Recognizing the role the California Environmental Quality Act (CEQA) often plays in hindering jobs-creating real estate development and energy infrastructure projects, a broad coalition of business leaders and labor leaders worked hard this year to advocate for meaningful CEQA reform that would reduce CEQA-created project delays, development costs, and often frivolous litigation that threatens much-needed economic activity. Various stakeholders, including the California Chamber of Commerce, the Los Angeles Chamber of Commerce and major business owners and labor leaders, together with a team of Latham lawyers, took the lead in identifying CEQA problems and proposing solutions. Given the severe economic recession and high unemployment in California, leaders were hopeful that this legislative session would provide opportunity to address the increasingly urgent need for CEQA reforms that would maintain CEQA’s historic role in environmental protection while reducing the delays, abuses, and waste that is now commonplace in CEQA processes and litigation. For the most part, those hopes were disappointed, but opportunities remain for 2012.

Last week, in a feverish spate of last-minute changes, the Legislature passed two bills in the last minutes of the legislative session that have been widely described as "CEQA reform" legislation — Assembly Bill 900 (Buchanan) and Senate Bill 226 (Simitian).1 Unfortunately, these bills appear to be more promise than reality, with more work needed to help create a significant number of job-creating projects and to reduce CEQA-caused delays, costs, and abuses. Many in the Legislature appear to recognize the weaknesses in those bills, and many statements have been made promising improvements to them in the next legislative session. For the sake of California’s economy, many business and labor leaders hope those improvements will actually be enacted so that real CEQA reform might be delivered soon.

Both bills are awaiting the Governor’s consideration, and would only become law if he signs them. To help address the many misconceptions about these two bills, below we briefly summarize their key provisions.

Assembly Bill 900

AB 900 does not create or expand any CEQA exemptions or incentives, does not clarify any of CEQA’s many vague provisions that create uncertainty and litigation, and does not address the long delays and high costs of going through the CEQA process. Rather, AB 900 just allows certain large projects — likely to be a very small number — to ask the Governor for a special certification that, if granted in the Governor’s discretion after a list of conditions is met, would allow litigation challenging those certified projects to skip the Superior Court step of CEQA litigation and go directly to the Court of Appeal. AB 900 would also require the Court of Appeal to rule in the litigation much faster than is typical in CEQA appeals unless the Court of Appeal decides it has "good cause" to take a longer time.

Surprisingly, even this modest bill does not apply to any project that already has an environmental impact report (EIR) in circulation, so it does not apply to those major projects that are closest to being approved and creating jobs. Instead, it can only apply to certain EIRs that are released in the future. Further limiting its scope, this bill only applies to projects whose EIRs are certified by June 1, 2014, which creates just a two and a half year window for major project EIRs to be released and certified. Accordingly, even a project certified by this process would not get the promised benefits of this legislation if opponents stall it.

Specifically, AB 900 sets forth a process by which projects may apply to the Governor for certification in order to receive certain self-described litigation streamlining benefits. The Governor is not required to certify any project. If the Governor chooses to certify a project, he is only supposed to do so if he makes the following findings:

(1) the project will result in a minimum investment of $100 million dollars in California upon completion of construction;

(2) the project will create high-wage, highly skilled jobs that pay prevailing wages and living wages and provide construction jobs and permanent jobs for Californians, and helps reduce unemployment;

(3) the project does not result in any net addition emission of greenhouse gases, including greenhouse gas emissions from employee transportation as determined by the State Air Resources Board;

(4) all mitigation measures used to make this designation are made binding conditions of approval;

(5) the project applicant agrees to pay the Court of Appeal’s costs in hearing and deciding any case; and

(6) the project applicant agrees to pay the costs of preparing the administrative record for the project.

If the Governor makes each of these findings, he can then submit that determination to the Joint Legislative Budget Committee for its review and concurrence or nonconcurrence. The Committee has thirty days from receiving the determination to concur or not concur in writing. If the Committee fails to concur or not concur on a determination, the project is deemed to be certified after thirty days. No court is allowed to review the Governor’s certification.

Upon a project being certified in this way, AB 900 would afford the certified project the following expedited litigation timing treatment:

(1) litigation against the project would have to be filed in the Court of Appeal with geographic jurisdiction over the project, including any non-CEQA claims alleging that a public agency has granted land use approvals in violation of the law; and

(2) the Court of Appeal would be directed to issue its decision within 175 days of the filing of the petition and may appoint a special "master" to help manage and process the case, but may extend the deadline "for good cause shown" and "to promote the interests of justice."

Many uncertainties remain as to how the Governor will implement this process and whether there will be many projects that qualify for being

considered for certification. Project applicants will have to think carefully about whether these uncertainties, given the newness of the bill and its procedures, might also create delay or contention that may not otherwise exist. For example, the conditions a project has to meet to win the Governor’s certification could impose substantially higher labor, construction, and/or operational costs on the project. The added step of trying to obtain certification may also incite project opponents to become involved in opposing the project at a very early stage, given that the certification request would occur before a Draft EIR is released. That potential, coupled with potentially higher costs and the narrow scope of potentially eligible projects, might chill any substantial use of this new program, thereby preventing this new bill from playing a meaningful role in creating jobs or bolstering California’s economy in crisis.

