In Berkeley Hillside Preservation v. City of Berkeley, (March 2, 2015, S201116) __ Cal.4th __ (Berkeley Hillside), in a Majority Opinion joined by five Justices the California Supreme Court provided long awaited guidance on the standards applicable to both lead agencies and courts tasked with interpreting and applying the “unusual circumstances” exception to categorical exemptions set forth in the CEQA Guidelines.
In Berkeley Hillside, a property owner filed an application to build a large home (6,478 sq.ft. house with a 3,394 sq.ft. garage) on a lot with a steep grade in a heavily wooded area in the Berkeley hills (Project). The City of Berkeley (City) approved the Project and concluded it was exempt from CEQA review based on two separate categorical exemptions: (1) the Class 3 exemption, which exempts small facilities or structures including “[o]ne single-family residence, or a second dwelling unit in a residential zone,” and “up to three single-family residences” “[i]n urbanized areas” (CEQA Guidelines, § 15303, subd. (a)), and (2) the Class 32 exemption, which exemptions in-fill development meeting certain criteria. (CEQA Guidelines, § 15332.)
Berkeley Hillside Preservation et al. (Petitioners) challenged the City’s approval arguing that the City was prohibited from relying on the Class 3 and 32 categorical exemptions. Petitioners argued the unusual circumstances exception prohibits a lead agency from relying on a categorical exemption where there is a fair argument that a project may have a significant effect on the environment. Petitioners asserted they established a fair argument that, due to the Project’s unusual size, location, nature and scope, it could cause significant environmental impacts.
At trial, the court found that while the Project may result in a significant environmental impact, the Project did not present any unusual circumstances and, therefore, the exception did not apply. On appeal, the court reversed the trial court, holding evidence demonstrating a project may have a significant effect on the environment is itself an unusual circumstance that renders use of a categorical exemption improper.
In Berkeley Hillsides, the Majority Opinion rejected the Court of Appeal’s interpretation of the “unusual circumstances” exception and set forth a new approach to interpreting and applying the exception. Specifically, the court explained:
[T]o establish the unusual circumstances exception, it is not enough for a challenger merely to provide substantial evidence that the project may have a significant effect on the environment, because that is the inquiry CEQA requires absent an exemption. (§ 21151.) Such a showing is inadequate to overcome the Secretary‘s determination that the typical effects of a project within an exempt class are not significant for CEQA purposes. On the other hand, evidence that the project will have a significant effect does tend to prove that some circumstance of the project is unusual. An agency presented with such evidence must determine, based on the entire record before it — including contrary evidence regarding significant environmental effects — whether there is an unusual circumstance that justifies removing the project from the exempt class.
The determination as to whether there are ‘unusual circumstances’ (Guidelines, § 15300.2, subd. (c)) is reviewed under… [the] substantial evidence prong. However, an agency’s finding as to whether unusual circumstances give rise to ‘a reasonable possibility that the activity will have a significant effect on the environment (Guidelines, § 15300.2, subd. (c)) is reviewed to determine whether the agency, in applying the fair argument standard, ‘proceeded in [the] manner required by law.’
In a Concurring Opinion, Justice Liu joined by Justice Werdegar agreed with the Majority that the Court of Appeal’s decision must be reversed and remanded for further proceedings. However, the Concurring Opinion rejects the test set forth in the Majority Opinion above. Instead, the Concurring Opinion concludes, similar to the Court of Appeal, that “[w]hen there is a reasonable possibility that a project otherwise covered by a categorical exemption will have a significant environmental effect, it necessarily follows that the project presents unusual circumstances.”
Notwithstanding the test clearly articulated in the Majority Opinion, the Concurring Opinion concludes that “[e]ven under the cumbersome rules set forth today, it is hard to imagine that any court, upon finding a reasonable possibility of significant effects under the fair argument standard, will ever be compelled to find no unusual circumstances and thereby uphold the applicability of a categorical exemption.” Because “after today’s decision, as before, courts reviewing agency determinations under section 15300.2(c) will be guided by that guideline‘s basic purpose, which echoes the statutory mandate: to ensure that projects with a reasonable possibility of significant environmental effects are not exempted from CEQA review.” Therefore, the Concurring Opinion questions whether the new test established in the Majority Opinion will lead to meaningful differences in the outcome of future CEQA litigation.
