In a modest yet significant reform that Californians should embrace, the California Supreme Court decided a case March 2 that slightly trimmed the California Environmental Quality Act’s expansive reach, even while introducing new complexities.

The case, Berkeley Hillside Preservation vs. City of Berkeley, matters because in the decades since the CEQA’s enactment, the state’s signature environmental law has evolved to require a detailed, time-consuming, often-redundant and expensive environmental and public review process for nonexempt projects. Any nonexempt project must run the CEQA gauntlet if someone points to credible evidence showing the mere possibility that it may have a significant environmental effect — even if there is stronger evidence that it won’t. This low threshold has made the CEQA a favorite litigation weapon of environmental and neighborhood groups opposing new housing, commercial, mixed-use or infrastructure projects — and is the bane of local and state agencies and developers. It has also made the CEQA a frequent target of legislative and judicial reform efforts.

The Berkeley case arose from neighborhood opposition to the city’s approval of Lotus founder Mitch Kapor’s hillside mansion under the CEQA’s categorical exemptions for small facilities or structures and in-fill development projects. The neighbors enlisted an expert and sued, claiming the 6,478-square-foot house and 3,394-square-foot garage planned on a steeply sloped and wooded lot were too large and seismically unsafe and would have other impacts requiring an environmental-impact report. They contended that their evidence precluded the city from relying on the exemptions under an “unusual circumstances” exception also found in the regulations. The trial court upheld the city’s approval under the exemptions, the First District Court of Appeal reversed and overturned it, and the Supreme Court reversed it yet again — issuing an opinion that will most likely result in reinstating Kapor’s approval.

Rejecting the neighbors’ arguments, the court made clear that a project opponent cannot defeat a categorical exemption by merely pointing to evidence that the project may have significant effects. Rather, the opponent must establish through a factual showing that “unusual circumstances” exist and that the potentially significant effects result from those circumstances. Only the second part of this two-part showing is subject to the lower-threshold standard advocated by the neighbors. While the court did not attempt to precisely define what a showing of “unusual circumstances” must entail, it made clear that local agencies are authorized to consider local conditions in the project’s neighborhood and that their decisions would be granted substantial deference if challenged in court. Adding some additional complexity to its newly announced two-part test, the court suggested that project opponents who offer “convincing evidence” that a project “will” cause significant effects may thus be able to establish the exception’s “unusual circumstances” requirement.

While the court ultimately took a position that was in-between those advocated by the city and the neighbors, its decision tipped mostly in favor of developers and local agencies relying on exemptions. In resolving a split in previous appellate decisions, the court fashioned a pragmatic solution. The court’s new analytic framework should enhance predictability and reduce litigation risk to agencies, and project proponents relying on exemptions — a modest yet significant step in the direction of needed CEQA reform.