“… like all things in life, project plans are subject to change.”
(Slip Opn. of Kruger, J., p. 4.)

The California Supreme Court provided needed clarification to some aspects of the operation of CEQA’s “subsequent review” rules (Pub. Resources Code, § 21166; CEQA Guidelines, § 15162) in its highly anticipated opinion, filed on September 9, 2016, in Friends of the College of San Mateo Gardens v. San Mateo County Community College District (2016) ___ Cal.5th ___, 2016 WL 4978435. CEQA’s subsequent review rules embody CEQA’s concerns for finality and efficiency, and implement a presumption against requiring a subsequent EIR for a modified project that has previously undergone CEQA review – i.e., they govern whether an EIR will be required, or another type of CEQA document (or no further documentation) will suffice, when changes are proposed in a project for which an initial CEQA review has been completed. (Slip Opn., p. 12.) I won’t reiterate this case’s facts and relevant background history (including oral argument and post-argument briefing in the Supreme Court) which can be found (in reverse chronological order) in my prior blog posts of July 8, May 12, May 4, April 26, 2016, and March 25, 2014. This post focuses on the legal rules and standards announced by the Court and their potentially significant implications for lead agencies and project proponents who consider approval of changes to a development project thahttp://www.ceqadevelopments.com/2016/05/12/the-plot-thickens-california-supreme-court-vacates-submission-of-just-argued-ceqa-subsequent-review-case-orders-supplemental-briefing/t has already undergone and survived a full CEQA review.

In the unanimous 28-page opinion authored by Justice Kruger, the Court returned to the focus of its original grant of review: resolving a disagreement among appellate courts regarding whether an agency’s determination to proceed under the statutory and regulatory rules governing subsequent or supplemental EIRs (Pub. Resources Code, § 21166 and CEQA Guidelines § 15162) – as opposed to those governing initial environmental review (Pub. Resources Code, § 21151) – is subject to a “threshold” question of law whether the proposal presents a modified project or a “new project altogether” (as held by Save Our Neighborhood v. Lishman (2006) 140 Cal.App.4th 1288), or a more deferential “substantial evidence” standard of review (as held by Mani Brothers Real Estate Group v. City of Los Angeles (2007) 153 Cal.App.4th 1385. 1400, and numerous other cases). The basic significance of this issue is clear: beginning the CEQA process completely anew is an onerous, expensive and time consuming endeavor that would require wasteful repetition of much work already done and also reopen to new challenges the adequacy of prior analyses on environmental issues that have already been “laid to rest.”

Thankfully, the Court rejected Lishman’s threshold “new project” test and summarized its resolution of this issue as follows:

When an agency proposes changes to a previously approved project, CEQA does not authorize courts to invalidate the agency’s action based solely on their own abstract evaluation of whether the agency’s proposal is a new project, rather than a modified version of an old one. Under the statutory scheme, the agency’s environmental review obligations depend on the effect of the proposed changes on the decisionmaking process, rather than on any abstract characterization of the project as “new” or “old.” An agency that proposes project changes thus must determine whether the previous environmental document retains any relevance in light of the proposed changes and, if so, whether major revisions to the previous environmental document are nevertheless required due to the involvement of new, previously unstudied significant environmental impacts. These are determinations for the agency to make in the first instance, subject to judicial review for substantial evidence.

(Slip Opn., pp. 2-3.)

In rejecting plaintiff’s (and Lishman’s) contrary position that the applicability of CEQA’s subsequent review rules depends on a threshold “same” versus “new” project inquiry to be decided by courts as “a question of law … based on their independent judgment[,]” the Supreme Court was clearly (and rightly) troubled by “the absence of any standards to govern the inquiry.” (Slip Opn., p. 12.) It noted: “Plaintiff does not suggest any standards, nor do the cases on which it relies.” (Id.) In rejecting Lishman’s threshold inquiry, the Supreme Court cited the reasoning of Mani Brothers and stated: “In the absence of any benchmark for measuring the newness of a given project, the new project test plaintiff urges would inevitably invite arbitrary results.” (Slip Opn., pp. 12-13.)

