State Supreme Court Sets Environmental Baseline
By Tim Taylor, Tom Henry and Sigrid Waggener
On March 15, 2010, the California Supreme Court published Communities for a Better Environment v. South Coast Air Quality Management District, a highly anticipated decision involving the California Environmental Quality Act (CEQA). The Court affirmed an appellate court decision holding that the "environmental baseline," against which the significance of a proposed project's physical environmental effects are judged, will normally be the existing physical or operational conditions rather than the maximum allowable level under an existing permit. The Court declined to find, as urged by respondents South Coast Air Quality Management District (the District) and ConocoPhillips Co. (Conoco), that the failure to use the maximum permit levels as a baseline would, in effect, deprive Conoco of its vested right in a previously issued permit or violate the statute of limitations.
The Supreme Court disagreed that the existing permits constituted a vested right. The Court also found that the action at issue did not constitute an action to set aside the existing permits and accordingly CEQA's statute of limitations was not at issue. In dicta, however, the Court noted that even when a vested right or the statute of limitations might preclude particular mitigation measures, it would not excuse the District from performing what the Court characterized as a "realistic CEQA analysis."
The litigation arose from an attempt by Conoco to modify and replace certain equipment at its Wilmington refinery in order to produce ultra low sulfur diesel fuel. The modifications required the refinery's existing boilers and cogeneration plant to operate at a higher average rate to produce additional steam. Conoco applied to the District for a permit to operate its proposed ultra low sulfur diesel fuel project. For its environmental baseline, the District used the maximum permissible NOx emissions level for the equipment covered under the refinery's previously issued District permit. Because the proposed ultra low sulfur diesel fuel project would not cause NOx emissions to exceed the previously permitted maximum, the District found that no significant impact would result from the daily release. Based on this line of reasoning, the District issued a mitigated negative declaration.
Communities for a Better Environment (CBE) challenged the District and Conoco on the theory that the proposed project's additional release of NOx was environmentally significant and that an Environmental Impact Report should have been prepared. CBE argued that the environmental baseline for purposes of determining the significance of a project's physical impacts is the "realized physical conditions on the ground," rather than a level that a prior permit may hypothetically allow. The thrust of CBE's argument was that although Conoco could conceivably operate its boilers such that the maximum NOx emission level was reached, it had not done so to date and, therefore, the baseline was something less than the permitted maximum.
The trial court disagreed with CBE and entered judgment for the District and Conoco. The Court of Appeal reversed, finding that the District abused its discretion in approving the negative declaration. The Court of Appeal found that the proper project baseline is normally the existing setting, not what is hypothetically allowed. It stated that "[w]here prior environmental review has occurred, though, the existing environmental setting may include what has been approved following CEQA review." 158 Cal.App.4th 1336, 1361. The Court of Appeal then went on to find that "there was no evidence that the impacts from the existing equipment that would be utilized as part of the [Project] had ever been subject to environmental review."
The Supreme Court found no exceptional circumstances in this instance to prompt deviation from this general rule. Conoco argued that deviation was necessary on the theory that using the actual daily NOx emissions as the baseline rather than the maximum permitted boiler NOx emissions would impair Conoco's vested rights under its existing boiler permits. The Court found this argument unpersuasive, stating that since the District could periodically modify or restrict the permitted boiler operation as part of the new ultra low sulfur diesel fuel project, Conoco's established vested rights were not impaired. The Court further recognized that Conoco's entitlement to operate at higher NOx emission levels pursuant to its existing vested right "does not excuse the agency from following the dictates of CEQA and realistically analyzing the project's effects."
In finding that the actual operational conditions at the Conoco refinery must be used, the Supreme Court stressed that the purpose of CEQA is to fully inform the public as to the environmental effects of a project and stated that using hypothetical, allowable conditions as a baseline is not informative. The Court, however, also recognized those Court of Appeal decisions that support the use of permitted maximum operational levels as a CEQA baseline under certain circumstances. These include either the modification of a previously analyzed project in which limited CEQA review is currently required, or the continued operation of an existing facility without significant expansion that qualifies for a CEQA exemption.
Tim Taylor is a partner with the Sacramento office of Stoel Rives and practices in matters involving all aspects of CEQA and CEQA litigation. He can be reached at firstname.lastname@example.org.
Tom Henry is a partner with the Sacramento office of Stoel Rives where his practice emphasizes CEQA and land use litigation matters, as well as mining law. He can be reached at email@example.com.
Sigrid Waggener is an associate with Stoel Rives where her practice is focused on complex business, land use and environmental litigation. She can be reached at firstname.lastname@example.org.
Originally published in The Daily Journal, April 1, 2010