Thomas Law Blog

CEQA Updates

Keeping You Up-to-Date on the California Environmental Quality Act


dateSeptember 27th, 2017 byby

In Respect Life S. San Francisco v. City of South San Francisco, 2017 Cal. App. Lexis 801, the First Appellate District held that the City of South San Francisco’s approval of a conditional-use permit allowing an office building to be converted to a medical clinic did not violate requirements imposed by the California Environmental Quality Act (CEQA). The City determined that the project fell within several categorical exemptions to CEQA, and thus, the permit did not require further CEQA review.

The case arose after the owner of an office building in downtown South San Francisco applied for a conditional-use permit to allow the building to be used as a medical clinic for a new tenant, Planned Parenthood. The physical changes to conversion of the building for use as a medical clinic were minor, and the City’s Planning Commission approved the permit after holding a public hearing.

Petitioner Respect Life South San Francisco (Respect Life) disagreed with the Planning Commission’s determination that the project fell into categorical exemptions and appealed to the City Council. Specifically, Respect Life alleged that the City ignored the “inherently noxious and controversial nature” of Planned Parenthood’s services which would cause protests leading to “environmental impacts… including traffic, parking, [and] public health and safety concerns,” thus necessitating an Environmental Impact Report (EIR) under CEQA.

The City Council affirmed the Planning Commission’s determination that the permit was exempt from CEQA under three categorical exemptions applying to (1) the operation of existing facilities (CEQA Guidelines section 15301); (2) the conversion of small structures (CEQA Guidelines section 15303); and (3) the development of urban in-fill projects (CEQA Guidelines section 15332). Thereafter, Respect Life filed a petition for a writ of mandate. The trial court upheld the City’s finding that the Project was exempt from CEQA and denied the petition. Respect Life subsequently appealed to the First District.

On appeal, Respect Life acknowledged that the project fell within at least one of CEQA’s categorical exemptions, but contended a full environmental review was still necessary due to the unusual-circumstances exception to those categorical exemptions. The “unusual-circumstances exception” provides that “a categorical exemption shall not be used for an activity where there is a reasonable possibility that the activity will have a significant effect on the environment due to the unusual circumstances.”

The Court of Appeal first noted the different standards of review: first the party seeking to establish the unusual-circumstances exception must show “that the project has some feature that distinguishes it from others in the exempt class, such as its size or location,” and second, that there is “a reasonable possibility of a significant effect [on the environment] due to that unusual circumstance.” (Berkeley Hillside Preservation v. City of Berkeley (2015) 60 Cal.4th 1086.) The Court elaborated that a deferential standard applies in reviewing the first element, and a non-deferential standard applies in reviewing the second.

Because the City Council did not directly address whether the Project would result in any unusual-circumstances, the Court concluded that to affirm such an implied municipal determination, the court must assume that the entity found the project involved unusual circumstances, but then consider whether a fair argument exists that the project will have significant effect on the environment. The Court then held that Respect Life failed to identify substantial evidence of any potentially significant environmental impact.

In reaching this holding, the Court explained that a “significant effect on the environment means a substantial or potentially substantial, adverse change in the environment.” (§ 21068.) The Court was unpersuaded by Respect Life’s argument that “the notoriety of [Planned Parenthood] and its activities,” would cause significant environmental impacts such as sidewalk obstruction, public safety concerns, parking congestion, business disruption and increases in noise levels. They found that there was no substantial evidence presented to support a fair argument that there was a reasonable possibility that these impacts will have a significant environmental impact, and conversely found evidence in the record showing the opposite. As a result, the Court of Appeal upheld the trial court’s decision denying Respect Life’s petition.

KEY POINT: While the City ultimately prevailed in this litigation, the decision serves as an important reminder regarding the value of a lead agency making express findings addressing the exceptions to the categorical exemptions.  If the City had expressly concluded that the Project did not involve any unusual circumstances, then the Court could have upheld the City’s determination based on the much more deferential “substantial evidence” standard of review and not been required to consider whether a “fair argument” of a potentially significant environmental impact existed.




dateSeptember 25th, 2017 byby

In Pesticide Action Network North America v. California Department of Pesticide Regulation, 2017 Cal. App. LEXIS 803, the First Appellate District reversed the trial court and set aside the Department of Pesticide Regulation’s (“DPR”) approval of amended labels for two pesticides, Dinotefuran 20SG and Venom Insecticide.  The purpose of the amended labels was to allow both pesticides to be used on additional crops, such as fruiting vegetables, onions, peaches, and nectarines.