Notwithstanding the conclusion in the Concurring Opinion, the rules established in the Majority Opinion set forth a clear test for applying the unusual circumstances exception. The test provides substantially more deference to the lead agency than the test proffered by the Court of Appeal or in the Concurring Opinion. Specifically, as the Majority Opinion explains:
While evidence of a significant effect may be offered to prove unusual circumstances, circumstances do not become unusual merely because a fair argument can be made that they might have a significant effect. Evidence that a project may have a significant effect is not alone enough to remove it from a class consisting of similar projects that the Secretary has found ‘do not have a significant effect on the environment. [Citations.] Therefore, an agency must weigh the evidence of environmental effects along with all the other evidence relevant to the unusual circumstances determination, and make a finding of fact. Judicial review of such determinations is limited to ascertaining whether they are ‘supported by substantial evidence.’‖(§ 21168.5.)…. On the other hand, when unusual circumstances are established, ….. [a]n agency must evaluate potential environmental effects under the fair argument standard, and judicial review is limited to determining whether the agency applied the standard ‘in [the] manner required by law.’‖ (§ 21168.5.)
The Concurring Opinion maintains that even under the Majority’s test, courts should still find projects with a “reasonable possibility of significant environmental effects are not exempted from CEQA review.” This suggests the Concurring Opinion takes the position that it would be unreasonable for a lead agency to conclude a project with a “reasonable possibility of significant environmental effects” is not unusual. But, under the Majority’s test, the traditional substantial evidence standard of review applies to a lead agency’s determination whether a project is unusual. As such:
[a]gencies must weigh the evidence and determine ‘which way the scales tip,’‖while courts conducting [traditional] substantial evidence . . . review generally do not.” [Citation.] Instead, reviewing courts, after resolving all evidentiary conflicts in the agency‘s favor and indulging in all legitimate and reasonable inferences to uphold the agency‘s finding, must affirm that finding if there is any substantial evidence, contradicted or uncontradicted, to support it. [Citations.]
Therefore, notwithstanding the Concurring Opinion’s effort to diminish the impact of the Majority’s test, the new test provides deference to a lead agency’s decision based on all the facts before it, including but not limited to evidence of potential environmental impacts, that a project is not unusual. Furthermore, “[i]n determining whether the environmental effects of a proposed project are unusual or typical, local agencies have discretion to consider conditions in the vicinity of the proposed project.” Only if a lead agency concludes unusual circumstances are present is the fair argument standard implicated. In that event, “it is appropriate for agencies to apply the fair argument standard in determining whether ‘there is a reasonable possibility of a significant effect on the environment due to unusual circumstances.’ (Guidelines, § 15300.2, subd. (c).)”
While both the Majority and Concurring Opinions disagree on the proper test applicable to the unusual circumstances exception, both agree remand is required because the trial court and Court of Appeal improperly considered evidence submitted by the Petitioners relating to Project elements not approved. Specifically, Petitioners argued the Project required side-hill fill with the potential to cause a significant impact despite the fact that the Project as proposed did not contemplate side-hill fill. As explained in the Majority Opinion, “a finding of environmental impacts must be based on the proposed project as actually approved and may not be based on unapproved activities that opponents assert will be necessary because the project as approved, cannot be built.” A lead agency and court need not speculate on impacts caused by unapproved activities because, as stated by the City, if a project as proposed cannot be built “and the applicants want to build a different project, then ‘they must return to the City for approval of a different project and the City could issue a stop-work notice to prevent unauthorized construction.’”
Finally, the Majority Opinion explains that, on remand, the Court of Appeal may only direct the City to prepare an EIR if it determines the categorical exemptions are inapplicable and that the City would lack discretion to apply another exemption or to issue a negative declaration, mitigated or otherwise.
Under the “unusual circumstances” exception to CEQA’s categorical exemptions, a court must first determine whether substantial evidence supports a lead agency’s conclusion that an unusual circumstance is not present. In making its determination, the lead agency should consider evidence relating to environmental impacts as well as other evidence relating to the typicality of the proposed project. The lead agency also has discretion to consider the conditions in the immediate vicinity of the project. If the lead agency concludes based on substantial evidence that unusual circumstances exist, then the “unusual circumstances” exception prohibits use of a categorical exemption where there is a fair argument that the project may result in a significant environmental impact.