It’s not quite Star Wars, but in the world of land use, this counts as a blockbuster.  The California Supreme Court has decided unanimously that the California Environmental Quality Act (CEQA) generally does not require analysis of the effects of the existing environment on future users or residents of a proposed project.1  The decision leaves unanswered important questions about the reach of the rule as newly stated by the Court.  But, on balance, it is welcome news for infill housing developers and other project proponents. 

Over the last few years, project opponents have increasingly brought CEQA suits claiming that the effects of environmental conditions not caused by the project have to be analyzed.  To manage their litigation risks, lead agencies, in turn, have increasingly insisted that such analyses be performed.  The Court’s decision should fortify lead agencies to resist the demands of project opponents for costly and unnecessary analysis of the effects of environmental conditions not caused by the projects they are reviewing.  

BAAQMD’s Controversial Thresholds 

The case—five years in the making—pitted the California Building Industry Association (CBIA) against the Bay Area Air Quality Management District (BAAQMD) in a dispute over BAAQMD’s ability to impose thresholds of significance for certain air pollutants.  Under the rules BAAQMD adopted in 2010, projects sited in areas that would expose new occupants to toxic air contaminants (TACs) in excess of the established thresholds would be found to have significant environmental impacts.  For infill and transit-oriented development, frequently sited close to freeways and heavily-developed areas, the thresholds would require many more projects to prepare Environmental Impact Reports (EIRs), rather than less time-consuming and costly forms of environmental review, and could prevent some otherwise beneficial projects from being approved. 

CBIA brought suit against BAAQMD, claiming (among other things) that the rules impermissibly expanded CEQA’s scope by requiring analysis of the environment’s impact on the project, rather than the project’s impact on the environment.  Although the Superior Court agreed with CBIA that the thresholds themselves were a “project” that should have been subjected to environmental review before adoption, the First Appellate District reversed and also upheld the thresholds on the merits.  (More details regarding the Court of Appeal’s decision can be found here.) The Supreme Court granted review to address under what circumstances, if any, CEQA requires an analysis of how existing environmental conditions will impact future residents or users of a proposed project.  

Although several courts of appeal have previously held that CEQA does not require analysis of the effects of the environment on a project, CEQA documents routinely include such topics.  In fact, in an earlier case, the Alameda County Superior Court in 2012 ruled on this specific issue when it found that CEQA does not require evaluating the effects of exposing new residents of transit-oriented housing to emissions from a nearby freeway.2  (Morrison & Foerster represented real parties in interest in the case.)  The petitioners did not appeal the issue.3

Supreme Court Reverses Course

Although the BAAQMD thresholds formed the backdrop to the controversy, the Court analyzed this question de novo and as a matter of statutory interpretation—without regard to the facts pertaining to the thresholds themselves.  The Court focused its attention on CEQA’s definition of the “environment” as related to physical conditions, and found that reading the term to include the future occupants of a project “would impermissibly expand the scope of CEQA.”  Accordingly, it held that requirements to consider the effects of the environment on a project will, in most cases, be invalid.4

The Court went on to strike a portion of the CEQA Guidelines section 15126.2(a) that called for an EIR for a subdivision on an active fault line to “identify as a significant effect the seismic hazard to future occupants of the subdivision.”  This provision, in the Court’s view, was “clearly erroneous and unauthorized under CEQA.”

Limits to the General Rule

However, the Court left intact other portions of Guidelines section 15126.2(a) that CBIA had challenged, including statements that an EIR should evaluate potential impacts of locating development in “areas susceptible to hazardous conditions (e.g., floodplains, coastlines, wildfire risk areas) ….”  The Court distinguished, as valid, analysis of how a project may exacerbate existing hazardous conditions.  As an example, the Court contemplated a project proposed on the site of an abandoned gas station with soil and groundwater contamination; although the contaminants may remain in place without disturbance, development could disperse those contaminants and, thereby, exacerbate the existing hazards. 

The Court did not explicitly address the other examples cited in the Guidelines, but presumably, these were upheld because it is conceivable that a development project could exacerbate hazards relating to floodplains or coastlines (by altering hydrological features or contributing to erosion) or wildfire (by providing additional fuel).  By contrast, development on a fault line could not increase the power of an earthquake.

Moreover, the Court expressly identified certain exceptions, codified in CEQA itself, to the general rule that the effects of the existing environment on a project are not CEQA impacts.  For certain airport, school, and housing developments, CEQA requires consideration of the effects of a project on future residents or users.  The Court rejected BAAQMD’s argument that it should extrapolate from these specific exceptions an “overarching, general requirement” to evaluate the effects of the environment on a project. 

How Will the Rule Be Applied?

The decision may not provide as much clarity and relief from costly studies and analyses as CBIA would have liked.  The Court stated what might be called a “transitive” rule for when CEQA requires analysis of a project’s impacts on its future residents or users: when there are “impacts on a project’s users or residents that arise from the project’s effects on the environment.”  It is not immediately obvious how to define the limits to this trigger, other than those instances where the project simply can have no exacerbating effect on the existing environment.  Regardless, and quite remarkably, the Court essentially invited lead agencies to continue to impose analysis of the effects on future residents or users, whether CEQA requires it or not.  It explained, in footnote 12, that CEQA does not “prohibit an agency from considering—as part of an environmental review for a project it proposes to undertake—how existing conditions might impact a project’s future users or residents.” 

Nevertheless, it may be that the practical effect of the Supreme Court’s mixed-message decision will be to preserve the long-standing status quo regarding the proper focus of CEQA review.  Many project proponents and local governments throughout the state have long been concerned that a different rule would greatly expand the scope of what is already a lengthy, expensive, and frequently contentious process.  This decision will provide them support in resisting demands for “reverse CEQA” studies and analyses from project opponents.  What remains to be seen is whether lead agencies will be willing to say “no” to such demands.