In 2006, a phenomenon called “colony collapse disorder” began, where many honey bees disappeared from managed hives in the United States. According to the 2012 Report on the National Stakeholders Conference on Honey Bee Health (“NSC Report”), approximately 28 to 33 percent of honeybee colonies had failed each year since 2006, while a normal loss rate was ten percent.  The NSC Report noted that colony collapse disorder was being caused by several factors, including pesticides.  In February 2009, the Department initiated a reevaluation of the two pesticides at issue in this case along with 280 other pesticide products.  In September 2014, the Department was granted by the California Legislature until July 1, 2018 to complete a thorough reevaluation of the pesticides on pollinator health.

In January 2014, before the Department completed the reevaluation, it released public reports concerning its proposed decisions to approve amended labels for Dinotefuran 20SG and Venom Insecticide. Subsequently, the Department approved the label amendments.  The plaintiff sued to set aside the Department’s approval, contending that the Department violated CEQA in approving the label amendments.  The trial court ruled in favor of the Department.

On appeal, the court rejected the Department’s argument that the environmental review was exempt from CEQA because it was conducted pursuant to the Department’s pesticide registration program certified under Public Resources Code (“PRC”) section 21080.5, which allowed the Department’s environmental documents to serve as the “functional equivalent” of CEQA documents. Based on the plain language of PRC section 21080.5 and case law, the court concluded that the Department’s registration program was subject to the broad policy goals and substantive requirements of CEQA while exempt from the CEQA procedural requirements set forth in CEQA Chapters 3 and 4 and PRC section 21167.

Next, the court identified the broad policy goals and substantive requirements of CEQA applicable to certified regulatory programs and found that the Department did not comply with these requirements. First, citing PRC section 21001(g), the court held that the Department must consider alternatives to registering the proposed new uses for the two pesticides.  Accordingly, the court found that the reports “glaringly” failed to address any feasible alternative.  Second, finding that the Department’s environmental documents must provide an adequate baseline, given the CEQA’s goal of informing the public of the potential impacts of a proposal, the court concluded that the Department failed to provide adequate baseline information.  Third, relying on case law, the court also found that the Department must consider the project’s cumulative impacts, but failed to so.  Finally, finding that the Department was required to recirculate any new significant information about the project, the court held that because the Department’s initial public reports were “so inadequate and conclusory … public comment on the draft was effectively meaningless” its effort to explain its decision in response to comments required recirculation.

Key Point

While exempt from the CEQA procedural requirements set forth in CEQA Chapters 3 and 4 and PRC section 21167, environmental documents prepared under a certified regulatory program pursuant to PRC section 21080.5 must comply with the policy goals and substantive requirements of CEQA.




dateAugust 14th, 2017 byby

In Friends of the Eel River v. North Coast Rail Road Authority, 2017 Cal. LEXIS 5650, the California Supreme Court addressed whether the federal Interstate Commerce Commission Termination Act (ICCTA) preempts the application of the California Environmental Quality Act (CEQA) for a California railroad project governed by the state’s North Coast Rail Authority (NCRA) and operated by a privately leased entity.

NCRA was sued under CEQA for inadequacies in its rail line project EIR. NCRA argued that the line was subject to federal ICCTA regulation instead of CEQA, removed the matter to the Ninth Circuit, and rescinded its EIR. The federal court remanded the matter to state court. The trial court held that the ICCTA preempted CEQA, and the First Appellate District affirmed. In December of 2014, the California Supreme Court granted petitioners’ petition for review as it related to the preemption issue.

The Court examined the ICCTA’s statutory construction and historical background, finding that although the ICCTA contains an express preemption provision and contemplates a unified national rail system, it was intended to combat rail monopolies while minimizing the need for federal regulatory control. The ICCTA expressly allows private rail owners to govern themselves internally via market-based self-correction and corporate bylaws, as long as those internal governances do not conflict with the ICCTA or other federal regulatory agencies. The Court concluded that this freedom to govern a private rail company translates to the freedom to govern state-controlled rail companies as well.

The Court held that the federal interest in railroads does not entirely sweep away the exercise of a state’s regulatory police powers when such regulation merely implicates rail transport, and that it does not follow that any and all state regulations touching on powers that may be federally regulated are preempted. The Court determined that application of CEQA to a public entity charged with developing state property is not a classic regulatory behavior, especially when there is no encroachment on the regulatory domain of the Surface Transportation Board or inconsistency with the ICCTA. Rather, application of CEQA constitutes self-governance on the part of a sovereign state. The Court presumed that Congress did not intend to preempt a state’s adoption and use of the tools of self-governance, or to leave the state without any means of establishing the basic principles under which it will undertake significant capital expenditures. The Court further concluded that ICCTA’s preemption of CEQA would be improper because it would allow the state to start and fund a rail line, but restrict how work is done on the line, unlike private owners.

