On March 15, 2010, the California Supreme Court released its unanimous decision in Communities for a Better Environment v. South Coast Air Quality Management District, ___Cal. 4th ____ (Case No. S161190) (CBE) and set forth important requirements for the preparation of environmental impact reports (EIRs) and negative declarations under the California Environmental Quality Act (CEQA). The Court held that these CEQA environmental documents must use a “baseline” of “existing physical conditions” to analyze and measure environmental impacts from a proposed project, and cannot use a “baseline of maximum permitted capacity.” Because the wrong “baseline” was used, the Court overturned the permit issued by the public agency and required that an EIR be prepared.
CEQA documents such as EIRs or negative declarations are used by public agencies in California to evaluate potential environmental impacts of proposed development projects, such as new or modified industrial, commercial or residential projects. Anyone preparing a CEQA environmental document for a new project should ensure that the analysis used to predict impacts of the proposed project uses the baseline of existing physical conditions as required by the Court in the CBE case, and does not measure the project’s impacts by comparing it to some other measuring stick, such as the existing maximum permitted levels of air emissions, traffic, water usage, electricity usage or other impacts. (Though other baselines might be used where the project is a modification to a previously approved or existing facility.) In the CBE case, failure to use this baseline, in the Court’s view, led the public agency to understate potential environmental impacts. However, in some other cases, using the “existing physical conditions baseline” might be beneficial to project proponents in preventing the exaggeration of the project’s environmental impacts or in using actual operations as a baseline even where such operations arguably exceeded existing permit conditions or project approvals.
The Court’s CBE decision leaves open a number of issues, including the possibility that an EIR or negative declaration could use a baseline based on an average of past physical conditions over a period of time. The Court also noted that “project effects might reasonably be compared to predicted conditions at the expected date of approval, rather than to conditions at the time analysis has begun.”1
Finally, the CBE decision underscores the importance of ensuring that plans to modify existing facilities or projects are treated as modifications of a previously approved project, rather than as a wholly new project. The CBE decision supports the use of the “previously approved project impacts,” and not the “existing physical environment” as a baseline for measuring impacts where the agency is considering a modification to an approved project which may have already undergone CEQA review.
Though the CBE decision involved only California law under CEQA, it is important to note that federal courts have reached somewhat analogous results in addressing the “baseline” issue for environmental documents prepared under the National Environmental Policy Act (“NEPA”). For example, in American Rivers et. al. v. Federal Energy Regulatory Commission, 201 F.3d 1186 (1999), the Ninth Circuit Court of Appeals upheld the agency’s use of the existing environment (which included the existing project) as the baseline for environmental analysis under NEPA and other federal statutes. 2
Background of the Case
The CBE case was a challenge by environmental and construction union groups against the approval of a permit by the South Coast Air Quality Management District (SCAQMD) to modify the ConocoPhillips refinery in Wilmington, an area of the City of Los Angeles, to allow the refinery to produce ultra-low sulfur diesel fuel. 3 The SCAQMD estimated that the new project would increase nitrogen oxide (NOx) emissions by an additional 237 to 456 pounds per day. The SCAQMD prepared a negative declaration for the project, instead of an EIR, finding that the project could not have a significant effect on the environment. While the increased operation of steam generation equipment at the refinery would cause additional NOx emissions, the SCAQMD concluded that there would be no increases above previously permitted levels of NOx emissions allowed in the refinery’s air pollution permits.
The California Supreme Court’s Decision in CBE
The California Supreme Court rejected SCAQMD’s use of a previously permitted level of NOx emission as the measuring stick, or “baseline,” for determining whether the project would cause an increase in emissions. It held that the agency should have looked to the existing physical conditions, rather than to the maximum permitted operation of the boilers. The Court described the required baseline for measurement as “existing physical conditions in the affected area” or “real conditions on the ground” rather than “the level of development or activity that could or should have been present” according to a plan or regulation.4
Because the project would have an increase in air pollution emissions when measured against the correct baseline (and this increase was above SCAQMD established standards for significant adverse NOx impacts), SCAQMD’s approval of a negative declaration and permits for the ConocoPhillips refinery project was overturned. The Court rejected the argument that there was no increase in air pollution emissions because the applicant held an existing permit which allowed it to produce maximum emissions above the level of the proposed project.
