In a partially-published, 150-page slip opinion resolving appeals in consolidated cases, and filed February 25, 2020, the Fifth District Court of Appeal affirmed in part and reversed in part a trial court decision finding CEQA defects in the 1800-plus page EIR prepared for Kern County’s adoption of an ordinance designed to provide a streamlined, ministerial permitting process for new oil and gas wells in the county. King and Gardiner Farms, LLC v. County of Kern, et al. (California Independent Petroleum Association, et al., Real Parties in Interest); Committee for a Better Arvin, et al. v. County of Kern, et al. (California Independent Petroleum Association, et al., Real Parties in Interest) (5th Dist. 2020) ____ Cal.App.5th ____. The published portion of the opinion held the EIR improperly deferred the formulation and implementation of mitigation for significant water supply impacts; failed to adequately mitigate farmland conversion impacts due to improper reliance on agricultural conversion easements (ACEs) as offsetting mitigation; and failed to adequately analyze noise impacts by relying solely on an absolute cumulative numerical limit threshold of significance, rather than also analyzing the significance of the magnitude of project noise increases over ambient levels in differently affected settings. (Approximately 53 pages of the opinion, a portion finding CEQA violations with respect to air quality and related health risks due to failure to adequately discuss PM 2.5 emissions impacts and related mitigation, and failure to recirculate the DEIR after adding significant new information in the form of an appended Cumulative Health Risk Assessment, were not certified for publication; consequently, those portions set no precedent and will not be discussed in further detail in this post.)

As a preliminary matter, the Court of Appeal’s opinion is significant because of the nature, scale and importance of the activity involved – oil and gas drilling operations in a 3,700 square mile geographic area that accounts for 80% of California’s total oil and gas production. It is also important due to the significant CEQA issues it addresses, and the detailed analysis and guidance it provides on those issues to lead agencies, practitioners, and the regulated community.

Key Facts In A Nutshell

In or about 2013, three oil and gas industry associations asked the County to amend its zoning ordinance addressing local permitting for oil and gas exploration, development and production. At the time, County’s zoning apparently did not require a permit for drilling on lands zoned exclusive or limited agriculture, heavy or medium industrial or natural resource. It did require conditional use permits (CUPs) for drilling in certain residential and commercial districts, and basic development, building and safety standards applied whether or not a local permit was required.

Also at the time, County had 43,568 active oil and gas wells of various types and 15,863 inactive wells. It had 100 active and inactive “Administrative Outfields” – as that term is defined by DOGGR (now renamed the “Geologic Energy Management Division in the Department of Conservation” (Pub. Resources Code, § 3002) – covering a 931.4-square mile area within the boundaries of the project area covered by County’s new ordinance. The EIR projected 2,697 new producing oil and gas wells would be drilled annually from 2013 through 2040, and 2,221 old wells would be capped and abandoned each year.

The goals of the new ordinance included creating an effective, streamlined ministerial regulatory and permitting process that would increase County oversight of “by right” activities and could be relied on by the County, DOGGR and other permitting agencies; streamlining environmental review; developing industry-wide best practices to protect public health and safety; and, with these expected increased efficiencies, increasing oil and gas exploration and production in the County and thus benefiting its economy.

After a nearly 2-1/2 year CEQA process that included numerous scoping meetings and public workshops, one Planning Commission meeting, and one County Board meeting, the Board certified the Final EIR, adopted required CEQA findings, a statement of overriding considerations, and a mitigation monitoring program, and adopted the ordinance on November 9, 2015.

CEQA actions were filed by KG Farms, and by a number of citizens and environmental groups (including the Sierra Club), and these and another non-CEQA action were consolidated for trial and disposition. The trial court entered judgment partly in favor of plaintiffs in the CEQA actions (finding the EIR inadequately analyzed rangeland and road paving impacts), and a separate judgment denying all relief in the non-CEQA action (which was affirmed by separate opinion and appeal).

