Growth pains, little reform for CEQA in 2014

Major California Environmental Quality Act reform continued to be elusive in 2014. We got limited exceptions and legislative fixes for individual projects and project types, largely regarding the big planning issue of the day, transit-oriented development. Actual changes to CEQA were limited and specific in the best cases, and potentially counterproductive in others.

Some of the most prominent developments involved the unfolding of Senate Bill 375, a 2013 statute that mixed project-specific exemptions with general attempts at CEQA streamlining for transit-oriented development projects. Possibly the biggest CEQA case of the year involved SB 375, with the Court of Appeal invalidating the environmental impact report (EIR) for the San Diego Association of Government's 2050 Regional Transportation Plan. The plan implemented SB 375 and its "Sustainable Communities Strategy," but failed to consider SB 375's smart growth principles to an extent that satisfied its opponents and the court.

CEQA's impact on business was also in the news this past year. The Legislature's refusal to grant CEQA relief to the proposed Tesla battery factory led the company to locate the facility in Nevada. Yet, we also saw that solutions may be available to companies that want to stay in California and work within the confines of CEQA, as with Kinkisharyo International's Palmdale Metro rail car facility, which stayed in state following the resolution of a potential CEQA challenge.

Looming in the background is whether, and, if so, how much, California should reform CEQA to be more business-friendly. Such a move risks an environmental cost Californians may be unwilling to pay, while a failure to do so may inhibit economic growth.

Legislative Fixes and Failures

In 2013, the Legislature passed Senate Bill 743, a bill that first received attention for offering CEQA streamlining for the construction of a new professional basketball arena in downtown Sacramento. Last year, the 3rd District Court of Appeal upheld SB 743 in Saltonstall v. City of Sacramento, 2014 DJDAR 15543 (Nov. 20, 2014), and denied the constitutional arguments against the provision that cut review timelines and prohibited injunctive relief for the arena project. The court found the Legislature has the clear power to limit remedies and timelines for its own statute.

Beyond the Sacramento arena project, SB 743 may provide an opportunity for CEQA streamlining for certain urban infill projects across the state. However, it's unclear whether developers will find the provisions' requirements - which have not been fully tested in court - worth whatever time-saving benefits that may exist. For qualifying projects, SB 743 allows aesthetic and parking impacts to automatically qualify as nonsignificant, among other available CEQA exemptions.

The most significant lasting impact of SB 743, however, may be its effect on CEQA traffic impact analyses. On Aug. 6, the Office of Planning and Research (OPR) released draft regulations that included revisions to CEQA guidelines. These amendments make several significant changes, in particular, using vehicle miles travelled (VMT) as the primary metric for traffic impact analyses rather than the traditional level of service (LOS) metric. This change is not only for transit-oriented projects (transit priority projects), but eventually for all projects.

According to OPR, LOS focuses on traffic congestion and favors mitigation measures that widen streets and allow for more traffic flow - which purportedly increase vehicle use over time. VMT would evaluate how far a project may cause users to drive. Under the proposal, causing congestion will no longer be a significant impact; only where a project causes people to drive more than the regional average could traffic impact be significant.

Implementing the VMT metric is intended to incentivize mixed-use development close to mass transit systems while discouraging suburban sprawl. Another consequence is eliminating improvements to relieve traffic congestion as mandated CEQA mitigation and replacing it with a long and potentially problematic list of VMT-related mitigation measures under the proposed guidelines.

The proposed guidelines will not eliminate LOS, as many local government agencies will likely continue to use it to manage traffic congestion. Questions about how LOS and VMT will coexist remain open, and years of litigation and demands for further reforms seem likely.

The Death of San Diego's Transit Plan

One of 2009's primary attempts at smart growth planning reform, SB 375 and its "Sustainable Communities Strategy," appears to be facing troubles. In Cleveland National Forest Foundation v. San Diego Association of Governments, 2014 DJDAR 15687 (Nov. 24, 2014), in a 2-1 decision, the 1st Division Court of Appeal overturned the EIR for the San Diego Association of Governments' (SANDAG) 2050 Regional Transportation Plan.

The court found fault with the EIR on numerous grounds. First, the seven project alternatives analyzed in the EIR were deemed insufficient, because none analyzed an alternative that would reduce VMT, instead focusing only on reducing traffic congestion as is mandated by CEQA (though apparently not for long). Second, the court held the EIR improperly failed to assess the plan's consistency with the 2050 greenhouse gas emissions reduction benchmarks contained in a 2005 executive order by the governor. Third, the EIR did not include a sufficient range of greenhouse gas emission mitigation measures because it did not sufficiently encourage the development of "smart growth" areas.

The dissenting opinion by Justice Patricia Benke can be summed up with the following: "This insinuation of judicial power into the environmental planning process and usurping of legislative prerogative is breathtaking." Despite Benke's clear reservations, so long as this case stands, public agencies must approach implementing the Sustainable Communities Strategy with great caution.

CEQA in the News

In September, much attention was paid to whether Tesla Motor Company would receive expedited CEQA review for a planned $5 billion battery manufacturing plant in the Bay Area. After a debate among state lawmakers ended with no action, the electric car manufacturer decided to construct the facility in Nevada, reigniting the long-standing debate over whether CEQA must be made more business friendly.

In November, Japanese rail car manufacturer Kinkisharyo International chose to stay in California despite a potential CEQA challenge, in a case that highlights both a path to success and a ground for criticizing the statute. In 2012, Kinkisharyo won an $890 million contract to build rail cars for the Los Angeles Metropolitan Transit Authority. Kinkisharyo ultimately located its rail car manufacturing operation at an existing facility in Palmdale, as the company claimed CEQA made the construction of a new facility impossible under its contractual deadlines. The Palmdale site was opposed by some labor groups on CEQA grounds. This led to Kinkisharyo seeking out-of-state options amid claims the labor groups were using CEQA merely for leverage in a workforce unionization debate. In late November, however, the dispute was settled, keeping the manufacturing operation in Palmdale for the foreseeable future.

Two major themes from the past year emerge. First, the broad implementation of smart growth in planning will likely continue to be gradual and difficult. Second, CEQA continues to present challenges to new business. While these challenges are far from insurmountable, CEQA reform is still needed. How that reform should look, however, continues to remain a vexing question that did not get answered in 2014.

Other Developments

Senate Bill 52 was enacted in September, requiring additional consultation with Native American tribes when Native American cultural artifacts may be impacted by a project, and mandating an automatic significant impact finding where a project may cause a "substantial adverse change" to Native American cultural artifacts. In Citizens for Restoration of L Street v. City of Fresno, 2014 DJDAR 12113 (Aug. 29, 2014), the 5th District Court of Appeal ruled the proper standard of review for a court in ruling whether impacted resources constitute historical resources is the substantial evidence standard, not the fair argument standard. In Tuolumne Jobs & Small Business Alliance v. Superior Court, 2014 DJDAR 10503 (Aug. 7, 2014), the state Supreme Court settled a conflict of appellate authority by finding that a municipality's immediate adoption of a voter-sponsored initiative measure is not subject to CEQA.