The California Supreme Court—reforming Ceqa from the Bench?

• Publication year: 2017
• Author: Matthew Henderson, Art Coon, Tom Henry, and Andrew Sabey

The California Supreme Court—Reforming CEQA from the Bench?

Matthew Henderson, Art Coon, Tom Henry, and Andrew Sabey¹

Matthew C. Henderson

Matt's practice encompasses all stages of land use and real property cases, from initial entitlement and environmental review to subsequent litigation and appellate work. Matt also serves in Miller Starr Regalia's Appellate Practice Group and has experience in representing both parties and amicus curiae in significant appeals throughout the state.

Arthur F. Coon

Art is Co-Chair of Miller Starr Regalia's Land Use Practice Group and Chair of its Appellate Practice Group. Art is a distinguished litigator whose areas of expertise include land use, environmental law, the law of public agencies, extraordinary writs, and the CEQA. He is also the author of MSR's blog: ceqadevelopments.com.

Tom Henry

Tom Henry is a partner at Stoel Rives LLP Tom's practice involves permitting, environmental review under the CEQA, as well as resolving other land use, title and regulatory compliance issues. Tom also advises clients as to California's AB 32 emissions reporting and Cap and Trade Program.

Andrew Sabey

Andrew's practice focuses on disputes arising out of the land use entitlement and permitting process. He has successfully resolved numerous cases involving CEQA, NEPA, Planning and Zoning Law, Subdivision Map Act, Development Agreement Law, and related proceedings as well as claims involving water law, ballot box planning, and due process.

I. Introduction

Reforming the California Environmental Quality Act² ("CEQA") has proven to be an enduring chimera. Governor Jerry Brown himself has advocated for CEQA reform on a number of occasions during his current tenure, but to little avail. Given the number of constituencies invested in CEQA's current form, meaningful gestures towards substantially amending the law have failed in the Legislature. Depending on the audience, CEQA remains an object of derision, scorn, affection, or devotion. Central to CEQA's controversial role in development is how it can be used (or abused) to attack, delay, and ultimately, prevent projects from moving forward, even where a full environmental impact report ("EIR") has been prepared. While CEQA has been used to protect California's environment, it has also been used by project opponents acting under the principles of NIMBY³ or BANANA.⁴ Indeed, the California Legislative Analyst's Office observed that CEQA can reduce new housing development and may contribute to the high cost of housing in California.⁵

Moreover, CEQA's complexity, and its often vague or subjective provisions, generate tremendous uncertainty with respect to how overworked, and by nature "generalist" trial judges will apply it. Predicting how any one judge will rule in a CEQA writ of mandate proceeding can amount to slightly educated guesswork. This variability is a problem for lawyers advising clients as to risk, and a problem for the clients themselves in making informed decisions.

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Naturally, the laudable goals of environmental protection, informed decision-making, and a knowledgeable and engaged public must be balanced against this well-known problem. However, paralysis in the executive and legislative branches of government does not forestall all potential action on CEQA. Given the vital role that courts play in its enforcement and interpretation, case law has the power to make significant changes in how CEQA is applied to projects. This is particularly true for decisions of California's highest court. While it may be a stretch to say that the California Supreme Court is seeking to "reform" CEQA, over the past decade or so it has taken an obvious interest in the statute; granting review in a surprisingly high number of CEQA cases. This article reviews some of the CEQA cases recently taken up or decided by the high court to examine how CEQA may (or may not) wind up being subject to judicial reform.