The Court, relying on analyses of Gregory v. Ashcroft (1991) 501 U.S. 452, Garcia v. San Antonio Metro. Transit Auth. (1985) 469 U.S. 528, and Nixon v. Missouri Municipal League (2004) 541 U.S. 125, held that when interpreting Congressional legislation, there must be unmistakably clear language to establish an intrusive exercise of Congress’ commerce clause powers against a state. The Court explained that when there is the possibility of preemption, the law should be presumed as preserving a State’s chosen disposition of its own power, in the absence of a clear and plain statement from the legislature. The Court utilized the presumption argument to support the view that CEQA is not preempted in this case, and concluded that preemption would interpose improper federal authority between a State and its municipal subdivisions. Particularly, the Court found that it would be improper to preempt the state’s ability to dictate how its own subdivision addresses environmental concerns caused by the state’s own railroad business.

Examining the market participant doctrine, the Court found that the while the doctrine ordinarily is used to analyze preemption when a state interacts with private parties as a participant in a private marketplace for goods, labor, or services, it does not address a state’s ability to govern its own governmental subsidiary. Nevertheless, the Court continued its analysis of the doctrine, and found that because states operating in a private marketplace are subject to the same burdens imposed by Congress on private owners, courts will presume that Congress would afford states, as owners, the same freedoms as private parties. The Court held that the state’s application of CEQA to NCRA’s proceedings can be analogized to a private corporation enforcing its bylaws.

The Court concluded that Congress did not intend to intrude upon state self-governance in this context. The Court found that affirming preemption would commit the state to a one-way ratchet—able to enter the rail business, but unable to require anything of the subordinate agency it set up to carry out the state’s rail initiative.

The Court was careful to establish that CEQA actions might cross the line into preempted regulation if the review process imposes unreasonable burdens outside the particular market in which the state is the owner and developer of a railroad enterprise. The Court also acknowledged that its holding does not mean that the ICCTA has no power to govern state-owned rail lines. State-owned rail lines, like private ones, clearly must comply with STB and ICCTA, and state regulation of rail carriers is preempted by these provisions.

Key Point:

The California Supreme Court found that Congress did not pen the ICCTA to infringe upon state self-governance in a manner dissimilar from private railway owners. Preempting the state’s ability to adopt laws governing its own development schemes would leave the state without the tools necessary to govern its own subdivision. This preemption would deprive the state of the ability to make decisions to carry out the goals the state embraced concerning development projects, including undertaking environmental mitigation or deciding not to undertake a project at all because of its environmental hazards. Although CEQA may be preempted by federal law when it imposes unreasonable burdens on rail line owners, when addressing the competing interests surrounding governance over NCRA’s contested railway, enforcing environmental procedures which California has imposed on itself does not constitute grounds for ICCTA preemption.



Supreme Court Upholds SANDAG Analysis of Greenhouse Gas Emissions; Cautions that it is not a Template for Future EIRs

dateAugust 7th, 2017 byby

In Cleveland Nation Forest Foundation v. San Diego Association of Governments (2017) Cal. LEXIS 5125, the Supreme Court of California held that San Diego Association of Government’s (SANDAG’s) environmental impact report (EIR) for its 2050 Regional Transportation Plan/Sustainable Communities Strategy need not include an analysis of the plan’s consistency with greenhouse gas emission reduction goals of 80 percent below 1990 levels by 2050, established by Executive Order (EO) No. S-3-05, in order to comply with the California Environmental Quality Act (CEQA) (Pub. Resources Code, § 21000 et seq.).

The case originated in 2011, when CREED-21 and Affordable Housing Coalition of San Diego filed a petition for a writ of mandate challenging the adequacy of SANDAG’s EIR under CEQA. The Cleveland National Forest Foundation and Center for Biological Diversity filed a similar petition, in which the Sierra Club and the state Attorney General later joined. Among other things, the complaints alleged that because SANDAG did not use the EO’s 2050 emission reduction goal as a threshold of significance, the impact conclusions within the report were misleading to the public.

The trial court granted the writ of mandate in part, finding the EIR failed to carry out its role as an informational document because it did not analyze the inconsistency between the state’s policy goals reflected in the EO and the transportation plan’s greenhouse gas emissions impacts post-2020. The lower court also found that the EIR failed to adequately address mitigation measures for the transportation plan’s greenhouse gas emissions impacts. In light of these findings, the court declined to decide the other challenges raised in the petitions. SANDAG appealed, arguing that the EIR complied with CEQA in both respects. Cleveland National Forest Foundation and Sierra Club cross appealed, contending that the EIR violated CEQA by failing to analyze a reasonable range of project alternatives, failing to adequately analyze and mitigate the transportation plan’s air quality impacts, and understating the transportation plan’s impact on agricultural lands. The Attorney General separately cross-appealed, arguing that the EIR further violated CEQA by failing to adequately analyze and mitigate the transportation plan’s impact on particulate matter pollution. The Court of Appeal affirmed the lower court’s decision, and concluded that the EIR failed to sufficiently consider feasible mitigation measures and project alternatives that would curb the rise in greenhouse gas emissions.

