December 21, 2015

California high court rejects "Reverse CEQA"

By Damien M. Schiff Senior Attorney

Last week, the California Supreme Court issued another major decision under the California Environmental Quality Act. In California Building Industry Association v. Bay Area Air Quality Management District, the high court ruled that, absent a specific statutory exception, the Act does not require an analysis of the environment’s impacts on a proposed project, but rather only an analysis of a proposed project’s impacts on the environment.

The case concerned the Association’s challenge to several “thresholds of significance” promulgated by the District pertaining to toxic air contaminants and particulate matter. The Act requires an analysis of the significant impacts of regulated projects. Thus, the challenged thresholds were designed to assist project proponents in determining whether the particulate matter or toxic air contaminants attributable to a proposed project would be high enough to be considered “significant” and therefore require further analysis and mitigation. What made these thresholds problematic, however, is that they were based on impacts to “new receptors,” i.e., the persons who would be living and working in the new developments. In other words, the thresholds would be met if, for example, a project were built in an area with existing pollution problems, even though those problems were not attributable to the project.

That interpretation of the Act is not without support. One of the “Guidelines” issued by the Natural Resources Agency on how to implement the Act provides, as an example of a significant environmental effect of a project that should be analyzed, the building of a subdivision near an active fault line, because the project would attract people to the existing hazards.  The development community characterizes this interpretation as “Reverse CEQA.”

In California Building Industry Association, the Supreme Court ruled unanimously that the Guideline’s interpretation was incorrect. The court underscored that, although containing a few express instances to the contrary, the Act principally is concerned with “a project’s impact on the environment, rather than with the environment’s impact on a project and its users or residents.” In a rare moment of acknowledgment of regulatory costs (perhaps occasioned by Justice Chin’s recent dissent in the Newhall Ranch case?), the court counseled that a contrary interpretation—taking account of the environment’s impacts on the project—“would tend to complicate a variety of residential, commercial, and other projects,” an unwelcome development “[g]iven the sometimes costly nature of the analysis required under [the Act] when an [environmental impact report] is required.” Interestingly, the court also concluded that its interpretation was consistent with the Act’s broader purposes of “informed decisionmaking and self-government,” observing that the Act “does not necessarily call for disapproval of a project having a significant environmental impact, not does it require selection of the alternative ‘most protective of the environmental status quo.’”

But the decision was not a complete victory for the building industry. In a somewhat opaque caveat, the court attempted to explain “how the analysis of a project’s potential to exacerbate existing conditions is not an exception to, but instead a consequence of, [the Act’s] core requirement that an agency evaluate a project’s impacts on the environment.” The court offered the example of a project proposed to be built near an abandoned gasoline station beneath which lies contaminated groundwater. If the project would have the effect of dispersing the contaminated groundwater, then the agency must consider the effects of “such worsened conditions [on] a project’s future users or residents.”

From the court’s example, one can draw three conclusions. First, a project’s anticipated users are not themselves part of the project but rather part of the environment. Second, impacts to those users that are caused by pre-existing conditions are not subject to analysis if the project’s only role is simply to have caused them to be exposed to those pre-existing conditions. Third, if the project will exacerbate pre-existing conditions, then the impact of those conditions on future users must be evaluated. One question arguably left undecided by the court is whether, in the third instance, mitigation merely to pre-existing levels of pollution is the most that could be required. One would think yes, given that, under the court’s principal conclusion, if the project had no impact at all on pre-existing conditions, then no analysis of the impact on future users caused by those pre-existing conditions would be required, much less any obligation to mitigate that impact.

Perhaps the decision’s biggest “impact” will be on how climate change is taken into account in environmental impact reports under the Act.  Under the District’s interpretation and the Guideline, one could plausibly argue that a project to be built along the cost would have to mitigate for the impact of sea level rise on the project’s inhabitants.  But under last week’s decision, such impacts should be ignored, because they are traceable to the environment itself, not to the project.

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