The Court noted that an “approach using hypothetical allowable conditions as the baseline results in ‘illusory’ comparisons that ‘can only mislead the public as to the reality of the impacts and subvert full consideration of the actual environmental impacts,’ a result at direct odds with CEQA’s intent.”5
The Court did not accept the claim that the refinery had a “vested right” to the level of emissions allowed in its air pollution control permits for purposes of environmental analysis under CEQA. The Court noted that even if ConocoPhillips had vested rights that prevented the imposition of conditions restricting refinery operations, CEQA would “still demand an analysis of the project’s true effects.”6 Vested rights might provide a reason not to impose a mitigation measure, but would not be an excuse to avoid CEQA analysis using the existing physical conditions baseline as the basis for measurement of environmental impacts. The Court also rejected the argument that CEQA’s statute of limitations barred the lawsuit against the refinery modification permits. The Court held that the failure to challenge the District’s much earlier decision to issue boiler permits to the refinery did not prevent plaintiffs from making the baseline argument against the permits for construction of the modifications to the refinery.
The CBE decision does approve of certain flexible approaches to defining the existing physical baseline. The Court noted that the date for establishing baseline conditions cannot be a rigid one, because environmental conditions could vary from year to year. As a result, it might be necessary for a CEQA environmental document to consider conditions over a range of time periods, including “peak impacts” or “recurring conditions of resource scarcity.”7 The Court also noted that an agency may seek to estimate predicted conditions at the expected date of project approval, rather than simply use conditions at the time analysis begins. Additionally, the California Supreme Court held that the refinery permit under the SCAQMD’s Regional Clean Air Incentives Market (“RECLAIM”) program was “irrelevant to the baseline for NOx emissions from the refinery” before the Court, because the SCAQMD did not rely upon the RECLAIM permit in its decision. As a result, the California Supreme Court did not adopt the Court of Appeal’s ruling on this issue. 8
Finally, the Court made clear that its decision did not apply to Supplemental or Subsequent EIRs, or other environmental documents which are prepared for “modification of a previously analyzed project” or to projects which involve the continued operation of an existing facility without a significant expansion of use. 9 The Court noted that the ConocoPhillips project was handled as a wholly new project by the SCAQMD, rather than as an existing facility or as a modification of a previously analyzed project. 10
Interestingly, while not addressed in the Court’s opinion, the CBE case may provide support for the position that the impacts of an existing facility or project must be included in the existing environment baseline, and lead courts to reject the argument from project opponents that a “pre-development” or “environment minus existing project” must be used to assess the impacts of a new or modified project. In the NEPA case of American Rivers et. al. v. Federal Energy Regulatory Commission, 187 F.3d 1007 (1999), opponents of a dam relicensing project argued that the baseline for analysis in an Environmental Impact Statement under NEPA should be the environment before the construction of the dam, not the current physical environment which included the dam.
Also not addressed in the CBE decision is the question of how the “No Project” alternative should be defined, analyzed, and compared to the proposed project in EIRs under CEQA. CEQA Guideline Section 15126.6 contains an extensive discussion regarding the definition of no project alternatives, and indicates that in an appropriate case the no project alternative might include a previously permitted expansion of operations, which would allow the agency to consider how the proposed project differs from future conditions where there may be an expansion of operations under existing permits.
Guidance for Project Proponents for CEQA and NEPA Compliance
The CBE case establishes the bright line rule that any negative declaration or environmental impact report prepared for a new project in California must use the existing physical baseline as the basis for predicting project impacts, and cannot use hypothetical maximum levels in previously approved permits or development plans as the basis for measuring project impacts. However, the opinion leaves open a number of important questions that must be resolved in future cases. For example, development plans which are classified as modifications to previously analyzed projects should be able to use the previously approved project as the baseline, rather than the existing physical baseline, but the precise rules for such an approach are still unclear. The CBE decision also leaves open to public agencies substantial discretion as the standards to use to accurately measure and characterize past levels of emission or operation of facilities, rather than using only one measurement of past levels of operation. The Court made clear that a public agency “enjoys the discretion” to determine how to “most realistically” measure existing physical conditions subject to a substantial evidence standard. 11
Additionally, project proponents should note the Court’s acknowledgement that an applicant’s vested rights might constitute a valid reason to forgo particular mitigation measures under CEQA.12 Finally, landowners must be wary of shutting down or reducing operations in anticipation of a new project at their location or facility. It might be argued that such reduced operations should reduce the allowable baseline for measuring environmental impacts from the new project, even though the Court stated in its opinion that “a temporary lull” in operations should not “depress or elevate the baseline...“13