The Supreme Court recognized that SANDAG updated its RTP/SCS in 2015 (in response to the Court of Appeal’s opinion), and that the updated RTP/SCS included some analysis of the Plan’s consistency with the EO’s 2050 emission reduction goal. Although SANDAG’s 2010 regional transportation plan was superseded, the Supreme Court granted review on the question of whether a transportation plan’s EIR must include an analysis of the plan’s consistency with the EO’s 2050 greenhouse gas emission reduction goal. The Court found that this issue is an important question of law that is likely to recur, and needed to be addressed. The Court held that, in analyzing greenhouse gas impacts at the time of the EIR, SANDAG did not abuse its discretion by declining to adopt the EO as a measure of significance, or to discuss the EO in detail.

In reaching its holding, the Court nevertheless disagreed with SANDAG’s claim that because its role in achieving the EO’s 2050 emission reduction goal is ‘likely small’, the agency could reject the target as a measure of significance. According to the Court, given the global scale of climate change, a long term solution requires the aggregation of many small reductions in greenhouse gas emissions by public and private actors at all levels. The Court found that SANDAG’s response to comments in the final EIR, which stated that the EO is not an adopted greenhouse gas reduction plan and that there is no legal requirement to use it as a threshold, was not dispositive. Although lead agencies have discretion in preparing an EIR, the exercise of that discretion must be based on available scientific and factual data. The EO’s 2050 goal of reducing California’s greenhouse gas emissions to 80 percent below 1990 levels is a reflection of the effort the scientific community believes necessary to stabilize the climate, and the Court stated that this scientific information is important to policymakers and citizens when considering the emission impacts of a project.

Despite these initial observations, the Supreme Court ultimately found in favor of SANDAG, and held that the disputed EIR sufficiently addressed the fact that greenhouse gas emissions under the plan would exceed the EO’s 2050 emission reduction goal. The Court found that divergences between the plan’s projected emissions and the EO goal were readily apparent in the EIR, and did not find the inconsistencies to be omitted, obscured, scattered in appendices, or buried within the text of the EIR. The fact that part of the discussion of greenhouse gas impacts in 2050 appeared in the response to comments section of the final EIR (rather than the original draft) did not invalidate the adequacy of the entire document.

The Court held that SANDAG did not abuse its discretion in declining to adopt the 2050 goal as a measure of significance. Neither the Attorney General nor the other plaintiffs were able to point to guidance on how the 2050 goal translates into specific reduction targets broken down by region or sector, and there are no reliable means to forecast the effect of future state actions to reduce emissions by 2050.

However, in reaching its holding the Court stated that SANDAG’s EIR is not intended to serve as a template for future EIRs. The Court stressed that the holding was in no way an invitation for regional planners to “shirk their responsibilities” under CEQA, and delineated that as more and better data becomes available, regional planners are expected to straightforwardly address such data.

Noting the enactment of SB 32, which codifies the goal of a 40% reduction of greenhouse gas emissions below 1990 levels by 2030, the Court stated that this regulation may clarify the way forward for public agencies to meet the state’s 2050 climate goals in a manner that was not available at the time of the disputed EIR’s drafting. This regulatory clarification, together with improved methods of analysis, may change the manner in which CEQA analysis of long-term emissions impacts is conducted. For this reason, the opinion has narrow application.

The Court reversed the judgment of the Court of Appeal on the issue of the EIR’s analysis of greenhouse gas emission impacts. The Court did not address the remainder of the Court of Appeal’s holding, and remanded to the Court of Appeal for proceedings consistent with the decision.

In dissent, Justice Cuéllar argued that SANDAG’s EIR was not adequately transparent under CEQA and SB 375, and that the regional plan was drafted in disregard to California’s long range greenhouse gas emission and environmental stability goals. The dissent criticized the agency’s response to the issue of increasing emissions over time by burying the discussion “in a nearly 700-page appendix”, and found that approval of SANDAG’s EIR, while narrow in scope, harms not only the future of California’s environmental quality, but also the legal interplay between CEQA and SB 375.

