On November 21, the California Fifth District Court of Appeal issued its decision in Association of Irritated Residents v. Kern County Board of Supervisors, 2017 WL 5590096, a challenge to the County’s Environmental Impact Report (EIR) and approval for modifications at the Alon Bakersfield Refinery. Among other things, the Association of Irritated Residents (AIR) claimed that, since crude oil processing was shut down when work on the EIR began, the EIR should have considered the refinery’s inactive condition as the “baseline,” treating impacts of resuming typical operation as impacts of the new project. Rejecting AIR’s argument, the court held that, since refinery operations fluctuated over time, the use of data from operations in a representative prior year to identify the baseline level of activity was appropriate under the California Environmental Quality Act (CEQA).

In addition, the court upheld the EIR’s greenhouse gas (GHG) emissions analysis, finding that it properly relied on compliance with California’s cap-and-trade program to conclude that refinery GHG emissions would be less than significant. However, the court rejected the analysis of impacts from transporting crude by rail to the refinery, finding that the EIR underestimated the risk of train accidents by misinterpreting federal safety data, and erroneously assumed that federal preemption precluded analysis of offsite emissions from trains traveling to and from the project site. While those holdings are significant, many agencies and project developers will be interested in the CEQA baseline discussion.

CEQA requires public agencies to consider and, if feasible, avoid or mitigate potentially significant environmental impacts of projects that they approve or undertake. A key step in CEQA review is identifying the existing environmental setting or baseline conditions for a proposed project. Existing baseline conditions must be subtracted from anticipated post-project conditions in order to assess new impacts. Locating a project in a pristine “greenfield” site may result in significant new impacts, for which mitigation measures or alternatives must be evaluated. Conversely, agencies and project proponents are not required to improve baseline environmental conditions that already exist and are not properly attributable to the project.

The CEQA Guidelines (regulations implementing CEQA) provide that the baseline should “normally” consist of the physical environmental conditions existing at the time the agency publishes a Notice of Preparation (NOP) commencing the EIR process. CEQA Guidelines (14 Cal. Code Regs.) § 15125(a). But as the word “normally” indicates, there are exceptions, where courts have upheld other baselines supported by substantial evidence. In Communities for a Better Environment v. South Coast Air Quality Management District (2010) 48 Cal.4th 310 (CBE v. SCAQMD), the California Supreme Court considered the appropriate baseline for another refinery modification project. While rejecting SCAQMD’s use of a “permitted capacity” baseline (i.e., the maximum activity authorized by the refinery’s permits, which it had never actually achieved), the Court concluded that the agency had discretion to identify an appropriate baseline based on the facility’s prior history of actual operations. In particular, the court noted, where conditions fluctuate over time, a “temporary lull or spike in operations that happens to occur at the time environmental review for a new project begins should not depress or elevate the baseline.” CBE v. SCAQMD, 48 Cal. 4th at 328.

In AIR v. Kern County, AIR argued, the lull was not temporary. The Bakersfield refinery was shut down in 2008 after the prior owner’s bankruptcy. Alon acquired the facility and, in 2011, resumed limited blending and terminal activities, but not crude oil processing. In 2013, the County issued an NOP for a project to expand rail transfer and storage facilities and upgrade process units, increasing the refinery’s capacity to process crude transported by rail. The County then prepared an EIR which identified the baseline as neither the refinery’s 2013 operations nor its permitted capacity, but instead as its activity level in 2007, the last year of full operation.

The court found that the County did not abuse its discretion in choosing the refinery’s 2007 operations as the baseline for comparison with project impacts. Finding that the application of baseline principles is “relatively simple in this case” following CBE v. SCAQMD, the court upheld the EIR’s conclusions that 1) existing conditions included an operating refinery, which was properly considered part of the baseline; and 2) 2007 data provided a realistic measure of the baseline level of operations. This choice of baseline was supported by evidence demonstrating that the refinery’s throughput in 2007 was typical of historical operations and, in fact, slightly below average; the baseline was below the refinery’s permitted capacity under permits that remained in effect; the refinery could resume processing crude oil without approval, independent of the proposed project’s modifications; refinery operations had been subjected to prior CEQA reviews; and using 2013 operations as the baseline, as urged by AIR, would confuse impacts of the proposed modifications with those of operating the existing refinery.

In addition, the court rejected AIR’s contention that a heightened evidentiary standard should apply to the baseline determination, based on another California Supreme Court case, Neighbors for Smart Rail v. Exposition Metro Line Construction Authority (2013) 57 Cal. 4th 439. That case upheld the EIR for a light rail transit extension using future conditions as the baseline, but cautioned that this is appropriate only if substantial evidence demonstrates that an existing conditions baseline would be “misleading or without informational value.” 57 Cal. 4th at 457. For a major public infrastructure project, existing conditions at the time of the NOP will be long gone by the time the project is funded and constructed, while anticipated conditions when the project commences operation provide a more informative baseline. In AIR v. Kern, plaintiffs argued that the same evidence must support any deviation from the normal time-of-the-NOP baseline. The court disagreed, finding that the Supreme Court intended the heightened standard to apply only to future baselines, since future conditions are necessarily hypothetical and uncertain, rather than to baselines of actually existing conditions at a representative prior time.