The Court of Appeal’s opinion in the consolidated cases addressed the CEQA plaintiffs’ appeals concerning claims on which they did not prevail at trial, and ultimately found that some of those other claims had merit.

The Court of Appeal’s Opinion

Water Supply Impacts

As backdrop to the water supply impacts analysis, the Kern County subbasin of the San Joaquin Valley Groundwater Basin, which includes most of the project area, is a highly impacted basin that has been in critical overdraft condition since 1980, Under the recently enacted SGMA, a groundwater sustainability plan is required to be adopted for it by January 31, 2020.

Central to the challenged EIR analyses were two categories of water: (1) municipal and industrial (M&I) water, which is essentially fresh, potable water used for those purposes; and (2) “produced water,” which is groundwater found in oil and gas reservoirs and brought to the surface with the extracted resources, which usually is saline, poor quality, and unusable for agricultural, residential, commercial or industrial usage without substantial decontaminating treatment. Based on 2012 data, the EIR concluded 234,959 acre-feet of water supplied to oil and gas operations annually was produced water and 8,778 acre-feet was M&I water. Some produced water (88,812 acre-feet) was used for oil and gas operations, some (114,794 acre-feet) was disposed of it ponds or by well injection, and some (32,771 acre-feet) was treated and used for agricultural irrigation.

The EIR estimated use of M&I water for covered oil and gas activities would increase by 2,983 acre-feet annually by 2035, and while it discussed recommended mitigation of “encouraging” additional reuse of produced water, it acknowledged that the extent to which that could actually be done to decrease or offset increased M&I water demand was uncertain (due to many factors, including the required intensive, costly treatment, which also would have its own environmental impacts); it thus recognized potential impacts to groundwater levels and aquifer volumes would be significant and unavoidable even with mitigation.

The Court of Appeal applied a substantial evidence standard (because factual questions predominated) to the “mixed” issue whether the EIR analyzed water supplies “to the extent feasible”; it concluded that the EIR passed muster insofar as it provided adequate information about the drought on the environmental setting it was required to analyze, and was not required to contain a more detailed analysis of impacts to geographic areas smaller than the three large subareas it analyzed in the EIR (in light of the uncertainty created by SGMA and implementation of relevant groundwater sustainability plans).

Further, addressing the legal issue whether the drought discussion was adequate under the requirement that it “sufficiently performs the function of facilitating ‘informed agency decision making and informed public participation’” (see Sierra Club v. County of Fresno (2018) 6 Cal.5th 502, 513), the Court held it was. Significantly in this regard, the Court rejected KG Farms’ argument that the EIR failed to include timely data and was thus not “based to the extent possible on scientific and factual data.” (Quoting CEQA Guidelines, § 15064(b).) Rather, the Court held that the EIR’s use of information about the drought and its consequences that was available at the time County published the notice of preparation (NOP) for the draft EIR in 2013 was sufficient to comply with the “timing requirement” of applicable former CEQA Guidelines § 15125(a), which (per the Court) “specifically addresses disclosure of information about the environmental setting and the appropriate timeframe for the data used.” Specifically, Section 15125(a) states the EIR must describe “the physical environmental conditions in the vicinity of the project, as they exist at the time the notice of preparation is published”; the EIR here complied with this timing requirement, and its description of water supply conditions (including the drought and its consequences) was therefore not inaccurate, incomplete or misleading, and did not violate Guideline sections 15064 or 15125. Nor, under the applicable substantial evidence test, did the County violate CEQA when it decided not to recirculate the draft EIR to update it with more recent drought information that became available before certifying it; KG Farms failed to even attempt to carry its burden to “lay out the evidence” favorable to County’s decision not to recirculate for this reason, and the Court’s independent review of the record further confirmed the public was not thereby deprived of a meaningful opportunity to comment on the ordinance’s potential water supply impacts.