Key Point:

While the decision was widely-anticipated to shed light on how to adequately address climate change in CEQA documents, the Court instead emphasized the narrowness of its holding, noting that it was not a general endorsement of the adequacy of the plan or its EIR, nor did it address whether SANDAG’s responses to the “indisputably significant greenhouse gas impacts” were adequate. The Court went so far as to caution that its decision may not serve as a template for future EIRs, and provided only that planning agencies must ensure that CEQA analyses stay in step with evolving scientific knowledge and state regulatory schemes.




dateJuly 24th, 2017 byby

On February 28, 2017, President Trump singed an executive order (“Order”) intended to roll back a rule promulgated by the U.S. Environmental Protection Agency (“EPA”) and U.S. Army Corps of Engineers (“Corps”) (collectively “Agencies”) under the Clean Water Act (CWA), known as the Waters of the United States (WOTUS) Rule (“Rule”). Noting that EPA can regulate “navigable waters,” waters that truly affect interstate commerce, the President announced that the Order would direct EPA to take action, paving the way for the elimination of this “very destructive and horrible rule.”

On March 6, 2017, the Agencies published in the Federal Register a Notice of Intent to review and rescind or revise the Rule in response to the Order. The Rule, which was issued under the Obama administration and became effective on August 28, 2015, defines “waters of the United States” to clarify CWA jurisdiction based on science and several U.S. Supreme Court cases. These cases addressed the federal government’s jurisdiction over activities affecting the wetlands, rivers, and streams that fed into “navigable waters,” which are defined as “waters of the U.S.” and regulated under CWA.

After the Rule was issued in 2015, numerous states, farmers, and industry groups filed lawsuits to enjoin the Rule, claiming that the Rule would dramatically expand the federal agencies’ regulatory jurisdiction. On October 9, 2015, the U.S. Court of Appeals for the Sixth Circuit in In re: EPA, 803 F.3d 804 (6th Cir. 2015), stayed the Rule nationwide, pending the court’s resolution of an issue related to the court’s jurisdiction over the case.

The Order directs the Agencies to initiate the process of rescinding or revising the Rule. The Order first directs the Agencies to review the Rule for consistency with the policy of keeping the Nation’s navigable waters free from pollution and at the same time promoting economic growth and minimizing regulatory uncertainty. Then, it directs the Agencies to publish for notice and comment a proposed rule rescinding or revising the Rule.

In addition, the Order also directs the Agencies and the heads of all executive departments and agencies to review all orders, rules, regulations, guidelines, or policies implementing or enforcing the Rule, and rescind or revise them to reflect any changes made to the Rule. Further, the Order requires that the Agencies take appropriate action concerning any litigation before the federal courts.

Finally, the Order requires that the Agencies interpret the term “navigable waters” in CWA in a manner consistent with Justice Scalia’s plurality opinion in Rapanos v. United States, 547 U.S. 715 (2006). The opinion, in which Justices Roberts, Thomas, and Alito joined, interpreted the term “waters of the U.S.” as “relatively permanent, standing or flowing” bodies of water “connected to traditional interstate navigable waters” as well as wetlands with a “continuous surface connection” with such waters. The plurality seemed to support narrower CWA jurisdiction than Justice Kennedy’s concurring opinion in Rapano, based on which the Rule was developed. Justice Kennedy’s opinion suggested that the term “waters of the U.S.” encompasses wetlands that possess a “significant nexus” to navigable waters.

Given the Rule’s extensive nationwide impact, any revision to the Rule will likely be challenged in court by stakeholders. Any change to the Rule requires the Agencies to comply with the notice and comment requirements under the federal Administrative Procedures Act. Stakeholders affected by the revision to the Rule should participate in the forthcoming notice and comment procedures. Thomas Law Group will closely monitor the notice and comment procedures associated with the Order.




dateJuly 24th, 2017 byby

In Banning Ranch Conservancy v. City of Newport Beach, (2017) 2 Cal.5th 918, the California Supreme Court unanimously held that the City’s EIR prepared for the Newport Banning Ranch (NBR) project was inadequate, finding that it failed to identify potential “environmentally sensitive habit areas” (ESHAs) under the California Coastal Act (“Act”) and analyze the project’s impacts to those areas.

The Banning Ranch site is an undeveloped, 400-acre plot of land containing oil field facilities and wildlife habitat. The project site, located in the City’s “sphere of influence,” falls in the “coastal zone” under the Act. NBR proposed to develop the site with up to 1,375 residential units, 75,000 square feet of retail, and 75 hotel rooms.

After the City announced in its notice of preparation that the project site included areas that might be defined as ESHAs, numerous public comments were submitted urging the City to discuss potential ESHAs in the EIR. The City refused to do so, contending that it had no legal authority to determine if the areas were ESHA, despite the fact that it knew that the California Coastal Commission (“Commission”) staff had preliminarily determined that the project site contained ESHAs.