Based on CEQA’s “central purpose … to ensure that agencies and the public are adequately informed of the environmental effects of proposed agency action[,]” and finding support in NEPA precedent, the Court posited a different threshold inquiry for application of CEQA’s subsequent review provisions, i.e., determining whether “the original environmental document retains some informational value [and, hence, relevance to the ongoing decisionmaking process].” (Slip Opn., p. 13.) Per the Court: “If the original environmental document retains some informational value despite the proposed [project] changes, then the agency proceeds to decide under CEQA’s subsequent review provisions whether project changes will require major revisions to the original environmental document because of the involvement of new, previously unconsidered significant environmental effects.” (Slip Opn., p. 14.) Given the breadth of information required for the many potential impact areas covered by CEQA, this test should be easy to satisfy, as a prior EIR or negative declaration will virtually always contain some environmental analysis that still applies to even a substantially changed project.

Moreover, this new, low-hurdle, threshold inquiry required by the Court to determine an agency’s ability to proceed under CEQA’s subsequent review rules – as opposed to treating a proposal as an original project subject to a de novo initial review under CEQA – is a predominantly factual one to be resolved by the agency itself, subject to substantial evidence review. Per the Supreme Court:

… [W]hether an initial environmental document remains relevant despite changed plans or circumstances – like the question whether an initial environmental document requires major revisions due to changed plans or circumstances – is a predominantly factual question. It is thus a question for the agency to answer in the first instance, drawing on its particular expertise. [citation] A court’s task on review is then to decide whether the agency’s determination is supported by substantial evidence; the court’s job “is not to weigh conflicting evidence and determine who has the better argument.” [citation]

(Slip Opn., pp. 15-16.)

The Supreme Court noted it “expect[s] occasions when a court finds no substantial evidence to support an agency’s decision to proceed under CEQA’s subsequent review rules will be rare,” but also that “this is only the first step” and that “the next – and critical – step is to determine whether the agency has properly determined how to comply with its obligations under these provisions.” (Slip Opn., p. 16, emph. in orig.) Per the Court:

… [W]here … the agency has determined that project changes will not require “major revisions” to its initial environmental document, such that no subsequent or supplemental EIR is required, the reviewing court must then proceed to ask whether substantial evidence supports that determination.

(Slip Opn., p. 16.) So far so good, but this is where the opinion begins to get “mushy”, with the Court also observing that “judicial review must reflect the exacting standard that an agency must apply when changes are made to a project that has been [initially] approved via a negative declaration” – an important aspect of its decision discussed further below.

Before attempting to more precisely articulate the standards governing subsequent review of projects originally approved via negative declaration, the Supreme Court first had to dispense of plaintiff’s meritless argument that negative declarations were essentially such “second class citizens” under CEQA that the subsequent review rules could never apply to them. The Court rejected plaintiff’s claim – which was outside the issues on which review was granted, belatedly focused on by counsel at oral argument, and the subject of subsequent briefing ordered by the Court – “that CEQA Guidelines section 15162 is invalid to the extent that it extends the section 21166 subsequent review framework to projects that were initially approved via negative declaration ….” (Slip Opn., p. 17.) The Court upheld the Resources Agency’s adoption of Guidelines § 15162 as not being clearly unauthorized by Public Resources Code § 21166 (despite that statute’s reference to EIRs, and failure to mention negative declarations), and as constituting a valid “gap-filling” measure consistent with CEQA’s statutory structure. Plaintiff’s plain language argument was undermined by the timing of the relevant provisions: “At the time section 21166 was enacted in 1972, no provision of CEQA referred to negative declarations; the category of negative declarations originated with the Resources Agency’s promulgation of the first set of CEQA implementation guidelines the following year. …. Because, at the time of section 21166’s enactment, EIRs were the only type of environmental document expressly referenced by CEQA’s text, the Legislature could not have used the phrase ‘environmental impact report’ in section 21166 with any specific intent to exclude negative declarations from its scope.” (Slip Opn., pp. 18-19.) Plaintiff’s arguments based on subsequent 1977 statutory amendments of CEQA likewise failed to support its position:

… [W]hen the 1977 amendments did refer to negative declarations, it was in order to affirm that a lead agency’s decision to proceed by negative declaration is entitled to the same degree of finality as a decision to proceed by EIR. (Pub. Resources Code, § 21080.1.) In light of that provision, plaintiff’s reading of the 1977 amendments – as implicitly requiring agencies to start the environmental review process over each time there is a change in plans or circumstances, no matter how minor – is an unlikely one.