The Court did find prejudicial errors, however, in the County Board’s and EIR’s findings and discussion regarding the ordinance’s water supply impacts and mitigation measures in other respects. Specifically, it found merit in the Sierra Club plaintiffs’ contention that County unlawfully deferred both the formulation and the implementation of mitigation measures it adopted to address and mitigate (albeit admittedly not to a less than significant level) acknowledged significant water supply impacts. The challenged measures were those encouraging oilfield operators to increase reuse of produced water to decrease M&I water demand, which the Board imposed as “feasible” mitigation to reduce project impacts, while still recognizing the water supply impacts would remain “significant and unavoidable” due to various complex factors and uncertainties involving water supply and demand allocations, water rights laws, water districts’ jurisdiction over sources, varied technical feasibility of treating produced water, and produced water reuse opportunities.

In agreeing with plaintiffs’ deferred mitigation arguments, the Court noted that the mitigation measures essentially required oil and gas drilling permit applicants to maximize to the extent feasible use of produced water at the site, and to minimize to the extent feasible the use of M&I water during well construction and operation. The Court noted the general rule against deferral of the formulation of mitigation measures is not absolute, and has exceptions under which, in some circumstances, some aspects of mitigation may appropriately be deferred. Measures may, for example, specify performance standards which may be accomplished in more than one specified way; it can be sufficient, where mitigation is feasible but impractical at the time of project approval, to articulate specific performance criteria and make further approvals contingent on finding a way to meet them.

In describing the exception to the “general rule” prohibiting deferral, the Court emphasized that “the deferral of the formulation of mitigation measures requires the agency to commit itself to specific performance criteria for evaluating the efficacy of the measures implemented” (citing POET, LLC v. State Air Resource Bd. (2013) 218 Cal.App.4th 681, 738 (“POET I”)), and that “[s]imply stating a generalized goal for mitigating an impact does not allow the measure to qualify for the exception[.]” Because requiring applicants to maximize use of produced water and minimize use of M&I water to the extent feasible is a generalized goal that lacks a specific performance standard for any increase in uses of produced water or reduction in use of M&I water, it did not qualify for the exception and constituted the deferred formulation of mitigation.

Further, per the Court, setting a precedent that this type of mitigation was adequate would discourage the future definition of mitigation measures in more specific terms, would undermine CEQA’s purpose of systematically identifying feasible mitigation measures that will avoid or lessen significant impacts (Pub. Resources Code, § 21002), and would violate the requirement that EIRs provide “a detailed statement” of proposed mitigation measures. (§ 21100(b)(3).)

Similarly, a mitigation measure requiring the five biggest oil industry users of M&I water by volume to review DOGGR data and develop and implement a plan to reduce such use was deferred mitigation not qualifying for the exception, since it lacked specific performance standards for M&I water use reduction and did not commit lead agency County itself to the adoption and implementation of measures ultimately included in the contemplated future plan. The same was true of another measure requiring the biggest users to “work with” water districts and local agricultural producers “to identify new opportunities” to use produced water. The absence of performance criteria and a County commitment further rendered these provisions improperly deferred and violative of the requirement that mitigation measures be “fully enforceable through permit conditions, agreements, or other legally-binding instruments.” (Guidelines, § 15126.4(a)(2).)

The measures relating to the five biggest oil industry users, and another measure requiring “best practices” and referring to a yet-to-be-adopted January 31, 2020 groundwater sustainability plan, suffered from a further and distinct deferred defect – delayed implementation. While the ordinance became effective December 9, 2015, such measures would not be implemented until sometime in 2020, thus allowing permit issuance and well drilling activity for years without being subject to any measures contained in the proposed plans. (Citing POET I, 218 Cal.App.4th at 738 [“Once the project reaches the point where the activity will have a significant adverse effect on the environment, the mitigation measures must be in place.”].)

