A divided 9th Circuit panel has upheld South Coast Air Quality Management District’s zero-NOx appliance rule, which will require the phaseout of certain gas-fired water heaters, boilers and process heaters across much of Southern California.

CAA is a plaintiff in the case, along with a broad coalition of housing, business, labor, restaurant, manufacturing, lodging, building and appliance-industry groups. The coalition challenged South Coast AQMD’s Rule 1146.2, arguing that it is preempted by the federal Energy Policy and Conservation Act, which regulates energy use and efficiency standards for covered appliances.

CAA and its coalition partners argued that the rule conflicts with the 9th Circuit’s earlier decision striking down Berkeley’s natural gas ban. In that case, the court held that local governments cannot use building codes to prevent consumers from using covered gas appliances.

The majority disagreed, finding that South Coast AQMD’s rule is different because it regulates appliance emissions under the Clean Air Act, rather than directly restricting gas infrastructure through a building code. The court also emphasized the South Coast region’s air-quality challenges and found that the Clean Air Act gives air regulators broad authority to adopt emissions-control measures to meet federal air-quality standards.

Judge Kenneth Lee dissented from the decision, arguing that the Berkeley case should control. He wrote that the majority’s decision “effectively makes that precedent vanish like smoke.”

CAA strongly disagrees with the ruling.

“The majority is bucking the 9th Circuit’s own precedent,” said Whitney Prout, executive vice president of legal affairs for CAA. “This rule may be framed as an emissions standard, but as Judge Lee recognized, its practical effect is to force covered gas appliances out of the market — which is exactly what the Berkeley decision found preempted.”

For rental housing providers, that practical effect matters. Converting from gas to electric equipment is often not as simple as changing where an appliance plugs into the wall. It can require major infrastructure work, including costly and time-consuming electrical panel upgrades. In some buildings, owners may also need to reconfigure spaces or relocate equipment to account for the different size, ventilation and condensate management needs of heat pump appliances.

The rule has already begun taking effect. The first phase started Jan. 1, 2026, and additional compliance deadlines will apply over time based primarily on appliance type, age and whether the equipment is in a new or existing building. New construction generally faces earlier compliance deadlines than existing buildings, but the rule ultimately requires all covered appliances to be converted.

The next major compliance deadline is Jan. 1, 2028, when new buildings must begin complying with the zero-emissions standard for instant water heaters with greater than 200,000 BTU, certain pool heaters and other covered appliances with a rated heat input capacity greater than 400,000 BTU per hour and up to 2 million BTU per hour. Existing buildings face their first compliance deadline in 2029.

CAA and its coalition partners will seek en banc review, which asks a larger panel of 9th Circuit judges to rehear the case. If granted, en banc review would give the court an opportunity to revisit the panel decision and the conflict CAA believes it creates with the Berkeley precedent.

CAA will continue fighting to preserve housing providers’ ability to choose lawful, reliable appliances and will keep members informed as the case moves forward.