(Slip Opn., pp. 19-20.)

Crucially, the Supreme Court’s opinion recognizes that CEQA provides adopted negative declarations with a presumption of finality and that subsequent review of project modifications following them is not a “from scratch” endeavor. The Supreme Court emphasized that: “Limiting agencies’ post approval review obligations for projects that were initially approved via negative declaration is wholly consistent with a statutory scheme in which negative declarations, no less than EIRs, are entitled to a statutory presumption of finality once adopted.” (Slip. Opn., p. 20, citing Pub. Resources Code, § 21080.1(a), Benton v. Board of Supervisors (1991) 226 Cal.App.3d 1467, 1479-1480.) Because “restart[ing] the CEQA process every time plans or circumstances change, or whenever new information comes to light” “would render agency decisionmaking intractable[,]” “[t]he Resources Agency did not act unreasonably in concluding that the statutory scheme calls for some limitations on postapproval environmental review of projects initially approved via negative declaration.” (Slip Opn., p. 21.)

At this point in the opinion, the “mushiness” increases. Regarding “the substance of the limitations the Guidelines prescribe” for subsequent review (id.), the Supreme Court found plaintiff’s arguments be “stronger”; while it rejected plaintiff’s contention that application of Guidelines § 15162(a)’s “substantial evidence” standard creates a “loophole” in CEQA “allowing agencies to evade their obligation to prepare an EIR based on the more demanding “fair argument” standard, so long as the potential environmental effects of the project are caused by changes in the project after a negative declaration had been approved” (Slip Opn., p. 22), it did so in language seemingly inconsistent with its earlier pronouncements that the substantial evidence standard applies in this context.

According to the Court, Guidelines §15162(a) does not “refer to substantial evidence that the project, as modified, will necessarily have significant effects” but instead to “substantial evidence that the proposed modifications will involve “[s]ubstantial changes” that “require major revisions of the previous EIR or negative declaration due to the involvement” of new or significantly more severe environmental effects.” (Slip Opn., p. 22, citations omitted.) One might think, consistent with earlier statements in the opinion which characterized this inquiry as a “predominantly factual question” for the agency subject to substantial evidence review, that this language is consistent with the Court embracing a traditional, deferential substantial evidence standard equally applicable to EIRs and negative declarations on subsequent review. But such a notion is challenged by the following – seemingly inconsistent – passages of the Supreme Court’s opinion:

… [W]hen a project is initially approved by negative declaration, a “major revision” to the initial negative declaration will necessarily be required if the proposed modification may produce a significant environmental effect that had not previously been studied. [citation] Indeed, if the project modification introduces previously unstudied and potentially significant environmental effects that cannot be avoided or mitigated through further revisions to the project plans, then the appropriate environmental document would no longer be a negative declaration at all, but an EIR. [Fn. omitted; ¶; ¶ ] In short, the substantial evidence standard prescribed by CEQA Guidelines section 15162 requires an agency to prepare an EIR whenever there is substantial evidence that the changes to a project for which a negative declaration was previously approved might have a significant environmental impact not previously considered in connection with the project as originally approved, and courts must enforce that standard. [citation]

(Slip Opn., pp. 23-24, emph. in orig., last citing Friends of “B” Street v. City of Hayward (1980) 106 Cal.App.3d 988, 1002.)