Finally, while there is no presumption that CEQA noncompliance is prejudicial (Pub. Resources Code, § 21005(b)), the County’s adoption of the EIR’s defective mitigation measures here was prejudicial. While CEQA permits a lead agency to adopt mitigation measures of uncertain effect, it must find that they are at least partially effective (Sierra Club, supra, 6 Cal.5th at 523), that all feasible mitigation measures have been adopted; that the impacts will still not be mitigated to less than significant levels, and it must also adopt a statement of overriding considerations. Further, all the findings must be supported by substantial evidence.

Additionally, per the Court, the EIR’s disclosures and analysis of the mitigation measures must be adequate to “justify the adoption of mitigation measures of uncertain effect and support the adoption of the statement of overriding considerations. To do so, the EIR must (1) describe the mitigation measures that are available (i.e., currently feasible) and (2) identify and explain the uncertainty in the effectiveness of those measures[,]” providing facts and analysis, not bare conclusions or opinions. Here, the Court held the EIR failed to fulfill its informational function by adequately discussing currently feasible mitigation measures. It provided no information about what applicants will or might do at permitted sites to minimize M&I water use or maximize produced water re-use, or about related technologies and techniques, and these informational gaps were compounded by its discussion about “complex variable” outside County’s jurisdiction and control. Nor was there discussion of whether applicants would be required to commit to any measures in their applications. Accordingly, the EIR lacked sufficient detail about water supply impacts mitigation to enable the public and decision makers to understand and consider meaningfully these issues. This noncompliance with CEQA’s information disclosure requirements constituted a prejudicial CEQA violation, as did the improper deferral defects discussed above.

Finally, adoption of the statement of overriding considerations failed to cure these defects or render them non-prejudicial; rather, per the Court, “the informational deficiency undermines the foundation upon which the statement of overriding considerations rests” because the information necessary to understand both the mitigation measures and the water supply impacts being overridden was omitted.

Agricultural Land Conversion Impacts

The Court’s published opinion next held the EIR’s and Board’s finding that the project’s significant agricultural land conversion impacts would be mitigated to a less-than-significant level violated CEQA. Per the Court, the finding that the mitigation measures relied on were capable of reducing the significant impact – 298 acres of agricultural land converted annually as a result of oil and gas development activities – to a level of insignificance was unsupported by substantial evidence and also “based on a legally incorrect view of the operation of agricultural conservation easements [.]” The measure allowed applicants to mitigate for farmland losses prior to undertaking ground-disturbing activities by presenting County with written evidence of 1:1 mitigation by “one or more” of four methods: (1) funding or purchasing agricultural conservation easements (ACEs); (2) purchasing conservation credits from an agricultural farmland mitigation bank; (3) restoring agricultural lands to productive use by removing legacy oil and gas equipment; and/or (4) participating in a Kern County agricultural land mitigation program that provides equal or more effective mitigation than the other measures.

The Court held method (3), which is akin to reclamation of mined land, could actually fully compensate for ag land conversion, but that nothing in the record established that method (2) constituted fee-based based mitigation that was linked to any reasonable plan for mitigation, and method (4) was too “open-ended” to determine it provided “available, effective mitigation” for conversion impacts. In perhaps its most surprising and significant holding on the ag land conversion issue, the Court held that method (1) – use of ACEs – was ineffective and inadequate as a matter of law to mitigate the identified significant effect, stating:

Entering into a binding agricultural conservation easement does not create new agricultural land to replace the agricultural land being converted to other uses. Instead, an agricultural conservation easement merely prevents the future conversion of the agricultural land subject to the easement. Because the easement does not offset the loss of agricultural land (in whole or in part), the easement does not reduce a project’s impact on agricultural land. The absence of any offset means a project’s significant impact on agricultural land would remain significant after the implementation of the conservation easement. [footnote omitted] Restating this conclusion using data from this case, the implementation of agricultural conservation easements for the 289 [sic] acres of agricultural land to be converted each year would not change the net effect of the annual conversions. At the end of each year, there would be 289 [sic] fewer acres of agricultural land in Kern County. Accordingly, under the thresholds of significance listed in the EIR, this yearly impact would qualify as a significant environmental impact. ….

