In John R. Lawson Rock & Oil, Inc. v. State Air Resource Board (2018) 20 Cal. App. 5th 77, the Fifth District Court of Appeal found the California Air Resources Board (CARB) issuance of a regulatory advisory was “project approval” triggering CEQA. Doing such before environmental review was complete violated the CEQA timing requirement and, later, CARB improperly relied on a negative declaration. Further, CARB failed to comply with the California Administrative Procedures Act (CalAPA). As such, the Court affirmed the trial court holding, directing CARB to comply with CEQA in modifying a set of 2008 regulations known as the Truck and Bus Regulations (Regulations).
CARB issued the Regulations to reduce emissions of diesel PM, NOx, and GHG’s from large vehicles by, as pertinent here, requiring vehicle owners to retrofit and upgrade existing vehicles by January 2014. In mid-2013, CARB staff found the global recession substantially reduced trucking activity making compliance financially difficult, especially for those in rural areas and small business settings. CARB responded by delaying reporting deadlines and requesting modification proposals. Taking note of these proposals, CARB issued a regulatory advisory in November 2013 stating a handful of Regulations modifications would be implemented, with changes slated for finalization in April 2014. Specific changes included: delaying compliance dates, eliminating filter replacement requirements for certain light trucks, and providing a 10-year window where only engines less than 20-years-old would require modernization. After circulating a staff report and proposed modifications in March 2014, the board issued its final approval in December 2014. Plaintiffs and Respondents filed on behalf of fleets that had already incurred significant cost in complying with the unmodified regulations, claiming CARB failed to conform with CEQA and CalAPA requirements.
The Court found agencies that operate under a certified regulatory program are exempt from certain elements of CEQA review yet still subject to the “functional equivalent” of CEQA environmental review, per the Court’s holding in POET, LLC v. State Air Resources Control Board (2013) 218 Cal.App. 4th 681. CARB’s regulatory program requires the preparation of a public staff report at least 45 days before public hearing on a proposed regulation, discussion of environmental alternatives, response to public comment, and compliance with CEQA. Within the regulatory scheme, CEQA documents—like the CARB staff report—are expected to be analyzed and considered before project approval.
Applying CEQA principles, the Court determined that project approval triggering CEQA, or its equivalent, happened where the regulatory advisory “opened the way” for a project to proceed. CARB conduct following the advisory was “detrimental to further fair environmental analysis.” It was not sufficient that the final approval was not to be until April 2014 and actually happened in December 2014 and that there was stated CARB authority to change the modifications. Language in the advisory that truckers could immediately take advantage of certain programs and the subsequent CARB reliance on the advisory “foreclosed alternatives” to the proposed modifications. Because the advisory was issued before environmental review was complete, CARB failed to comply with the CEQA timing requirement.
Moving to the actual environmental review, the Court held the proper baseline for CEQA consideration is the actual environmental conditions at the time of review, not those allowable by the current regulations. Here, CARB acted within its discretion to not use the maximum air quality conditions allowable in the Regulations. Rather, the baseline was the situation as it was at that time, recognizing that some trucks and buses were not yet in compliance despite the Regulations.
The Court went on to address the actual environmental analysis to determine if it ultimately complied with CEQA. CARB argued that implementing the Regulations modifications would result in a continual decrease in PM, NOx, and GHG emissions, while Plaintiffs argued pollutants would increase in the short term. CARB ignored the fair argument that modifications to the Regulations would negatively and significantly impact air quality and wholly failed to address the inconsistencies between the proposed project’s emissions and applicable general plans, specific plans, and regional plans. Where a fair argument could be made substantial evidence showed a potential for significant environmental effects, CARB was incorrect to rely on a negative declaration and therefore failed to comply with CEQA.
Despite these findings, the trial court was incorrect to direct CARB to prepare an EIR, or its functional equivalent. The Court held such a remedy is only appropriate where the agency no longer has discretion to act in compliance with CEQA. Here, CARB still retained such discretion so the proper remedy is to simply direct CARB to comply with CEQA.
Lastly, CARB failed to comply with CalAPA where it did not adequately address economic impacts to intrastate commerce. While the Court usually gives deference to the agency on determinations of economic impacts, there is no deference for improperly adopted regulations. Here, CARB heard public testimony that relaxing the regulations would impact intrastate competition where those in compliance took on a large expense to be so and others would be able to undercut them. The Court held that testimony, while not written in a formal letter or report, nonetheless put CARB on notice of such issues. While CARB claimed it answered this issue in other comment answers, the Court found that its responses were not supported by any record evidence or meaningful analysis.
A regulatory advisory may be “project approval” triggering CEQA where it forecloses project alternatives therefore environmental review must be complete before its issuance. This standard applies to partially-exempt regulatory bodies and state agencies when their certified regulatory programs are intended to be CEQA-compliant.