In a 47-page published decision filed June 17, 2015, the Fourth District Court of Appeal reversed the trial court’s judgment denying a writ petition, and held that Respondent Western Riverside County Regional Conservation Authority (“Agency”) must comply with CEQA before “refining” its Multiple Species Habitat Conservation Plan (“MSHCP”) to exclude a 200-acre parcel of ranch land owned by Anheuser-Busch, LLC (“Busch”) from its protections against development. Albert Thomas Paulek v. Western Riverside County Regional Conservation Authority (Anheuser-Busch, LLC, Real Party in Interest) (4th Dist., Div. 2, 2015) ___ Cal.App.4th ___, 2015 WL 3765370.

The MSHCP “refinement” ordered set aside by the Court’s decision involved removing a conservation designation from Busch’s parcel and placing the designation on two other parcels totaling 1,064 acres which the Agency considered environmentally superior habitat. The Agency had determined its action was not a “project” subject to CEQA or, alternatively, was exempt under CEQA’s Class 7 and 8 categorical exemptions (i.e., regulatory agency actions to assure the maintenance, restoration, enhancement, or protection of natural resources and the environment) and the “common sense” exemption.

The Court’s lengthy published opinion addressed numerous issues of interest under CEQA, including the following areas:

  • Standing. Petitioner Paulek had standing – as an individual – to challenge the Agency’s CEQA compliance because he spoke at the hearing at which the Agency adopted the challenged MSHCP “refinement” resolution and objected to that action (see Resources Code, § 21177(a)), and also submitted a letter. He did not lose individual standing by identifying himself at the hearing as the conservation chair of Friends of the Northern San Jacinto Valley (“Friends”) – a group that ultimately did not sue. While his hearing “comments can be interpreted as him speaking in both capacities – on his personal behalf, since he identified his personal residence status, and in his capacity as an officer of the Friends, since he also identified himself in that capacity[,]” the Court concluded Paulek had individual standing because “it would strain government resources for people to have to repeat identical comments in different capacities” at such hearings. The Court opined that if it held only Friends had standing, it “would be upending the rule that organizations gain standing through their members.”
  • CEQA “Project.” Boiling down the case’s somewhat complicated procedural history and factual background, the Agency’s MSHCP “refinement” action was contemplated by both a settlement of prior eminent domain/inverse condemnation litigation between Riverside County and Busch, and by a complex and conditional multi-phased Purchase and Sale Agreement (“PSA”) between the Agency and Busch involving the subject 200-acre parcel and 700-plus acres of additional lands owned by Busch to be purchased in portions on an annual basis by the Agency over many years. It is uncertain under the terms of the PSA (and may remain so until year 2020) whether the 200-acre Busch parcel will ultimately be purchased by the Agency for conservation purposes (for the $11 million consideration specified in the PSA). What is certain, according to the Court, is that by means of the Agency’s “refinement” action the MSHCP conservation overlay was removed from 200-acre property. The Court held, as a matter of law (citing Creed-21 v. City of San Diego(2015) 234 Cal.App.4th 488, 503; Rominger v. County of Colusa (2014) 229 Cal.App.4th 690, 702), that this action was a “project” subject to CEQA. Reasoning by analogy to general plan and zoning enactments and amendments, the Court held that removal of a MSHCP’s conservation overlay protection from certain lands is a “change [that] embodie[s] a fundamental land use decision that has the potential for causing ultimate physical changes in the environment, because land that was protected for conservation purposes will no longer be subject to such protections.”
  • Project Component vs. Mitigation Measure. The Court rejected the Agency’s argument that its MSHCP “refinement” action was “not a project because the Reynolds and Peak properties [on which new conservation designations were placed as part of the action] are biologically superior or equivalent to the [200-acre] phase 9 property.” This position was flawed because it only accounted for changes to the Reynolds and Peak properties and “essentially wash[ed] over any negative changes to the phase 9 property [and its environment.]” The Court also indicated its agreement with Paulek’s position that the additional designations were more properly viewed as mitigation measures than as part of the “project” itself (as contended by the Agency). (While the Court did not rest its holding on this distinction or elaborate on its potential legal ramifications, it might well have had in mind certain CEQA case law holding that it is impermissible to “mitigate into” a categorical exemption. See Salmon Protection and Watershed Network v. County of Marin(1st Dist., 2004) 125 Cal.App.4th 1098. However, it should be noted that subsequent case law has suggested generally applicable environmental or land use regulations and pre-existing aspects of continuing normal operations of existing facilities may not count as “mitigation measures” for purposes of this rule, which is, perhaps, why the Court did not overtly invoke or ultimately rely on it.)
