Deciphering the New Ceqa Rules for Modified Projects After San Mateo Gardens

• Publication year: 2017
• Author: by Marina Cassio

Deciphering the New CEQA Rules for Modified Projects After San Mateo Gardens

by Marina Cassio^*

Projects must often be modified after completion of review under the California Environmental Quality Act ("CEQA"). This may be due to changing project finance availability, changing technology, a change of ownership, or any number of other circumstances. CEQA anticipates such changes, and does not require a modified project to restart the review process again from scratch. However, for some time now, plaintiff groups have been bringing CEQA challenges under the theory that a purportedly modified project was actually an entirely new project. A new project would require a new CEQA review process.

Last September, the California Supreme Court effectively put an end to this strategy. In Friends of the College of San Mateo Gardens v. San Mateo County Community College District,¹ the Court was presented with the questions of how to tell the difference between a modified project and a new project, and who makes this determination. The Court concluded that this was a fact-bound inquiry given to the lead agency, entitled to substantial evidence deference, and that it mattered only whether the initial CEQA documents retained "some informational value" for the modified project. This renders the "new project" litigation strategy significantly less viable.

Interestingly, this aspect of the Court's opinion is not what has generated such a wide range of reactions from CEQA practitioners and commentators. That distinction goes to the Court's unanticipated reinterpretation of CEQA requirements for modified projects that were initially approved by a negative declaration. This portion of the opinion has stirred debate because the Court's many endorsements of finality seem to contradict the Court's reference to reapplying the "fair argument" test. However, the opinion appears internally consistent if the reintroduced fair argument standard is applied only to the potential impacts attributable to the incremental modifications to an existing project.

This article analyzes the new CEQA regime applicable to modified projects in the wake of San Mateo Gardens. It concludes that the case has increased the attractiveness for project proponents of preparing an EIR in the first instance, while decreasing the attractiveness of preparing a negative declaration.

I. CEQA BACKGROUND

In California, both public development projects and private development projects subject to discretionary public approval must comply with CEQA. Whenever a new project "may have a significant effect on the environment," even after mitigation, CEQA requires the primary public agency involved to prepare an environmental impact report ("EIR") before it can approve the project.² An EIR provides a detailed and often time-consuming analysis of all of the potentially significant environmental impacts of a project, as well as of potential project alternatives. If a project will not have a significant impact on the environment, however, a less searching disclosure document known as a negative (or mitigated negative) declaration can be prepared instead of an EIR.

For new projects, CEQA strongly favors the more robust disclosure requirements of an EIR.³ Specifically, an EIR must be prepared whenever some substantial evidence exists in the record to support a fair argument that the project may result in a significant impact.⁴ The state or local agency is generally not entitled to deference in this determination.⁵ This standard of review is known as the "fair argument" test.

However, if an EIR for a given project already exists, the presumption shifts in favor of agency discretion when dealing with project modifications. Under CEQA's subsequent review provision, Public Resources Code ("P.R.C.") section 21166, and the implementing CEQA Guidelines ("Guidelines") provision, section 15162, an agency cannot require a subsequent or supplemental EIR unless it determines that a proposed modification requires major revisions to the initial EIR due to new or substantially more severe significant impacts.⁶ If new or increased impacts do not cross the section 15162 significance threshold, the agency must prepare a subsequent negative declaration. If modifications involve no new or increased impacts, the agency may instead prepare an addendum or no further documentation at all. The agency's decision as to the appropriate form of subsequent review must be upheld so long as it is supported by some substantial evidence. This deferential standard of review is known as "substantial evidence" review.

Prior to the Court's decision in San Mateo Gardens, the prevailing interpretation of section 15162 afforded the same "substantial evidence" deference to an agency's subsequent review determination regardless of whether it was based on a previously certified EIR or a previously approved negative declaration.⁷ In other words, the same standard of review applied to an agency's subsequent analysis determination regardless of whether the initial version of the project did or did not have potentially significant impacts. As reasoned by the foundational appellate court decision in Benton v. Board of Supervisors,⁸ it would make little sense to penalize a project for having initially had no significant impacts by then holding it to a heightened review requirement for subsequent modifications.

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At the same time, however, the appellate courts were split with regard to the issue of whether a so-called modification might sometimes be deemed a brand new project. A new project, of course, requires starting the entire CEQA process over again from scratch.

II. APPELLATE COURT SPLIT

In 2006, in Save Our Neighborhood v. Lishman,⁹ a California court of appeal concluded for the first time that all subsequent review issues were subject to a threshold determination by the court as to whether the project was actually new.

In Lishman, the City of Placerville had prepared a mitigated negative declaration and approved a hotel and retail development ("the North Point Project") around 1997. But the North Point Project was never constructed. In 2004, the City prepared an initial study/mitigated negative declaration for a very similar plan submitted by a new developer for the same property ("the Gateway Project"). When opponents pushed for a full EIR, the City decided to instead prepare an addendum to the mitigated negative declaration for the North Point Project. Challengers asserted that the addendum was invalid because the Gateway Project was in fact an entirely new project.

Lishman reasoned that P.R.C. section 21166 and Guidelines section 15162 commit discretion to the agency only with regard to a project that already exists. Thus, if a project is actually new, the agency should receive no deference in claiming otherwise. Lishman determined that its threshold newness question would be decided based on the "totality of the circumstances." The court ruled that the Gateway Project was in fact new, citing such evidence as the fact that the project developer had changed, and that the modified proposal did not use any of the same drawings as the original.

The following year, in Mani Brothers Real Estate Group v. City of Los Angeles,¹⁰ another appellate court strongly criticized Lishman's analysis. Mani Brothers opined that the Lishman test impermissibly imposed a new substantive requirement outside the scope of CEQA. In particular, the Mani Brothers court faulted Lishman for relying on project changes that were unrelated to environmental impacts, which it explained were the only concern of CEQA. The Mani Brothers court also disapproved of Lishman's departure from the prevailing practice of giving substantial evidence deference to the agency...