The Court of Appeal claimed (in the omitted footnote) that its conclusions in this regard were not contradicted by the First District’s determination in Masonite Corp. v. County of Mendocino (2013) 218 Cal.App.4th 230 (my August 2, 2013 blog post on which can be found here). It reasoned in the footnote that Masonite merely concluded an EIR’s determination that ACEs were legally infeasible was incorrect and remanded for further environmental review, and that it “did not consider the net effect of implementing an [ACE] and whether a significant impact could be reduced to a less than significant level by such an easement.” It went on in its opinion to hold the County’s EIR failed to provide reasoned responses to comments regarding another, apparently feasible, suggested mitigation measure for ag land conversion impacts, i.e., clustering oil and gas wells and infrastructure to the extent feasible to avoid disturbing more surface area than reasonably necessary.

In my view, while the Court’s statements regarding ACEs might be justified in this particular case based on County’s chosen significance threshold (as a narrow reading of its opinion would suggest), they appear to go out of their way to broadly condemn ACEs per se as a mitigation measure for a project’s agricultural conversion impacts. This seems to conflict with both the reasoning of Masonite and the CEQA Guidelines’ definition of “mitigation” as including “[c]ompensating for the impact by replacing or providing substitute resources, including through permanent protection of such resources in the form of conservation easements.” (CEQA Guidelines, § 15370(e).)

Noise Impacts

The Court’s last major published holding was that the EIR’s noise analysis was inadequate under CEQA. County’s EIR relied solely on a single threshold of significance that would find a significant noise impact only if project-generated noise levels would permanently or temporarily increase ambient noise levels to a cumulative level greater than 65 dBA CNEL, a standard derived from County’s general plan. While the Court acknowledged the lead agency enjoys substantial discretion to determine and develop its own thresholds of significance and choice of methodology for evaluating the significance of project impacts (citing, inter alia, Mission Bay Alliance v. Office of Community Investment & Infrastructure (2016) 6 Cal.App.5th 160, 192; Save Cuyama Valley v. County of Santa Barbara (2013) 213 Cal.App.4th 1059, 1068) it also cited CEQA case law analyzing noise impacts and holding that conformity with general plan standards does not insulate a project from EIR review where it can be fairly argued it will nonetheless have significant environmental impacts. (Oro Fino Gold Mining Corp. v. County of El Dorado (1990) 225 Cal.App.3d 872, 881-882; Citizens for Responsible & Open Government v. City of Grand Terrace (2008) 160 Cal.App.4th 1323, 1338, 1341; Keep Our Mountains Quiet v. County of Santa Clara (2015) 236 Cal.App.4th 714, 732-734.) Noting that Keep Our Mountains Quiet concluded “the lead agency should consider both the increase in noise level and the absolute noise level associated with a project” (citing id. at 733), it found the cited case law to stand for the “conclusion that conformity with the absolute or maximum noise level specified in a general plan does not prevent a fair argument from being made that the proposed project will generate environmentally significant noise impacts.” It cited Berkeley Keep Jets Over the Bay Com. v. Board of Port Cmrs. (2001) 91 Cal.App.4th 1344 as authority holding an EIR’s noise analysis, based on a sole threshold of significance of an absolute noise level of 65 decibels, was inadequate under CEQA as failing to provide meaningful analysis of many types of impacts of increases (from aircraft overflight) of noise levels above existing ambient levels.

