and working lands management.” Statewide plans tend to include policies that aim to limit global warming by focusing on GHG emissions from buildings (known as “building decarbonization”). For example, the California Energy Commission (CEC) states that homes and commercial buildings “produce a quarter of the state’s greenhouse gas (GHG) emissions, making homes and businesses a major factor in climate change. Reducing these emissions is a key part of California’s climate strategy.” Currently, California’s Assembly Bill 3232 directs the CEC to “assess the potential to . . . reduce” GHG emissions from the “residential and commercial building stock by at least 40 percent below 1990 levels by January 1, 2030.”
New York’s statewide natural gas restrictions is an integral tool used for its overall climate agenda. New York State’s budget states that its natural gas restriction is “to support the goal of zero on-site greenhouse gas emissions and help achieve the state’s clean energy and climate agenda,” including GHG reductions set forth in the state’s Climate Leadership and Community Protection Act.
For those states that have preempted local governments’ natural gas restrictions, the main policy justifications are encouraging consumer choice and the costs of the restrictions. For example, in Texas, the passage of Senate Bill 1017 “prohibits political subdivisions from adopting or enforcing ordinances, orders, regulations or similar measures to limit access to specific fuel sources or prohibit the sale of engines based on their fuel source.” After signing the bill, Governor Greg Abbott of Texas stated, “No city or county should be able to deny Texans the ability to put gas in their cars, power their lawnmowers, or use natural gas in their homes.” Upon filing, the bill’s sponsor, state senator Brian Birdwell, shared, “California-style restrictions on engines or fuel sources that limit consumers and business owners from being able to access the energy sources, they need have no place in Texas.”
Furthermore, the potential impact on costs is a consideration as well in statewide preemptions. Arizona enacted House Bill 2686 in 2020—the first adopted preemption ban in the U.S. Republican State representative and speaker Rusty Bowers sponsored the bill and articulated during a hearing in early February 2020 that, “[i]n a way, there is a discrimination, both between the purchase base—the population purchasing base—as well as on the services available to certain citizens or all citizens.” His argument for the bill focused on the logistical challenges of having “piecemeal” utility services and the resulting increase in the cost of infrastructure falling on fewer consumers.
II. Analysis of Natural Gas Restrictions
Impact on Emissions
Natural gas restrictions aim to reduce GHGs and other pollutants emitted by appliances that burn natural gas in buildings. Natural gas is comprised mainly of methane (CH4), a strong GHG; and combustion of natural gas directly releases carbon dioxide (CO2) into the atmosphere, as well as harmful pollutants indoors, including nitrogen dioxide (NO2), a gas that has been found to cause or exacerbate respiratory problems.
In the US, carbon dioxide is the largest source of GHG emissions, accounting for approximately 79.4 percent of total gross GHG emissions in 2021, with the vast majority (92.2 percent) of CO2 emissions coming from fossil fuel combustion. The U.S. Environmental Protection Agency (EPA) estimates that natural gas accounted for nearly 34.9 percent of total U.S. energy-related CO2 emissions from fossil fuel combustion.
Methane is the next largest source of GHG emissions in the US, representing 11.5 percent of total gross GHG emissions in 2021. While smaller in terms of overall contribution to GHG emissions, methane is more than 28 times as potent as CO2 at trapping heat in the atmosphere over a 100-year period. Methane is emitted directly into the air by natural gas appliances when not in use—a source reportedly not captured by EPA’s GHG emissions inventory—or when fossil fuel combustion is incomplete. Leaks from natural gas wells, storage tanks, and pipelines also release methane into the atmosphere. More specifically, natural gas systems accounted for 24.9 percent of all U.S. methane emissions in 2021 (2.9 percent of total gross GHG emissions), while abandoned oil and gas wells and stationary combustion accounted for 2.3 percent of methane emissions.
By limiting the amount of natural gas used in buildings, natural gas restrictions are expected to reduce GHGs, as GHG emissions from buildings are substantial. According to the EPA, residential and commercial buildings accounted for approximately 30.3 percent of U.S. GHG emissions in 2021. Almost half (12.7 percent) of these emissions were attributed to direct combustion of natural gas and petroleum for uses such as heating and cooking. The remaining 17.6 percent represents the allocation of indirect GHG emissions associated with electricity generation. Most of residential and commercial buildings’ GHG emissions are CO2, and, according to the EPA’s estimates, emissions of methane from the residential and commercial sectors represented just 2 percent of total U.S. GHG emissions in 2021. Nevertheless, the impact of natural gas restrictions on methane emissions in buildings may not be trivial. For example, a recent study found that the annual methane emissions impact of gas stoves in U.S homes is comparable to the annual carbon dioxide emissions of 500,000 automobiles, with more than three-quarters of methane emissions generated from stoves when not in use. Additional studies have also found that post-gas meter residential methane emissions from natural gas appliances, including stoves and water heaters, are an important and understudied source of methane emissions.