In July 2012, the City certified the FEIR and approved the NBR project master plan. Subsequently, Banning Ranch Conservancy (BRC) challenged the project approval, raising two issues. First, BRC claimed that the EIR failed to identify areas that might qualify as ESHAs and account for those areas in its analysis of project alternatives and mitigation measures. Second, BRC contended that the City violated its obligation under the general plan to work with the Commission to identify wetlands and habitats to be protected from development.


The trial court rejected BRC’s CEQA claim, but found that the City had not complied with their general plan obligations. The Fourth Appellate District affirmed on the CEQA issue, but reversed on the trial court’s general plan findings because the general plan did not require the City to work with the Commission before project approval.

Reversing the Fourth Appellate District’s holding related to BRC’s CEQA claim, the Supreme Court held that CEQA requires an EIR to identify areas that might qualify as ESHAs. Further, rejecting the City’s argument that CEQA imposes no duty to consider the Act’s ESHA requirements, the Court noted that the lead agency should integrate CEQA review with its project approval process. In addition, the Court held that an EIR must lay out any competing views put forward by the lead agency and other interested agencies. Finally, the Court held that it did not need to address the general plan issue because BRC was found to be entitled to relief on its CEQA claims.

Key Point:

The lead agency must identify a potential ESHA through consultation and discuss their ramifications for mitigation measures and project alternatives in the EIR when there is credible evidence that an ESHA might be present on the project site. The Court provided that whether an EIR has omitted “essential information” is a procedural question subject to de novo review, without clarifying exactly what is deemed “essential information” required to be analyzed under CEQA. Thus, the Court’s holding in this case raises a question of whether an EIR must address other similar statutory schemes relevant to the project, such as the California Fish and Game Code, the California and federal Endangered Species Acts, the federal Clean Water Act, and other statutory requirements administered by the responsible, trustee, or interested agency.




dateJuly 24th, 2017 byby

In California Chamber of Commerce, et al., v. State Air Resources Board, et al. (2017) 10 Cal.App.5th 604, the Third Appellate District affirmed the trial court and rejected challenges to a cap-and-trade program developed by the State Air Resources Board (“CARB”) under the California Global Warming Solutions Act of 2006 (“AB 32”).

The program imposes a “cap” on the total amount of GHG emissions from regulated entities, which mostly consist of large GHG emitters. CARB lowers the cap over time to reduce the total emissions and issues allowances, the total value of which is equal to the amount of the cap.

Regulated entities receive these allowances – either through auction, from CARB for free, or a combination of both – or purchase “emission offsets,” credits generated from voluntary emission reductions made outside the capped entities, and surrender an allowance for each ton of emissions they release. If a regulated entity does not need all of the allowances it has in a given period, it may bank them to surrender later or sell them to another registered party. Non-covered entities may buy allowances, either to speculate, or to retire them and reduce emissions.

Business groups filed the suit, arguing that the auction sales exceeded CARB’s authority under AB 32, and that the revenue generated by the auction sales amounted to a tax subject to Proposition 13, which requires any new tax to be passed by a supermajority vote of each house of the state legislature.

First, the court held that CARB did not exceed its authority in designing the cap-and-trade auction program because the legislature had given broad discretion to CARB to design a system including an auction style, market-based mechanism for reducing GHG. The court noted that even if AB 32 had not authorized CARB to adopt the auction program, the legislature ratified it in 2012 through passage of four bills specifying how auction proceeds would be used to effectuate AB 32.

Second, the court held that the revenue generated by the auction sales was not a tax subject to Proposition 13, based on what the court deemed as two “hallmarks” of a tax: (1) it is compulsory; and (2) it does not grant any special benefit to the payer. The court found that participation in the program was voluntary. According to the court, this is because an entity would not have to obtain extra allowances or offset credits unless it chooses to pollute beyond the level of allowances it receives from CARB for free. The court also found that the allowance credits, unlike taxes, would grant benefits to the payers as they were valuable commodities tradable between private parties.

Finally, the court held that the test used to determine whether regulatory fees were taxes in Sinclair Paint Company v. State Board Of Equalization (1997) 15 Cal.4th 866 (Sinclair Paint), which was applied by the trial court, did not control this case. The court explained that the auction system that set up a revenue generating measure at hand was entirely different than a regulatory fee.

In a 13-page dissent, Justice Hull agreed that CARB did not exceed its authority under AB 32, but argued that the cap-and-trade auction program was compulsory and a tax, because covered entities currently in California would be compelled to buy allowances if they were to remain in California. Justice Hull also questioned the majority’s characterization of the auction credits, noting that the value of the auction credits would be ephemeral, given that the state could at its sole discretion limit or terminate them. 

