Many interest groups have urged that the California Environmental Quality Act (“CEQA”) needs to be “modernized”, but disagree as to the changes that are needed. As the California Legislature tackles this challenge, the most visible effort is Senate Bill 731 (S.B. 731) now sponsored by California Senate President pro Tem Darrell Steinberg. As a bill sponsored by the President pro Tem there is a reasonable likelihood this legislation will pass, whether in this form or in an amended version, so its provisions are of particular interest.

S.B. 731, which faces its first legislative hearing on Wednesday May 1, 2013, was amended last week.

Rather than broad-based CEQA reform, the bill focuses more narrowly on changing the CEQA process for infill and clean energy projects and makes modest changes in a number of areas. While the bill is intended to benefit infill projects that implement “smart growth” attributes, the extent to which the legislation might result in benefits or burdens to such projects will depend upon new significance thresholds that the bill proposes to be developed by the Resources Agency. The bill also contains a number of new procedural requirements that could lengthen and complicate the CEQA process for all types of projects. Opinions of observers are quite divided as to whether the bill on an overall basis provides greater benefits than burdens to project applicants.

S.B. 731 contains the following proposed changes:

  • Aesthetic impacts for “residential, mixed-use residential, or employment center projects within a transit priority area” would not be considered significant impacts under CEQA. (“Transit priority area” is defined by S.B. 731 as an area within one-half mile of an existing or planned major transit stop.) The language is vague about whether this would apply to all residential and mixed-use residential projects, or only those in a transit priority area.
  • The Secretary of Resources would be directed to propose new guidelines for significance of noise, transportation and parking impacts within transit priority areas. Some have argued that the application by lead agencies of traditional significance thresholds for traffic, parking and noise often has counterproductive effects for infill projects that implement “smart growth” concepts, and the legislation attempts to address these concerns by requiring the Secretary of Resources to develop new significance thresholds. For example, for traffic impacts, the bill requires significance thresholds to be developed that are based on a project’s proximity to a multimodal transportation network, its overall transportation accessibility, and its proximity to a diversity of land uses, rather than the “level of service” metric typically used by lead agencies. Of course, the impact of the bill on the process for these projects will depend upon the significance thresholds developed by the Resources Agency.
  • Opinion is divided as to the benefits of creating new statewide minimum thresholds of significance compared to current law that allows local control on these issues. Moreover, applicants may not be able to place complete reliance on new significance standards contained in these potential Guidelines until potential litigation has ended, because in the past CEQA Guideline standards adopted by the Secretary of Resources have been subject to extensive litigation and at times invalidated.
  • New procedural requirements would be imposed on local and state agencies for CEQA findings. All public agencies would be required to provide their proposed CEQA findings to the public at least 15 days prior to the proposed approval date and provide a public notice of the availability of the findings for public review. Additionally, public notice of the availability of these draft findings must be made by electronic mail and by newspaper publication, which as a practical matter means that the documents must be available for a longer period of time. This new provision would appear to reduce local agency flexibility to respond to project opponents who make late comments by making it more difficult for the local agencies to adopt new or different findings in response to public comments, without going through delay if there is a requirement to “re-notice” revised findings. The result of this provision could be to potentially increase processing times and procedural risks and delays for projects.
  • The legislation would give project applicants the option to require the lead agency, for certain types of projects, to post the administrative record electronically as it is created so that it can be filed within 30 days in the event of litigation. The intent of this provision is to reduce the litigation delay that is caused by lead agencies taking several months to prepare the administrative record once a lawsuit is filed. However, S.B. 731 further provides that all of the costs of preparing and certifying the electronic record must be reimbursed by the applicant, and the petitioner filing a CEQA lawsuit would not be obligated to advance or reimburse to the public agency the costs of preparing this electronic record, thereby reducing the potential costs to CEQA challengers for filing lawsuits against projects with an electronic record. Under this provision, public agencies would be required to make all public comments available electronically within 5 business days of receipt of electronic comments, and 7 business days of receipt of non-electronic comments, at the applicant’s expense. The bill is not clear as to the impact of the failure to comply with the new provisions, but this provision could provide a new basis for CEQA lawsuits alleging failure to timely provide materials on an electronic basis while the public agency is considering the project.
  • New requirements would be imposed on local and state agencies for annual monitoring and reporting. After project approval, for an indefinite time, all public agencies would be required to prepare annual reports available online regarding project compliance with the adopted mitigation and monitoring plan.
  • The bill adds language to Government Code Section 65457 which contains an existing limited exemption from CEQA for residential projects consistent with an adopted Specific Plan, specifying that new information “consisting solely of argument, speculation, unsubstantiated opinion or narrative” or “is clearly inaccurate or erroneous,” or suffers from other defects, should not affect the applicability of the exemption. It appears that this current language in S.B. 731 simply reflects existing law regarding material that can be considered as “evidence” by a public agency under CEQA, though the stated intention appears to be to strengthen the existing exemption.
  • Section 13 of the bill amends Public Resources Code Section 21168.9(a) to clarify language regarding the requirements for a court order to be issued when a court finds a CEQA violation, including the circumstances under which a portion of the approved project can be “severed” from the Court’s decision overturning the project approval. This section of the bill also specifies that an agency found to have violated CEQA must be ordered by the court to provide an “initial return” to a writ of mandate specifying what must be corrected under CEQA before taking steps to adopt new CEQA documents. This procedural requirement could be helpful to the extent it provides clarity for the corrections, but could also lead to significant delays in undertaking corrective actions by the local agency and may result in a new round of litigation with project opponents challenging the agency’s proposed corrective measures.
  • The bill adds a new Section 21167(g) which authorizes tolling agreements to extend the statute of limitations when agreed to by the public agency, the “party asserting noncompliance” with CEQA and the real party in interest (normally the project applicant). At least one case has already held that the CEQA statute (without S.B. 731) authorized tolling agreements, but this proposed amendment provides additional confirmation of the court’s decision. The new language of this bill may also amend CEQA so that a tolling agreement with one party extends the statute of limitations for any opponent, but the language of the bill is not clear on this point.
  • A new office of “Advisor on Renewable Energy Facilities” is created in the office of the Governor. The legislation does not specify the authority of this office, and no changes are made to CEQA’s applicability to renewable energy facility projects.
  • The bill adds a new section, Public Resources Code Section 21080(h), stating that a project applicant for a renewable energy project may present to a public agency “the benefits onsite or offsite of the project, including, but not limited to measures that will mitigate greenhouse gas emissions resulting from the project”. While this is something that most project applicants are already doing under existing CEQA provisions, there have been reports that some public agencies were not allowing project applicants to include these project environmental benefits in the CEQA analysis for renewable projects. While the additional language in S.B. 731 does not mandate how public agencies should treat the information submitted by project applicants, it may be read as additional support for including these benefits in the CEQA analysis.

As the Legislature considers S.B. 731 this week and in the next several months, more information about S.B. 731 should become available, and further amendments may be made by the bill’s sponsor or the Legislature.