Future is now (or is it?): minimizing CEQA litigation risk

Does the future exist? Ask a lawyer who grapples with application of the California Environmental Quality Act (CEQA) to projects that are anticipated to be completed in the medium-to-long range - i.e., five to 15 years from the time of project approval - such as public infrastructure projects or major industrial projects.

CEQA requires a public agency with lead CEQA responsibility (lead agency) to evaluate the potential for significant environmental impacts from proposed projects in an environmental impact report (EIR), prior to the project's approval. To determine whether an environmental impact is "significant" - and therefore must be mitigated - a lead agency must measure environmental impacts against the existing environmental setting, or "baseline." The baseline concept is critical because an environmental impact may be deemed significant when measured against one baseline, but not significant when measured against another. So, in selecting a baseline, the lead agency can affect the determination as to whether impacts are found to be significant, requiring mitigation measures. This can play a key role in whether the project is approved and at what cost.

How does a lead agency pick a baseline that measures the existing setting? Can the "existing" setting be one that occurs in the future when the project is expected to be completed? These seemingly simple questions recently resulted in a state Supreme Court decision and a spate of appellate decisions. Unfortunately, those decisions have not provided definitive answers.

The baseline concept originates in the CEQA Guidelines. Guideline 15125 states:

"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 ... at the time environmental analysis is commenced ... This environmental setting will normally constitute the baseline physical conditions by which a lead agency determines whether an impact is significant."

The word "normally" appears to recognize that there are at least some instances in which the environmental setting existing at the time of environmental review - often called "current conditions" - would not be a proper CEQA baseline. A number of appellate decisions over the years lent support to this interpretation of CEQA, including Fairview Neighbors v. County of Ventura (1999) and Fat v. County of Sacramento (2002). However, until recently there was little appellate guidance as to how much discretion public agencies really have in selecting a baseline.

Then the state Supreme Court weighed in. In Communities For a Better Environment v. South Coast Air Quality Management (2010) (CBE), the court held that an air district erred in evaluating a refinery expansion project by using a baseline consisting of the maximum operating capacity of the refinery's equipment under existing permits. Because operation of the equipment at maximum capacity was not the norm at the refinery, the court held that the selected baseline was not a realistic description of existing conditions. The court concluded that this approach, using "hypothetical allowable conditions" as the baseline, results in "illusory comparisons" that are misleading and at odds with the intent of CEQA.

Although the holding of CBE was limited in application, the court also made a more general statement about baseline selection:

"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."

With this statement, the court opened the floodgates to a new round of appellate decisions regarding the outer boundaries of agency discretion in baseline selection.

The first was Sunnyvale West Neighborhood Association. v. City of Sunnyvale City Council (2010), which involved a highway infrastructure project that employed projected traffic conditions in the year 2020 as an environmental baseline because that was when the project was scheduled to be completed. The 6th District Court of Appeal rejected that approach, stating that "nothing in the law authorizes environmental impacts to be evaluated only against predicted conditions more than a decade after EIR certification and project approval."

Then, in Madera Oversight Coalition v. County of Madera (2011), the 5th District Court of Appeal reviewed a project that identified projected conditions anticipated to exist without the project as the baseline. The court, in rejecting the EIR's baseline analysis, stated that the Sunnyvale decision was persuasive and held that "lead agencies do not have the discretion to adopt a baseline that uses conditions predicted to occur on a date subsequent to the certification of the EIR."

The Sunnyvale and Madera courts drew the brightest of lines. Under their holdings, any EIR relying solely on a baseline reflecting conditions after the date of EIR certification and project approval violates CEQA, regardless of whether the record contains evidence to support that decision.

However, another appellate court recently entered the fray and rejected the Sunnyvale/Madera rule. In Neighbors for Smart Rail v. Exposition Metro Line Construction Authority (2012), the 2nd District Court of Appeal affirmed that future conditions may be employed as a CEQA baseline when supported by substantial evidence. The case involved an EIR for a light rail line that utilized a baseline for measuring impacts based on conditions projected for 2030, the year estimated for project completion. The court explicitly rejected the use of a current conditions baseline, stating that "[a]n analysis of the environmental impact of the project on conditions existing in 2009 ... would only enable decision makers and the public to consider the impact of the rail line if it were here today," which did not reflect reality. The court maintained that its decision was consistent with CBE and rejected the notion that CEQA forbids use of projected conditions as a baseline.

There is a clear conflict among the appellate courts on this issue of how to define "existing conditions" for purposes of a CEQA baseline. In fact, it is a dispute between those who believe the public is best served by using current conditions at the time of project approval (which can be seen and measured) versus those who are willing to rely on models and projections of conditions at the time of project completion (which is less tangible, but perhaps more logical with respect to assessing project-generated impacts). Both positions have merit, but lead agencies, the public, and project proponents need clarity and certainty from the courts.

Until the state Supreme Court or the Legislature clarifies where the temporal line will be drawn, there is significant uncertainty as to whether use of a projected conditions baseline renders an EIR vulnerable to challenge in the courts. As such, lead agencies and project proponents should consider the following points:

* Although a CEQA baseline must generally incorporate current conditions at the time of environmental review, an EIR may utilize a dual baseline approach and compare project impacts against both current conditions and an alternative baseline reflecting projected future conditions.

* If an agency elects to either utilize an environmental baseline other than actual current conditions, or employ a dual baseline approach, it must explain its rationale in the EIR and provide reasoned analysis and substantial evidence in the administrative record, so that CEQA's twin goals of informed public participation and informed decision making are served.

* Regardless of the baseline selected, the EIR must still provide an adequate description of the existing environmental setting for the project, consistent with CEQA Guideline 15125.