  • Timing of CEQA Review/Speculative Nature of Impacts. The Court also rejected the Agency’s (not-unreasonable, in my view) arguments that CEQA review would be premature and that no CEQA “project” existed because future development of the 200-acre Busch parcel was purely speculative, with no plans in the works. Per the Court: “[T]his is a situation where all that can be known with certainty is that the MSHCP conservation overlay was removed from the phase 9 property. Therefore, the change is analogous to amending a general plan or changing a zoning ordinance…. The change in protected status is a fundamental land use decision that has the potential for causing ultimate physical changes in the environment. As a result, the act is a “project” under CEQA. [citations]” In fact, as noted elsewhere in the opinion, Busch had agreed not to develop the 200-acre parcel (or any other part of its Ranch) until after escrow closed on the final purchase installment (which was the 200-acre parcel), or until termination of the PSA, which gave the Agency until 2020 to purchase it for conservation. These circumstances would, indeed, appear to make the issue whether the parcel would ultimately be developed at least somewhat speculative.
  • Categorical Exemptions. The Court’s opinion, in my view, lacks sufficient analytical rigor in its discussion of the standard of review and background law relevant to its holding that CEQA’s Class 7 and 8 categorical exemptions did not apply to the Project. It appears to me the Court could simply have decided that those exemptions did not apply on their faces. The “whole of the action” at issue clearly extended well beyond regulatory actions merely assuring natural resource and environmental protection – it also involved the removal of protection for a significant amount of previously protected acreage. Indeed, it was apparently undisputed that the 200-acre parcel from which conservation protection was being removed, while somewhat of a degraded habitat, contained protected species not found on either of the “replacement” properties and its potential future development further posed the threat of “new urban edge” impacts to a neighboring conservation area. Given the existence of CEQA case law (not acknowledged by the Court) rejecting a “net” environmental analysis that weighs a proposed action’s environmental benefits against its detriments in determining whether it may have significant impacts (e.g., California Farm Bureau v. Wildlife Conservation Board (2006) 143 Cal.App.4th 173, 186 [“There may be environmental costs to an environmentally beneficial project, which must be considered and assessed.”]), it appears that a construction of the exemptions as limited to projects consisting only of the specific actions expressly described therein may have been appropriate here. (See also 14 Cal.Code Regs., § 15308 [Class 8 exemption expressly stating: “Construction activities and relaxation of standards allowing environmental degradation are not included in this exemption.”], emph. added.)
  • Exception to Categorical Exemptions. Nonetheless, the Court of Appeal did not pursue such an analysis and instead held the categorical exemptions relied on by the Agency were inapplicable, not because the Agency’s action did not fall within them, but because an exception applied – i.e., because the record did not contain substantial evidence negating a “fair argument” that there may be a significant effect on a natural resource or the environment. The Court of Appeal’s opinion in this regard appears to overlook key legal issues. It only tersely cites to the California Supreme Court’s recent landmark categorical exemption decision in Berkeley Hillside Preservation v. City of Berkeley(2015) 60 Cal.4th 1086, 1115-1116. In discussing what it characterizes without further elaboration as a “fair argument” exception to categorical exemptions, the Court of Appeal’s opinion does not apply, discuss, or acknowledge the “unusual circumstances” prong of the exception, which the Supreme Court’s recent decision emphasized has significant independent meaning and function. (See California Supreme Court Construes CEQA’s “Unusual Circumstances” Exception To Categorical Exemptions in Berkeley Hillside Preservation v. City of Berkeley Decision,” by Arthur F. Coon, posted March 3, 2015.) Readers of the Fourth District Court of Appeal’s Opinion should thus proceed with caution before relying too heavily on this particular aspect of its analysis.