Key Point:

The new test set by the court for assessing whether the cap-and-trade auction program is a tax is far from clear. The majority and Justice Hull disagreed on what “compulsory” meant under the test. On June 28, 2017, the California Supreme Court denied the petitions for review of the Third Appellate District’s decision.




dateJuly 24th, 2017 byby

In Poet v. State Air Resources Board (2017) 12 Cal.App.5th 52, the Fifth Appellate District held that the Air Resources Board (ARB) violated several procedural requirements imposed by the California Environmental Quality Act (CEQA) and the California Administrative Procedure Act (APA) through noncompliance with a previous writ compelling the agency to address its NOx emissions from biodiesel in accordance with the California Global Warming Solutions Act of 2006 and its subsequent low carbon fuel standards (LCFS).

Upon the adoption of the California Global Warming Solutions Act of 2006, which sought to reduce greenhouse gases to 1990 levels by 2020, ARB adopted LCFS regulations. ARB sought to adhere to these LCFS regulations and reduce greenhouse gas emissions by promoting the use of biodiesel as a substitution or blend with petroleum-based diesel fuel. However, ARB failed to analyze potential increases in the emission of NOx resulting from increased biodiesel use, and the possibility of unmitigated adverse environmental consequences of promoting the alternative fuel. In the prior CEQA litigation, Poet I, the trial court issued a writ of mandate directing that:

“ARB shall address whether the project will have a significant adverse effect on the environment as a result of increased NOx emissions, make findings (supported by substantial evidence) regarding the potential adverse environmental effect of increased NOx emissions, and adopt mitigation measures in the event the environmental effects are found to be significant.”

In addressing the writ, ARB produced a set of findings and statement of overriding considerations and adopted the 2015 modified version of the LCFS regulations. The mandated environmental analysis found that while use of biodiesel may increase NOx emissions in some engines, depending on feedstock and blend level, that the total NOx emissions from biodiesel would decline from the 2014 baseline level under the proposed LCFS and alternative diesel fuel (ADF) standards. The study further concluded that the use of biodiesel was consistent with the proposed ADF and would not constitute a significant adverse impact to air quality.

In its environmental analysis, ARB adopted 2014 NOx emissions data as the baseline to conduct its study, citing that because biodiesel had only recently become incentivized in 2009 (and was used in blends with petroleum-based oils with much less frequency at that time), that biodiesel NOx emissions in 2009 were minimal and improper to use as the baseline. ARB defended its use of the 2014 data, citing that use of earlier data would be misleading, was not required by law, and was not required by the writ issued in Poet I.

In November 2015, ARB filed its return to the February 2014 writ. POET challenged the return arguing that ARB failed to consider the original LCFS regulation, and that it was inappropriate to use the 2014 baseline in its environmental analysis, which allegedly allowed ARB to avoid acknowledging 2010-2015 NOx emission increases caused by the original LCFS regulations. Additionally, POET criticized ARB for skewing analysis of the impact of NOx emissions by comparing predicted future emissions to a baseline made higher by the original LCFS regulations. Additionally, ARB objected to the return on the grounds that it violated the third paragraph of the writ by assuming that the effect of the original LCFS regulation was not an environmental impact attributable to the project as a whole.

In January 2016, the trial court filed an order discharging the 2014 writ, and found ARB satisfactorily responded to the writ. Upon appeal, the appellate court reversed this discharge, finding that while ARB addressed NOx emissions from biodiesel pursuant to the third paragraph of the 2014 writ, it misconstrued the term “project” and erroneously determined the original LCFS regulations were not part of the “project.”

The appellate court held that ARB’s misinterpretation of the term “project” was not objectively reasonable, that the remedial actions taken in response to the writ of mandate did not appear to be a sincere attempt to provide the public and decision makers with the information required by CEQA. Further, the court held that the baseline for a primary environmental analysis under CEQA must ordinarily be the actually existing physical conditions, rather than hypothetical conditions that could have existed under applicable permits and regulations, and held that the correct baseline would be the data from the environmental conditions before the 2009 LCFS regulations were instated.

The appellate court concluded that most of ARB’s corrective action in response to the February 2014 writ satisfied a subjective good faith standard, but the part of ARB’s corrective action addressing NOx emissions from biodiesel did not. Further, the court held that since 2009, ARB has been in violation of CEQA because its environmental disclosure documents have not provided the public with statutorily required information about the project’s NOx emissions. As a result, the court found that ARB’s corrective action taken in reliance on those environmental disclosure documents did not comply with CEQA.

Subsequently, the order discharging the 2014 peremptory writ of mandate was reversed. The superior court was directed to vacate the previous order and enter a new order stating that ARB’s return did not demonstrate compliance with the third paragraph of the peremptory writ of mandate.

