latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/ariz-governor-signs-nation-s-1st-prohibition-on-building-gas-bans-57249737 content esgSubNav
In This List

Ariz. governor signs nation's 1st prohibition on building gas bans

Blog

Global M&A By the Numbers: Q3 2021

Blog

Insight Weekly: Global stock performance; hydrogen pilot projects; Powell's Fed future unsure

Blog

Insight Weekly Labor market recovery hurdles power market integration nonbank MA hunt

Blog

Q&A: Q2'21 Power Forecast: Overheated Power Markets are Here – Who Wins, Who Loses, and Why?


Ariz. governor signs nation's 1st prohibition on building gas bans

Arizona became the first state in the nation to prohibit local governments from adopting measures that would ban natural gas use in new buildings.

Republican Gov. Doug Ducey on Feb. 21 signed into law a bill that will block cities, towns and counties from using local authority to deny building permits to structures that include a natural gas hookup. The legislation is meant to preempt the type of building gas bans that have taken hold throughout California and spread to Seattle and the Boston area.

The law could foreshadow a new strategy for gas backers in statehouses. Committees in the Tennessee House and Senate are scheduled on Feb. 25 to consider bills that would bar political subdivisions "from prohibiting the connection or reconnection of a utility service based on the type or source of energy to be delivered to an individual customer."

SNL Image

Here at the Arizona state Legislature, Republicans feared policies banning natural gas in new buildings would creep across the border from California, where the climate change strategy has swiftly gathered momentum.
Source: Thinkstock

The Arizona legislation breezed through the GOP-controlled Legislature, taking just three weeks between its first reading and passage. Republicans in both chambers voted unanimously to support the bill, with several House and Senate Democrats crossing party lines to support it.

Local gas utility Southwest Gas Holdings Inc. backed the legislation, along with local trade groups and chambers of commerce. Southwest Gas could not immediately be reached for comment. Environmentalists, Pima County, Phoenix and Tucson opposed the bill, though neither of the cities had put forward building gas bans.

The absence of any plans to prohibit gas hookups formed the foundation of Democratic opposition. The minority characterized the bill as a giveaway to gas companies that preemptively narrowed cities' options for making climate change policy in the future.

Yet Republicans got encouragement from a state Rules Attorney Office analysis that determined the bill was constitutional and any gas ban would be unlikely to survive a legal challenge. The office found that courts would likely find a rational basis for the policy for providing access to utility providers, that the need for access to those utilities is rational and that uniform statewide regulation is appropriate.

"I can't tell you with 100% certainty that if this was challenged it would be upheld, but ... if I was a gambling man, I would bet that this would be upheld," rules attorney Tim Fleming said during a Feb. 3 Rules Committee hearing.

The final version of the bill underscored that analysis, stressing that "The regulation of a utility provider's authority to operate and serve customers is a matter of statewide concern."

House Speaker Rusty Bowers, a Republican who sponsored the bill, said gas bans would pick apart the economic viability of the utility business in a piecemeal fashion. Since the cost of the infrastructure is spread across all ratepayers, allowing cities to block access to those services would cause prices to go up for remaining customers, Bowers said.

"In 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," he said during the Feb. 3 hearing.

The American Gas Association, which represents public utilities, welcomed the bill's enactment.

"We applaud Governor Ducey and the Arizona State Legislature for codifying a smart, yet simple concept: that people want a choice when it comes to the energy they use in their homes and businesses," Karen Harbert, the association's president and CEO, said in a statement. "Arizonans will now have the opportunity to take advantage of all of the energy options offered to them, including the comfort and savings of natural gas."

The bill is broadly worded to prohibit local governments from denying building permits based on the structure's future utility provider or imposing any fine or requirement meant to restrict the provision of utility services. Fleming suggested the lawmakers better define a utility in the law, a change the League of Arizona Cities and Towns also sought, the Phoenix New Times reported. The final version defines utility service as water, wastewater, natural gas, propane or electric power provided to an end user.