Applying these authorities to its analysis of the County’s EIR’s noise analysis, the Court stated that “[i]n practical effect, the County adopted a single threshold of significance for noise impacts because it used the same threshold for evaluating (1) the noise level after the project, (2) permanent increases in ambient noise levels, and (3) temporary increases in ambient noise levels.” County refused suggestions in comments to consider the magnitude of increases over existing ambient noise levels (e.g., 5 dBA increase) as another threshold of significance, despite such a threshold being commonly used by other agencies and suggested in a noise study included as an appendix to the EIR (even though not required by CEQA). The Court held County’s “use of an absolute noise level as the [sole] threshold of significance [for noise impacts] . . . violate[d] CEQA” and that the “EIR’s exclusive reliance on the cumulative DNL metric does not provide a complete picture of the noise impacts that may result from the project.” The Court reasoned:

The cumulative noise level of 65 dBA DNL does not provide a complete and reasonable method of evaluating the significance of noise impacts because an increase in ambient noise of 20 dBA at monitoring site 12, which was recorded as being 44.8 dBA, would not be [considered] a significant, adverse change in the noise environment. In contrast, a 2 dBA increase at monitoring site number 2, which was recorded as being 63.9 dBA would be considered a significant adverse change in the noise environment. The EIR does not provide a rational explanation for this approach to environmental change. Simply saying the cumulative noise level would not be exceeded at site number 12 and would be exceeded at site number 2 does not provide a rational explanation for why a 20-dBA increase is an insignificant increase at Site 12.

County’s discretion to choose its thresholds of significances, per the Court, was “substantial,” but “not unlimited or absolute.” Citing to the Supreme Court’s reasoning regarding GHG analysis in Center for Biological Diversity v. California Dept. of Fish and Wildlife (2015) 62 Cal.4th 204, 228, the Court stated: “Here, the County has not documented how the single quantitative method [it chose to rely on to assess noise impacts], which does not consider the magnitude of the increase in noise, accurately describes how changes in noise levels affect human beings.” Finally, the County could not cite “evidence showing why the magnitude of an increase was irrelevant in determining the significance of a change in noise[,]” and its general plan did not constitute substantial evidence supporting the use of its sole threshold, or that “the magnitude of an increase in ambient noise is irrelevant to the significance of the change in the noise environment.” Per the Court: “In summary, we conclude the County’s exclusive reliance on a single cumulative DNL metric for determining the significance of the project’s noise impacts and the absence of an analysis, supported by substantial evidence, for concluding the magnitude of the increase in ambient noise is irrelevant to the significance of the noise impact, does not comply with CEQA.”

The Court’s Remedy

The Court of Appeal invalidated the County’s adoption of the Ordinance and the Ordinance itself, effective 30 days after the filing of its Opinion, and set aside its certification of the EIR, which allowed permits issued under the ordinance before its date of invalidity to remain in effect. It declined County’s request to exercise its equitable powers to allow the ordinance to remain in effect pending County’s correction of deficiencies in the EIR and mitigation measures. It concluded this was not an “extraordinary case” justifying such a remedy, distinguishing POET I as a case where CARB was legislatively obligated to adopt regulations to implement low carbon fuel standards for the purpose of environmental protection. Here, the County – unlike CARB in POET I, which could not abandon its project – had discretion to readopt, modify or abandon its Ordinance project, and allowing the Ordinance to remain in place would, in effect, be a prediction of how the Board would exercise that discretion which the Court was reluctant to make. Further, the basic purpose of County’s Ordinance was not environmental protection, but accelerating oil and gas development and its economic benefits, and indeed, the Ordinance was found (despite its environmentally protective aspects) to still have significant unavoidable environmental effects.

Conclusion And Implications

The Court of Appeal’s holdings as to water supply impacts and related mitigation measures, and as to the adequacy of EIR noise impact analysis, certainly provide guidance that should be needed by lead agencies, real parties and EIR preparers as to how to craft a thorough CEQA-compliant document. The Court’s holdings and analysis regarding agricultural conversion impacts and mitigation measures will make mitigation of such impacts more difficult, and its broad statements about ACEs appear to conflict with the First District’s Masonite decision and CEQA Guidelines, § 15370(e).