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California Supreme Court Rejects Permit Limits as CEQA Baseline, Affirms Need to Compare Impacts Against Existing Physical Condition March 16, 2010 by Kelley M. Taber ktaber@somachlaw.com |
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In a much anticipated decision with significant consequences for both public and private entities holding permits for the operation of ongoing facilities, the California Supreme Court yesterday unanimously affirmed that the baseline for environmental analysis of new projects under the California Environmental Quality Act (CEQA) (Pub. Resources Code, § 21000 et seq.) are the physical conditions actually existing at the time of the analysis, not the maximum capacity allowed under prior or existing operating permits. (Communities for a Better Environment v. South Coast Air Quality Management District, S 161190, March 15, 2010.) Background The case involved a challenge brought under CEQA to a project by ConocoPhillips to produce ultra low sulfur diesel fuel at its existing petroleum refinery in the City of Los Angeles (the Diesel Project). The Diesel Project required modifications to the existing refinery, and ConocoPhillips applied to the South Coast Air Quality Management District for a permit to construct the modifications. After preparing an initial study, the District concluded the project did not have the potential to result in a significant effect on the environment and thus proposed a negative declaration. The plaintiffs, a group of trade unions, an environmental group and several individuals, argued the project would have a significant effect from nitrogen oxide (NOx) emissions, a contributor to smog formation that can cause adverse health effects, and that an EIR should be prepared. In particular, the plaintiffs argued that additional NOx emissions, estimated between 237 and 661 pounds per day, would substantially exceed the District’s threshold of significance for NOx emissions of 55 pounds per day. While the District noted that the Diesel Project would cause increased NOx emissions from increased operation of existing permitted boilers at the refinery, the District did not consider the increases resulting from boiler operation to be part of the project because they did not exceed the maximum rate of production allowed under the boilers’ existing permits. Thus, the District treated any additional NOx emissions from increased plant operations that were within previously permitted levels as part of the environmental baseline for CEQA review, rather than part of the proposed Diesel Project. The District reasoned that ConocoPhillips had permits to operate the equipment, the refinery was an established use with operations fluctuating over time, and the Diesel Project did not require any equipment that would exceed its permitted capacity. The District thus adopted a negative declaration and issued a permit to construct the modifications to the refinery. The Plaintiffs filed petitions for writ of mandate alleging the District violated CEQA by failing to prepare an EIR before it approved the Diesel Project. The trial court denied the petitions, and the Court of Appeal (Second Appellate District) reversed. The appellate court held that increased use of the existing equipment should have been evaluated as part of the Diesel Project, not as part of the baseline, and if the proper baseline had been used, there was substantial evidence of a significant impact requiring an EIR to be prepared. Use of Prior Operating Permits as Baseline In rejecting ConocoPhillips’ argument that its prior operating permits established the baseline for CEQA review of the Diesel Project, the Court began by quoting section 15125(a) of the CEQA Guidelines, which provides: An EIR must include a description of the physical environmental conditions in the vicinity of the project, as they exist at the time the notice of preparation is published, or if no notice of preparation is published, at the time environmental analysis is commenced, from both a local and regional perspective. This environmental setting will normally constitute the baseline physical conditions by which a lead agency determines whether an impact is significant. (14 Cal. Code Regs., § 15125(a), emphasis added.) The Court then cited a “long line of Court of Appeal decisions” holding that “the impacts of a proposed project are to be compared to the actual environmental conditions existing at the time of CEQA analysis, rather than to the allowable conditions defined by a plan or regulatory framework. This line of authority includes cases where a plan or regulation allowed for greater development or more intense activity than had so far actually occurred, as well as cases where actual development or activity had, by the time CEQA analysis was begun, already exceeded that allowed under the existing regulations.” From this authority the Court cited the general rule that the baseline for CEQA analysis must be the “existing physical conditions in the affected area, that is, the real conditions on the ground, rather than the level of development or activity that could or should have been present according to a plan or regulation.” Applying the “general rule” to the Diesel Project proposal, the Court concluded the District erred in using the boilers’ maximum permitted operational levels as a baseline. “By treating all operation of the boilers within the individual limits of their permits to be part of the environmental setting, or baseline, the District ensured that no emissions from increased boiler operation would be considered an environmental impact so long as no single boiler operated beyond its permitted capacity.” The Court noted that the District’s assumption of simultaneous maximum operation of all the boilers was not a realistic description of the existing conditions without the Diesel Project. By comparing the proposed project to what could happen, rather than what was actually happening, the District set the baseline not according to “established levels of a particular use,” but by “merely hypothetical conditions allowable under the permits.” The District’s use of the prior permits’ maximum operating levels as a baseline thus obscured the Diesel Project’s potential to result in a significant impact by substantially exceeding its own significance threshold for NOx emissions. In rejecting the District and ConocoPhilipps’ reliance on court of appeal cases allowing use of the maximum operational levels allowed under a permit, rather than existing physical conditions, as a CEQA baseline, the Court distinguished those cases as involving modifications to previously analyzed projects, which require lesser review under Public Resources Code section 21166, or the continued operation of existing projects without significant expansion of use, which were exempt from CEQA review. In both instances, the approved project, rather than the existing physical conditions, constitutes the relevant baseline for assessment of changes. Here, the Diesel Project added a “new refining process to the facility, requiring the installation of new equipment as well as modification and significantly increased operation of other equipment.” Moreover, both the District and ConocoPhillips treated the application as a new project, rather than an exempt project or modification of a previously approved project. As such, the Court declined to find that any of the cited decisions compelled a determination that the preexisting boiler permits established the baseline for CEQA review of the Diesel Project. Methodology for Determination of Baseline In finding that substantial evidence supported a fair argument that increased NOx emissions from the Diesel Project would have a significant adverse impact, the Court declined to address the specific mechanism by which existing facility operations should be measured for baseline purposes in this case or future cases. ConocoPhillips had objected to direction by the Court of Appeal that the District use annual averages to establish a baseline of daily emissions, arguing that approach failed to account for day-to-day fluctuations and peak production periods. Without specifying a particular test or methodology for establishing a baseline where existing facility operations fluctuate over time, the Court reiterated the Guidelines’ direction that an agency assess impacts against conditions at the time the notice of preparation is published or at the time environmental analysis is commenced. But the Court also recognized that both background physical conditions and facility conditions could vary from time to time, and that lead agencies need to use care in such situations to establish a baseline that accurately reflects representative conditions. The Court stated, “Neither CEQA nor the CEQA Guidelines mandates a uniform, inflexible rule for determination of the existing conditions baseline. Rather, an agency enjoys the discretion to decide, in the first instance, exactly how the existing physical conditions without the project can most realistically be measured, subject to review, as with all CEQA factual determinations, for support by substantial evidence.” In describing the various scenarios that lead agencies might confront in establishing a baseline for changing environmental conditions, the Court cautioned against relying on outlier conditions that might “depress or elevate the baseline,” specifically mentioning that “over-reliance on short-term activity averages might encourage companies to temporarily increase operations artificially, simply in order to establish a higher baseline.” Other Arguments The Court rejected ConocoPhillips’ arguments that use of the current conditions as a baseline affected its vested rights in their air permits or that it violated CEQA’s statute of limitations by allowing a challenge to the existing permits. On the question of vested rights, the Court noted that the right to operate the boilers was not at issue and use of existing conditions as the baseline, rather than the permit maximums, “could not result in any order that would require ConocoPhillips to reduce or limit its use of an individually permitted boiler below the previously permitted level” or otherwise prohibit boiler operation, even if the new Diesel Project resulted in the imposition of pollution control mitigation affecting boiler operation. Regarding CEQA’s statute of limitations, the Court noted that using existing physical conditions as the baseline to assess the Diesel Project’s environmental impacts could not result in review or setting aside of the boiler permits, and thus the statute of limitations had “no bearing on baseline question.” Conclusions/Implications The South Coast decision makes clear that lead agencies may not rely on prior operating permit limits as a baseline for evaluating the effects of new projects that involve existing facilities. Moreover, the decision affirms the lead agency discretion in establishing a baseline in situations where existing conditions may vary considerably from season to season and year to year. Because there is no clear cut test for determining when changes to a previously approved project constitute a “new project” versus a “modification,” the South Coast decision arguably maintains significant discretion for decisions involving changes to ongoing facilities. In those cases, whether the lead agency treats changes to a previously approved project as a new project, or a modification of a previously approved project, will have significant consequences for both the baseline question and the scope of additional CEQA review Somach Simmons & Dunn provides the information in its Environmental Law & Policy Alerts and on its website for informational purposes only. This general information is not a substitute for legal advice, and users should consult with legal counsel for specific advice. In addition, using this information or sending electronic mail to Somach Simmons & Dunn or its attorneys does not create an attorney-client relationship with Somach Simmons & Dunn. |