In addition, there might be substantial difficulties implementing the expedited litigation process at the Court of Appeal. The Court of Appeal now normally processes CEQA cases pending on appeal in a much longer timeframe than the 175 days this bill specifies for certified projects, so it is unclear how or whether the appellate courts will be able to manage any significant number of such certified projects in this timeframe, especially recognizing that the Legislature has concurrently reduced funding for the operation of the Courts of Appeal in this year’s budget. Since this bill allows the Courts of Appeal to take a longer time "for good cause shown" and "to promote the interests of justice," it remains to be seen how much expedited litigation treatment will be afforded to certified projects. This bill directs the California Judicial Council to prepare rules for handling these cases on an expedited basis by July 1, 2012, which should provide more guidance on whether the 175-day deadline is likely to be achieved in a significant number of cases.

Additionally, questions have been raised about the constitutionality of this bill, and some groups are discussing the potential for litigation to block this bill. Any such litigation could, of course, make it more difficult for project applicants to make the decision to seek certification.

While it is heartening for California businesses and workers to see an effort to help allow job-creating real estate development and infrastructure projects to get approved and built, it is clear that further work will need to be done. With some key lawmakers and stakeholders having publicly committed to working on these issues further in the next legislative session, there is hope for more comprehensive CEQA streamlining and reform next year.

Senate Bill 226

SB 226 offers another approach at what is described as CEQA reform, offering somewhat of a grab-bag of limited CEQA streamlining measures and miscellaneous provisions. The bill addresses four areas: (1) it creates a new CEQA exemption for solar energy systems in limited circumstances;

(2) it changes parts of CEQA’s scoping meeting requirements in instances where a planning agency is adopting or amending a general plan;

(3) it adds language to CEQA’s provisions on categorical exemptions to address the impact of a project’s greenhouse gas emissions on the application of the exemptions; and

(4) it changes the scope of required CEQA analysis for newly-defined "infill" projects in certain circumstances.

CEQA Exemption for Solar Energy Systems. Unlike AB 900, SB 226 creates a new categorical exemption under CEQA, albeit one that applies in a very specific circumstance. SB 226 would exempt the installation of a solar energy system, including associated equipment, on the roof of an existing building or an existing parking lot. Associated equipment includes parts and materials that enable the generation and use of solar electricity or solar-heated water, including any monitoring and control, safety, conversion, and emergency responder equipment necessary to connect to the customer’s electrical service or plumbing. It also includes any equipment necessary to connect the energy generated to the electrical grid, whether that connection is onsite or on an adjacent parcel and separated only by an improved right-of-way. The associated equipment may not exceed 500 square feet of ground surface, and must not impact certain protected plants and trees. The exemption does not apply if installation would require an individual federal permit under the Clean Water Act or the Porter-Cologne Water Quality Control Act, an individual take permit for species protected under the federal or state Endangered Species Acts, or a streambed alteration permit pursuant to the Fish and Game Code. The exemption does not apply to any transmission or distribution facility or connection.

Scoping Meeting Requirements for General Plan Adoption and Amendments. CEQA currently requires lead agencies to have scoping meetings for projects of statewide, regional, or areawide significance, and requires the scoping meeting notice to be provided to counties or cities adjacent to the project site. Separately, CEQA currently requires that when projects need new or amended general plans, the planning agency is to refer the proposal to neighboring cities and counties so they may comment on the proposed project. SB 226 combines these processes so that the referral of a proposal to adopt or substantially amend a general plan may be conducted concurrently with the scoping meeting, and the city or county may submit its comments at the meeting.

CEQA Exemptions and Project Greenhouse Gas Emissions. SB 226 amends CEQA to clarify that a project’s greenhouse gas emissions do not, in and of themselves, mean that a project cannot take advantage of a CEQA categorical exemption that otherwise applies to the project, provided that the project complies with statewide, regional, or local greenhouse gas plans that are themselves consistent with the existing Section 15183.5 of the CEQA Guidelines pertaining to the assessment of greenhouse gas emissions.

Limited CEQA Analysis for "Infill" Projects. SB 226 creates new rules concerning the scope of CEQA review for "infill" projects. Specifically, the bill provides that where an EIR has been previously certified at the planning level (e.g., the enactment or amendment of a general plan, community plan, specific plan, or zoning code), a later specific infill project may rely in part on the previously certified EIR and limit its CEQA analysis to two categories.

The bill defines an "infill project" as a project with residential, retail, and/or commercial uses, a transit station, a school, or a public office building, that is located in an urban area on a previously developed site or on an undeveloped site if it is mostly surrounded by developed uses. The project must also be either consistent with land use planning strategies that achieve greenhouse gas emission reduction targets as determined by the California Air Resources Board, feature a small walkable community, or, where a sustainable communities or alternative planning strategy has not been adopted for the area, include a residential density of at least 20 units per acre or a floor area ratio of at least 0.75. The project will also be required to meet a number of standards related to energy efficiency which SB 226 directs the Office of Planning and Research to prepare.

Where an infill project meets this definition and an EIR has been certified for a planning level decision, SB 226 allows the project to limit its CEQA analysis to addressing only (1) effects on the environment that are specific to the project or to the project site and that were not addressed as significant effects in the prior EIR, unless a lead agency finds that uniformly applicable policies or standards substantially mitigate the effects, and (2) substantial new information shows that effects that cannot be substantially mitigated will be more significant than described in the prior EIR. Alternative locations, densities, and building intensities to the project, including growth inducing impacts, need not be addressed.