In its discussion of remedial action, the appellate court severed the ADF regulations and the 2015 LCFS regulation, citing that the ADF regulations were not tainted by the continuing CEQA violations. Further, the court found that suspending the diesel provisions of the LCFS regulations would result in adverse environmental impacts due to the increased emissions of greenhouse gases, and elected to leave the LCFS regulations in place, deeming it would provide more protection for the environment than suspending their operation pending ARB’s compliance with CEQA; citing that the possibility that the use of biodiesel during the interim would produce more NOx emissions (than the petroleum-based diesel it replaces) does not justify nullifying all LCFS regulation while waiting for proper compliance with the CEQA.

Key Point:

Where a proposed project commences during CEQA litigation, if a writ of mandate is issued that directs the lead agency to conduct further CEQA review, then baseline conditions on remand normally should be treated as the environmental conditions before the original project was approved.




dateJanuary 25th, 2017 byby

On January 11, 2017, the California Supreme Court unanimously granted review of the Fourth Appellate District’s published opinion, Union of Medical Marijuana Patients, Inc. v. City of San Diego (2016) 4 Cal.App.5th 103.

In granting review, the Court identified the following issues:

  1. Is the enactment of a zoning ordinance categorically a “project” within the meaning of the California Environmental Quality Act (Pub. Resources Code, § 21000 et seq.)?
  2. Is the enactment of a zoning ordinance allowing the operation of medical marijuana cooperatives in certain areas the type of activity that may cause a reasonably foreseeable indirect physical change to the environment?

The Fourth District held that the enactment and amendment of the zoning ordinance did not have the potential for resulting in “a reasonably foreseeable indirect physical change in the environment,” and was thus not a project. (4 Cal.App.5th 103). More specifically, the court ruled that the impacts alleged by appellants concerning increased travel, cultivation, and development did not create a reasonably foreseeable indirect physical change in the environment because these allegations were too speculative. (4 Cal.App.5th 103, 119-124).




dateJanuary 18th, 2017 byby

In Japanese Village, LLC v. Federal Transit Administration, 2016 U.S. App. LEXIS 21700, the Ninth Circuit affirmed the district court’s rulings and rejected NEPA challenges to the Los Angeles Metropolitan Transportation Authority’s (“Metro”) approval for a 1.9-mile light rail extension line in downtown Los Angeles. The project was proposed to be funded by the Federal Transit Administration (“FTA”).

The project, intended to meet increased demand for public transit, would connect the light rail Gold Line to the Blue and Expo Lines. In January 2012, Metro and FTA (“Agencies”) issued an EIS for the project. Subsequently, the FTA issued the record of decision (“ROD”) approving federal funding for the project. In January 2013, the plaintiffs sued, challenging the project’s NEPA compliance. The lower court granted summary judgment in favor of the Agencies, except for one claim which required them to analyze tunneling alternatives for the project.

On appeal, the court first declined to take judicial notice of three documents on Metro’s website, including the federal ROD and the mitigation and monitoring and reporting program, because they were already included in the appellate record.


Second, applying the “arbitrary and capricious” standard under the Administrative Procedure Act, the court held that the EIS adequately analyzed the project’s impacts. The court found that the analysis of construction-related noise and vibration impacts was adequate, given that the Agencies took a “hard look” at alternatives and addressed the extent to which adverse noise effects could be avoided. However, the court declined to decide whether temporary relocation of residents or businesses to mitigate construction-related noise and vibration impacts was a valid mitigation measure under NEPA.

Similarly, the court found that the EIS satisfied NEPA’s “hard look” requirement with respect to the impacts associated with parking, grade separation, and emergency vehicle access. The court also held that the mitigation measures that incorporated “adaptive management” plans concerning traffic, vibration, and noise impacts satisfied the “hard look” requirement. Further, the court held that the mitigation measures to reduce subsidence, which could result from the tunneling under the Japanese Village, did not impermissibly defer required analysis because an expert study addressing potential subsidence impacts was prepared after the EIS was issued and became part of the administrative record for the ROD.

Third, the court held that the Agencies properly rejected the use of closed-face tunnel boring machine, a method of construction that would help minimize disruption to surface traffic and adjacent land uses, in certain project areas. The Agencies’ decision was based on three technical impediments identified. Giving deference to the Agencies’ technical expertise, the court found the Agencies were not arbitrary or capricious in making that decision.

Finally, the court held that a supplemental EIS was not required after variances to the City of Los Angeles’ construction noise restrictions were sought to undertake utility relocations necessary for the project. The court explained that the EIS had already addressed the noise and light impacts of possible nighttime construction.