On October 7, 2015, the California Supreme Court heard oral argument in California Building Industry Association v. Bay Area Air Quality Management District (Supreme Court Case No. S213478), a case which calls into question the “continued vitality” of a line of appellate cases holding that the “reverse application” of the California Environmental Quality Act (CEQA) is inconsistent with the statute’s language and intent. While the California Building Industry Association’s (CBIA) challenge to the Bay Area Air Quality Management District’s (BAAQMD) guidelines raised numerous legal issues, the Supreme Court’s order granting review in the matter expressly limited briefing and argument to the following issue: “Under what circumstances, if any, does the California Environmental Quality Act (Pub. Resources Code, § 21000 et seq.) require an analysis of how existing environmental conditions will impact future residents or users (receptors) of a proposed project?” In other words, is CEQA review limited to an analysis of a project’s impact on the existing environment, or does it also require an analysis of the existing environment’s impact on the project and its future occupants and users?

CBIA’s Challenge to BAAQMD’s Thresholds of Significance

On November 29, 2010, CBIA filed a petition for writ of mandate challenging BAAQMD’s 2010 thresholds of significance for certain air contaminants (Thresholds), adopted pursuant to Section 15064.7 of the CEQA Guidelines. The trial court agreed with CBIA that BAAQMD should have conducted an environmental review under CEQA before issuing the Thresholds, but declined to address CBIA’s remaining arguments, including that the Thresholds were arbitrary and capricious to the extent they required an evaluation of the impacts the environment would have on a given project (referred to by some as CEQA in reverse).[i]

The First District Court of Appeal reversed the trial court judgment invalidating the Thresholds, holding that a public agency’s promulgation of thresholds of significance pursuant to the procedures of the CEQA Guidelines is not itself a “project” subject to CEQA review.[ii]  Regarding the CEQA in reverse issue, raised by CBIA, the Court of Appeal discussed four cases relied on by CBIA concluding that an Environmental Impact Report (EIR) is not required for a proposed project based solely on the effect of the existing environment on people who will live and work at the project site, but determined that it “need not decide whether [these cases] were correctly decided or whether, as a general rule, an EIR may be required solely because the existing environment may adversely affect future occupants of a project,” because “CBIA’s challenge to the receptor thresholds as unauthorized by CEQA are [sic] analogous to a claim [that] a statute or regulation is unconstitutional on its face[.]”[iii] Such a facial challenge could not succeed unless the Thresholds “present a ‘total and fatal conflict’ with the relevant CEQA provisions or will be unauthorized ‘in the vast majority of [their] applications.’”[iv] The Court of Appeal concluded that CBIA had not met its burden under this standard and declined to further analyze the “CEQA-in-reverse” issue, explaining: “Because the receptor thresholds are not invalid on their face, it would be inappropriate to set them aside. The [validity of CEQA-in-reverse] is better reserved for a case in which the receptor thresholds have actually been applied to a project.”[v]

The Supreme Court Challenged Counsel for Both Sides With Critical Questions About a Valid Application of “CEQA-In-Reverse”

In oral argument before the Supreme Court last week, the Justices asked counsel for both sides a number of questions regarding the proposition that CEQA mandates consideration of both the effects that a project will create, as well as the effects of existing conditions on a project and its future occupants. To counsel for CBIA, the Justices questioned whether the California legislature should address this issue. Counsel for CBIA answered by citing two bills introduced in the 2013 legislative session (SB 617 and AB 953), which, according to counsel for CBIA, were expressly designed to overrule case law indicating that CEQA does not require consideration of the impact of existing conditions. Counsel for CBIA explained that the legislature had the opportunity to say that CEQA applied in reverse, but the bills were not adopted.

Counsel for CBIA further addressed the Justice’s questions by explaining that “cumulative impact” or “baseline” assessments demonstrate why CEQA cannot work in reverse. In a baseline assessment, an assessment of the existing environment, absent the project, is made in order to then measure the incremental effect of the project. Counsel for CBIA directed the Justices to Section 15064(h)(4) of the CEQA Guidelines, which states: “The mere existence of significant cumulative impacts caused by other projects alone shall not constitute substantial evidence that the proposed project’s incremental effects are cumulatively considerable.” According to counsel for CBIA, this is the key issue with “CEQA in reverse”—if the impact is caused by existing conditions, the proposed project’s incremental effects are not to blame.

The Justices also probed counsel for BAAQMD regarding how to reconcile BAAQMD’s interpretation of CEQA with the plain statutory language. In response, counsel for BAAQMD explained that bringing people to the environment is one effect of the project and it is that indirect consequence or change that precipitates exposure to substantial risk. The Justices then questioned whether any proposed project would not involve bringing people into an environment, and asked for a concrete example of a project that would not be subject to CEQA if BAAQMD’s interpretation of the statute were correct. Counsel for BAAQMD offered an oil pipeline as an example of such a project in response, but the Justices noted that even in a pipeline project, people would have to come to the area to build and repair the pipeline.

The Justices also questioned whether “CEQA-in-reverse” is not merely duplicative of other laws (e.g., laws regarding seismicity). BAAQMD counsel argued that CEQA is different because it requires consideration of the environmental impact of a project at the earliest stages and requires public notice, which other laws do not require. However, the Justices questioned why it is not sufficient to consider these existing conditions as baseline conditions.

What to Watch For

The Supreme Court’s decision regarding the circumstances, if any, under which CEQA requires an analysis of how pre-existing environmental conditions will impact future residents or users of a proposed project could have substantial ramifications for project applicants and for any public agency conducting a CEQA analysis or preparing an EIR.