A key consideration in evaluating the impact that natural gas restrictions will likely have on GHG emissions is the type of energy that is substituted for natural gas, which in most cases will be electricity. Importantly, for natural gas restrictions to have a net reduction impact on GHG emissions, the substitution of electric appliances for natural gas appliances needs to rely on non-fossil fuels to generate electricity; otherwise, one type of fossil fuel would be substituted for another with the net impact indeterminate—and potentially even increasing GHG emissions in some cases.
Currently, and for the foreseeable future, a minority of electricity is generated with renewable sources. Specifically, in 2022, 21.3 percent of electricity generated in the U.S. came from renewable, clean energy consisting of wind (10.3 percent), hydropower (6.0 percent), solar (3.4 percent), biomass (1.2 percent), and geothermal (0.4 percent). Most electricity (60.4 percent) in the U.S. is generated using fossil fuels, with natural gas and coal accounting for 39.9 percent and 19.7 percent, respectively. Nuclear power accounts for 18.2 percent.
This means that the electric appliances substituted for natural gas appliances will typically be powered using fossil fuels with similar or even greater GHG emissions impacts, as in the case of coal-based generation, which produces more than 200 pounds of CO2 per million British thermal units (MMBtu), compared to 117 pounds of CO2 per MMBtu for electricity generated by natural gas. While the share of renewable electricity is expected to grow considerably, growth in renewables and reductions in coal-based generation will likely show much variability. For example, GHG emissions increased in 2021 coming out of the pandemic, largely due to an increase in CO2 emissions from coal combustion in the electric power sector. In 2021, CO2 emissions from coal consumption increased 14.6 percent from 2020 levels, primarily within the electric power sector, while CO2 emissions from natural gas use increased 0.5 percent, with no increase in natural gas consumption observed in the electric power sector. All this means that the immediate and near-term net impact of natural gas restrictions on GHG emissions is uncertain. Furthermore, when one considers that the U.S. can export natural gas through pipelines and liquefied natural gas, the net impact that natural gas restrictions in the U.S. will have on global emissions is even more uncertain.
Impact on Health
With respect to health benefits, these are more certain as natural gas restrictions improve indoor air quality in buildings by reducing nitrous oxide (NO2) and methane emissions, and substitution of electric appliances does not result in concomitant releases of dangerous emissions in a building. As noted above, studies have found links between gas stoves in the home and adverse health outcomes. For example, one study found that long-term exposure to NO2, similar to that from a gas stove, results in an increase of at least 20% in the odds of developing a respiratory illness in children. Another study found that gas stoves increase the risk of asthma in children, and a 2022 study reported that 12.7 percent of all U.S. childhood asthma cases are attributable to gas stove use. A previously cited study found nitrogen oxides emissions in the home to be related to the amount of natural gas burned, and highlighted the importance of using range hoods and proper ventilation. The California Air Resources Board noted that “[u]sing your stove ventilation hood reduces all emissions from cooking by on average 66%.”
B. Costs and Competition
As a practical matter, natural gas restrictions require households to use electric appliances—e.g., furnaces, water heaters, stoves, washing machines—rather than natural gas appliances in new construction, raising two direct cost effects for consumers: (1) the cost of the appliance and (2) the cost of operating the appliance, in the form of monthly electricity and natural gas expenditures.
With respect to the former, with the exception of electric heat pumps, which have large up-front costs but lower operating costs and which homeowners may not need to purchase in order to comply with natural gas restrictions, the cost differential between electric and natural gas appliances is not pertinent because the market for appliances is competitive and consumers have a wide range of options at different price and quality combinations.
The primary cost impact of natural gas restrictions is the impact on the typical utility bill for operating electric versus natural gas appliances, especially for home heating. While the costs of electricity and natural gas can vary frequently and significantly depending on a myriad of issues—e.g., the costs of fuel, the fuel mix of generation plants, geography, weather, average household size, efficiency, and consumption—currently, residential energy expenditures during the winter months are forecasted to be significantly lower for homes primarily using natural gas for heating compared to homes primarily using electricity for heating (see table 1).
[see table below]