The possible significance of the Court’s citation of Friends of “B” Street will not be lost on CEQA practitioners – that case is often cited for its articulation of the “fair argument” standard, a test disavowed by the Guidelines and previous case law in this context, and seemingly disavowed in earlier portions of the Supreme Court’s opinion. (Compare, e.g., CEQA Guidelines, § 15064(f)(7) [observing: “Under case law, the fair argument standard does not apply to determinations of significance pursuant to sections 15162, 15163, and 15164.”].) The Supreme Court goes on to state if there is any “substantial evidence [in the record] that the changes … might have a significant impact not previously considered connection with the project as originally approved,” that a subsequent EIR (of some type) will be required. (Slip Opn., p. 24, emph. added.) The standard announced by the Court – using the key words “may” and “might” – arguably resembles a variant of the “fair argument” test, which seems contrary to the opinion’s earlier pronouncements that “substantial evidence” review applies. Whatever the Court intended to convey, due to the very nature of subsequent review and the opinion’s express embrace of the finality accorded negative declarations by CEQA, it seems clear that the agency’s analysis on subsequent review would apply only to the incremental environmental impacts of project changes when compared to a “baseline” assuming build-out of the original project, as opposed to reopening previously analyzed (and presumptively insignificant and/or mitigated) impacts attributable to the original project.

Finally, the Court rejected plaintiff’s arguments that the College District’s initial project was a phased project or “program” such that CEQA’s “tiering” provisions (see Pub. Resources Code, §§ 21068.5, 21094, Guidelines § 15152), rather than its subsequent review rules, should have been applied to it. (Slip Opn., pp. 25-27.) The 2006 IS/MND at issue was not a tiered EIR; it concluded all potential impacts of the entire project (including every building on campus) were analyzed and mitigated, and to entertain the argument that it “should be treated as a tiered EIR would [impermissibly] disregard the substance of the District’s conclusions in order to permit plaintiff to raise an untimely challenge to the adequacy of the MND, as well as the District’s decision to proceed by MND in the first place.” (Slip Opn., p. 27.)

As is not uncommon it its recently decided CEQA cases, the Supreme Court did not resolve all issues in this case but concluded its opinion by reversing the judgment and remanding the case to the Court of Appeal for further proceedings consistent with its opinion. For example, it noted but did not address plaintiff’s arguments that Guidelines §§ 15162 through 15164 “improperly authorize lead agencies to approve certain project modifications through the use of addenda without public comment, rather than requiring the issuance of a subsequent or supplemental EIR or negative declaration.”

In the overall context of the opinion, which clearly and decisively rejected most of plaintiff’s arguments, the Court’s holding regarding the standard of agency and judicial review applicable in the context of subsequent review following negative declarations seems strangely ambiguous and arguably contrary to its earlier statements that a substantial evidence standard applies. While the precise contours and operation of this holding will have to be worked out on remand by the First District Court of Appeal (and, perhaps, other state appellate courts) in further litigation, one thing is clear: the standard of review must be more favorable and deferential to lead agencies than the ordinary “fair argument” standard applicable to initial CEQA review, or else there would be no benefit at all to proceeding with subsequent review following negative declarations under the “subsequent review” provisions of Guidelines § 15162, as opposed to undergoing initial “new project” review under § 15152. In that event, the whole exercise of resolving the “new project” split would have been pointless – and the Supreme Court obviously does not undertake pointless tasks.

While not clearly articulated by the Supreme Court, a significant benefit of proceeding under the subsequent review rules lies in the effect of the finality accorded the prior negative declaration and the consequently more limited scope of the subsequent review. As the Court helpfully stated earlier in its opinion: “The purpose behind the requirement of a subsequent or supplemental EIR or negative declaration is to explore environmental impacts not considered in the original environmental document …. The event of a change in a project is not an occasion to revisit environmental concerns laid to rest in the original analysis. Only changed circumstances … are at issue.” (Slip. Opn., p. 11, quoting Save Our Neighborhood, supra, 140 Cal.App.4th at 1296; accord Mani Brothers, supra, 153 Cal.App.4th at 1398-1399.) Accordingly, to the extent environmental impacts were considered by the prior negative declaration, they should be considered part of the environmental “baseline” and the adequacy of their analysis and mitigation should be conclusively presumed and not subject to further challenge – i.e., only the potential incremental impacts of the proposed project changes are at issue under the subsequent review rules, and only these are reviewed under the standard announced by the Court.

Due to the somewhat ambiguous and contradictory elements of the opinion – perhaps the result of compromises forged among the justices to achieve unanimity in a case they found difficult to decide – further elucidation of the precise contours and context of that standard will have to await another day.