II. BERKELEY HILLSIDE PRESERVATION: EXCEPTIONS TO CATEGORICAL EXEMPTIONS

The Supreme Court⁶ weighed in on the operation of categorical exemptions to CEQA and exceptions to those exemptions in Berkeley Hillside Preservation v. City of Berkeley.⁷

As opposed to statutory CEQA exemptions, which are generally enacted by the Legislature for policy reasons rather than as assessments of probable environmental impacts,⁸ categorical exemptions are statutorily authorized exemptions promulgated by the Office of Planning and Research ("OPR") and adopted by the Secretary of the Natural Resources Agency ("Secretary")⁹ that set forth classes of projects that have been determined by OPR and the Secretary to typically not have significant environmental effects.¹⁰ Also, unlike statutory exemptions, which are traditionally absolute, categorical exemptions are all qualified and do not apply "where there is a reasonable possibility that the [otherwise exempt] activity will have a significant effect on the environment due to unusual circumstances."¹¹

In the context of a lawsuit that challenged the approval of a large, single-family home on a steep Berkeley hillside, and that was based on two categorical exemptions,¹² the Supreme Court elucidated the standard of judicial review applicable to challenges to the use of a categorical exemption based on this "unusual circumstances" exemption. The proposed home was approximately 6,500 square feet with a 3,400 square foot garage, and would cover about sixteen percent of a lot with a slope of approximately fifty percent grade in a heavily wooded area.¹³

While large by most standards, the evidence relied on by the City of Berkeley showed that the proposed house was not unusually so, and was a single-family residence to be located in an urbanized area on a parcel of less than five acres. These parameters were consistent with the local general plan and zoning requirements, and without other peculiar disqualifying aspects. City of Berkeley residents administratively appealed the zoning adjustment board's approval, submitting their own expert evidence to support their position that the residence's "unusual size, location, nature[,] and scope will have significant environmental impact on its surroundings," violate city code height restrictions and general plan policies, present such severe geotechnical issues that it could not be constructed as designed (with the consequence that massive fill, retaining walls, and grading not shown on the plans would be required), and could result in "seismic lurching of the oversteepened side-hill fills."¹⁴

Following the Berkeley City Council's denial of the administrative appeal and a seesaw of judicial rulings before the case reached the Supreme Court,¹⁵ the high court laid down the law. Construing the CEQA Guidelines¹⁶ as "administrative regulations," the Court held that "[t]he plain language of [section 15300.2(c)] supports the view that, for the exception to apply, it is not alone enough that there is a reasonable possibility that the activity will have a significant effect"; rather, the effect must be "due to unusual circumstances."¹⁷ The Court noted that the plaintiffs' (and the concurring opinion's) contrary construction would render the categorical exemptions of little practical effect— since under it a mere "fair argument" of potential impact could overturn them—and that this approach contradicted legislative history and intent that such exemptions be given meaningful application.¹⁸

The court addressed this situation by adopting a "bifurcated" standard of review for the two components of the "unusual circumstances" exception: whether there are unusual circumstances, and if so, whether those circumstances may give rise to a potentially significant environmental impact. The Court held that "[t]he determination as to whether there are 'unusual circumstances' ... is reviewed under [Public Resources Code] section 21168.5's substantial evidence prong," and "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' ... is reviewed to determine whether the agency, in applying the fair argument standard, 'proceeded in [the] manner required by law.'"¹⁹ The "unusual circumstances" component of the exception poses "an essentially factual inquiry" as to which the lead agency is "the finder of fact" whose decision is reviewable under the deferential "substantial evidence" standard. Once unusual circumstances have been established, however, "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 [the] 'unusual circumstances.'"²⁰ Further, the Court held that "[i]n determining whether these environmental effects of a proposed project are unusual or typical, local agencies have discretion to consider conditions in the vicinity of the proposed project."²¹

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In rejecting plaintiffs' attempted re-casting of the approved project by arguing (based on their own expert's opinion) that it could not be built as planned and approved, the Court held as a matter of law that "a finding of environmental impact 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."²² "[I]f a proposed project cannot be built as approved, then the project's proponents will have to seek approval of any additional activities and, at that time, will have to address the potential environmental effect of those additional activities."²³

While the Supreme Court seemingly "split the baby" in this case by holding that there are two prongs and two different standards of review applicable to the unusual circumstances exception to categorical exemptions, lead agencies and the development community gained a little more certainty, and categorical exemptions were given a little more meaning as a result...