  • Common Sense Exemption/Exhaustion/Forfeiture. The Court of Appeal also rejected the Agency’s argument that its MSHCP “refinement” project was exempt from CEQA under the so-called “common sense” exemption (14 Cal.Code Regs., § 15061(b)(3)), and further rejected the argument that Paulek had forfeited his right to challenge this claimed exemption by failing to do so in the public “comment period” or in the trial court.   Neither the Agency’s notice nor agenda for the relevant hearing, nor its adopted resolution accomplishing the challenged MSHCP criteria refinement, gave the public any notice that it was relying on the “common sense” exemption (as opposed to its other claims that its action was not a “project” and, even assuming it was one, that it was exempt under the Class 7 and 8 categorical exemptions). While the Agency’s post-hearing, post-vote Notice of Exemption (“NOE”) filed for the Project added the “common sense” exemption to this list, this was not in time to provide notice to Paulek that he needed to raise the issue in the administrative proceedings. (Citing Tomlinson v. County of Alameda (2012) 54 Cal.4th 281, 291, for the proposition that “an agency needs to give notice of the ground for its exemption determination so members of the public have an opportunity to raise concerns.”) The Court further concluded that since Paulek’s lawsuit was properly focused on and directed at the legal propriety of the Agency’s resolution, not the NOE, and since Paulek addressed the issue when the Agency first raised it in the litigation, Paulek did not forfeit the issue by failing to raise it initially in his petition and complaint. (In my opinion, this last bit of analysis appears somewhat incomplete as a matter of CEQA law and litigation procedure, since, inter alia, it does not acknowledge the case law holding that an agency is not precluded from relying on an exemption not stated in the NOE where no prejudice is shown (see California Farm Bureau Federation v. California Wildlife Conservation Bd. (2006) 143 Cal.App.4th 173, 190-101), nor does it discuss the generally liberal standards for amending pleadings to conform to proof.) On the merits of the issue, for all the reasons it previously stated in concluding the Agency’s action was a “project,” the Court also held substantial evidence did not support application of the common sense exemption.
  • Procedural/Police Power Issues. Finally, the Court also rejected (1) the Agency’s statute of limitations argument (because Paulek timely challenged the Agency’s resolution and CEQA compliance, and did not – at least overtly – challenge the earlier settlement agreement), and (2) the Agency’s and Busch’s argument that Paulek failed to join the County as an allegedly necessary and indispensable party (since the County was not a “recipient” of the MSHCP “refinement” or the Agency’s decision not to apply CEQA, which were the only actions Paulek challenged or needed to). Moreover, any argument that the earlier Settlement Agreement “guaranteed” the MSHCP criteria refinement would be adopted without CEQA review was meritless, since it is well-established that an agency cannot “contract away” its police power or circumvent procedural requirements (such as CEQA) by contract. (Citing Trancas Property Owners Association v. City of Malibu (2006) 138 Cal.App. 4th 172, 182-183.) In my view, the Opinion’s indispensable parties analysis is puzzling and opaque in important respects. It does not state which party or parties were named in the Agency’s NOE as approval recipients; this raises questions about whether it may have been based on a now-superseded version of CEQA’s real party statute, especially since it does not set forth the text of that statute, which was significantly amended in 2011. (See Resources Code §§ 21167.6.5(a), (d) [amended in 2011 to require agencies to identify all project approval recipients named in NOD or NOE and providing CEQA plaintiffs’ failure to name in petition parties other than real parties so identified is not grounds for dismissal].) Again, readers of the Opinion should proceed cautiously before relying on this part of its analysis.

The Court of Appeal’s Opinion left this reader with the distinct impression that, in many respects, there was probably much more to this case than meets the eye – a disappointing and vaguely disturbing feeling given that the Court chose to publish its work. Notwithstanding several areas where its legal and factual analysis could have been more robust, transparent and helpful, the Opinion does address a number of interesting CEQA and land use issues, and does provides valuable published guidance – in the nature of a cautionary tale – for property owners and public agencies dealing with development proposals in areas subject to a MSHCP.