The regular session of the Texas Legislature came to a fraught end on May 31, 2021. The political spectacle in recent days capped off a legislative session dramatically interrupted by a winter storm in February that crippled much of the state with snow, ice, and power outages. That natural disaster led to intense scrutiny of the state’s power distribution infrastructure and calls to weatherize the power grid.
In response, the Texas Legislature approved legislation aimed at addressing some of the infrastructure issues caused by the storm. The Legislature’s response to the storm understandably received much attention. Perhaps this allowed another energy infrastructure bill—one that makes a big statement in terms of energy and climate policy—to pass without similar attention.
House Bill 17 passed the Texas Legislature earlier this year and was signed into law by Governor Abbott on May 18, 2021. The law prohibits Texas localities from restricting or discriminating against utility infrastructure based on the type or source of the energy delivered to the end-use customer. The law also prohibits Texas localities from imposing additional charges on development and building permit applicants that encourage or discourage the installation of infrastructure based on the type or source of energy. While not expressly stated, the intent of the bill is to prohibit localities from phasing out natural gas and its infrastructure.
Texas’s House Bill 17 reflects a rift developing nationwide between cities intent on meeting climate goals and states seeking to protect the natural gas industry. Berkeley, CA passed the nation’s first ban on natural gas hookups for new construction in 2019. Since then, several other cities in California as well as Seattle, Denver, and New York have either passed or proposed similar measures. Green groups generally support these efforts by municipalities as a way to cut back on fossil fuels and carbon emissions.
In response to this trend, legislatures in Arizona, Oklahoma, Kansas, Tennessee, and Louisiana in addition to Texas have passed laws generally prohibiting the enactment of local bans on natural gas infrastructure. Industry and business groups generally support these state-level measures arguing that the local bans are too costly and restrictive. Another concern is that the transition to greater electrification will create stranded natural gas assets, which could lead to higher costs for consumers.
The tension between these local bans and state prohibitions is playing out as infrastructure takes center stage in the US Congress. President Biden’s sweeping infrastructure plan in part addresses natural gas infrastructure and electrification. Indeed, President Biden’s plan calls for incentivizing high-performance electrified buildings and wider use of electric heat pumps and induction stoves. These incentives appear to be aimed at reducing reliance on natural gas in new construction.
As the debate over President Biden’s infrastructure plan ramps up, state and local efforts to enact bans either protecting or prohibiting natural gas infrastructure will continue. Indeed, Ohio is reportedly considering joining Texas and the other states in enacting a ban on localities restricting natural gas infrastructure. These bans appear to be ripe for preemption litigation, and companies, particularly in the development and construction industries, will likely need to be aware of such restrictions as they navigate this evolving landscape. These bans also serve as an important reminder for clients to diligently review applicable state and local regulations that might affect their projects as they may change with less attention and coverage than other headline-grabbing items.