A new appellate decision reinstates the Bay Area Air Quality Management District’s controversial “significance thresholds” for evaluating air quality impacts under the California Environmental Quality Act. Reversing the trial court, the court of appeal found that adoption of thresholds for CEQA review was not a “project” itself subject to CEQA review, and rejected claims that the thresholds were unsupported and would have adverse environmental side-effects by discouraging high-density development and promoting suburban sprawl.

The California Environmental Quality Act (“CEQA”)1 requires that agencies analyze the potentially significant environmental impacts of proposed projects prior to approval, and that they identify and implement feasible mitigation measures or alternatives to avoid or reduce such impacts. A “significance threshold” is the level at which an impact is determined to be significant, triggering mitigation, and also determines the level at which mitigation is effective in reducing the impact beneath the threshold. The State CEQA Guidelines (regulations implementing CEQA) specify a formal procedure for adoption of significance thresholds.2 However, in practice, this process is rarely used, and most agencies informally utilize thresholds adopted by relevant regulatory agencies—e.g., air district thresholds for air quality impact analysis—or thresholds taken from prior Environmental Impact Reports (“EIRs”).

In 1999, the Bay Area Air Quality Management District (“BAAQMD”) adopted guidelines for air quality analysis by Bay Area agencies conducting CEQA review (referred to as lead agencies). Lead agencies are not required to utilize BAAQMD’s guidelines but, as a practical matter, they are widely followed. A lead agency that chooses other thresholds must develop substantial evidence to support them or risk challenges to its EIRs. In 2010, BAAQMD updated its guidelines with new, more stringent thresholds, including a first-time threshold for greenhouse gas (“GHG”) emissions.3 BAAQMD’s 2010 guidelines also included highly controversial “receptor” thresholds for impacts of toxic air contaminant and fine particulate matter emissions from existing sources—not from the proposed project—on residents or users of the proposed project. Projects are subject to this analysis if sensitive individuals such as children, the elderly, and those with health problems affected by air quality are likely to spend a significant amount of time there, e.g., residences, schools, parks and playgrounds, daycare centers, nursing homes and medical facilities. This approach, in effect, examines the effect of the existing environment on the proposed project (i.e., its residents and users), which is inconsistent with recent case law holding that CEQA analysis is focused exclusively on the proposed project’s impacts on the existing environment.4

The California Building Industry Association (“CBIA”) challenged the BAAQMD thresholds, alleging that their adoption was a “project” subject to CEQA review and should have been analyzed in an EIR. In particular, CBIA alleged, the new receptor thresholds would have adverse environmental side-effects, driving projects away from urban areas with existing emission sources, discouraging infill development and diverting growth-related impacts into greenfield areas, thus inadvertently causing significant impacts that BAAQMD had failed to evaluate. In support of its allegations, CBIA cited comments BAAQMD had received from local governments and transportation agencies with expertise in “smart growth” and transit-oriented development. The trial court agreed and ordered BAAQMD to set aside the guidelines until it completed CEQA review.  

The Court of Appeal Decision

The First District Court of Appeal reversed, holding that BAAQMD’s promulgation of the thresholds was not a project subject to CEQA review.5 First, the court reasoned, the State CEQA Guidelines establish a procedure for adopting significance thresholds, and CEQA review of the thresholds themselves is not part of that procedure. Moreover, in adopting the thresholds, BAAQMD had undertaken a public review process and considered substantial evidence, so that requiring CEQA analysis would be duplicative.  

Next, the court found insufficient evidence to show that the thresholds would qualify as a “project” subject to CEQA by causing a physical change to the environment. While acknowledging that “several local governments and agencies with responsibility for land use planning” expressed concern at the potential for discouraging smart growth and promoting sprawl, the court concluded that CBIA’s claims were too attenuated and speculative to subject the thresholds to CEQA review.

Addressing cases which hold that CEQA review should consider impacts of the project on the environment, not the environment on the project, the court noted that CEQA defines “significant” impacts to include substantial adverse effects on human beings, either directly or indirectly.6 Accordingly, the court observed, a new project that will expose its occupants to preexisting dangerous pollutants can be said to have a substantial adverse effect on human beings. Nevertheless, the court declined to resolve the issue, instead determining that the receptor thresholds were not facially invalid because they could be applied to situations other than considering impacts of the existing environment on the proposed project. The decision leaves this question for a future case where the thresholds are applied in such a manner. Finally, the court concluded that BAAQMD’s thresholds were supported by substantial evidence and not arbitrary or capricious.

Implications of the Decision

It remains to be seen whether CBIA will appeal to the California Supreme Court. Meanwhile, agencies that wish to adopt their own CEQA significance thresholds may proceed, in most cases, without the effort and expense of preparing an EIR to study them (though the court's reasoning suggests that CEQA review still might be required where there is better evidence of more direct impacts). However, local governments and developers in the Bay Area must contend with the consequences of the BAAQMD thresholds, including the allegedly sprawl-promoting receptor thresholds. Moreover, the decision leaves open the opportunity for future challenges to the receptor thresholds, as applied to impacts of the existing environment on a specific proposed project. Under the receptor analysis guidelines, such applications and challenges appear inevitable.

Ironically, this comes just as the Metropolitan Transportation Commission has finalized Plan Bay Area, a new regional transportation plan incorporating a Sustainable Communities Strategy ("SCS") under S.B. 375,7 intended to promote denser development and combat sprawl as a means of reducing GHG emissions. Plan Bay Area was developed in collaboration with the Association of Bay Area Governments and BAAQMD itself. Successful implementation may prove more difficult with the SCS and BAAQMD's CEQA guidelines working at cross-purposes.