CEQA review now required for ordinances authorizing new medical marijuana dispensaries

The California Supreme Court recently issued a decision that may require cities to conduct environmental review prior to adopting ordinances authorizing the establishment of new medical marijuana dispensaries or other new types of businesses within city limits. The court determined that an ordinance passed by the city of San Diego constituted a "project" under the California Environmental Quality Act (CEQA) and is therefore potentially subject to further environmental review. Union of Medical Marijuana Patients, Inc. v. City of San Diego, 2019 DJDAR 7893 (April 19, 2019).

In 2014, San Diego passed an ordinance that authorized the establishment of medical marijuana dispensaries for the first time, and amended zoning regulations to control the location and number of dispensaries in commercial and industrial areas. The city determined that the ordinance would have no foreseeable environmental effects and therefore was not a project subject to CEQA. In effect, the city concluded it did not need to conduct any environmental review in passing and implementing the ordinance.

The Union of Medical Marijuana Patients (UMMP), a civil rights organization that supports the rights of medical marijuana users, challenged the city's failure to conduct any environmental review under CEQA. UMMP claimed the restrictions on the location and number of dispensaries could have foreseeable environmental impacts by causing an increase in traffic, creating "unique development impacts" in the areas designated for new dispensaries, and causing more people to start growing their own marijuana due to closures of unpermitted dispensaries. The city argued that the possible environmental effects raised by UMMP were too speculative, and pursuant to CEQA Guidelines, public agencies are not required to assess speculative impacts when determining whether an activity constitutes a project.

In its analysis, the court first clarified the test for what constitutes a "project" subject to CEQA. California Public Resources Code section 21065 defines a project as an activity that may cause "either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment." UMMP had argued that any enactment of a zoning ordinance by a public agency constitutes a project as a matter of law under a separate Public Resources Code Section 21080, governing discretionary agency activities, Section 21080, regardless of whether the activity could cause either a direct or an indirect physical change in the environment. The court rejected UMMP's argument and concluded that the discretionary agency activities listed in Section 21080, including zoning ordinances, are merely examples, and are only subject to CEQA if they meet the definitional requirements of Section 21065. This holding disapproved of a prior California Court of Appeal case, Rominger v. County of Colusa (2014), 229 Cal.App.4th 690.

The court further clarified that the proper inquiry at the project determination stage, i.e. whether an activity could have a direct or reasonably foreseeable indirect effect on the environment, is "not whether the activity will affect the environment, or what those effects might be, but whether the activity's potential for causing environmental change is sufficient to justify the further inquiry into its actual effects that will follow from the application of CEQA." An impact is only speculative if there is no plausible causal connection between the proposed activity and the potential environmental impact. This interpretation could arguably lead to uncertainty regarding which impacts are speculative and which are theoretical.

This case specifically involved new medical marijuana businesses the city of San Diego had previously not allowed. The court notes that the ordinance amended zoning regulations "to permit the establishment of a sizeable number of retail businesses of an entirely new type," and therefore the establishment of these new businesses is capable of causing indirect physical change in the environment. For example, the ordinance could theoretically lead to new retail construction and changes in traffic patterns from the businesses' customers, employees and suppliers. By conducting additional environmental review, the city could determine whether these theoretical impacts would in fact have a significant effect, or, instead that there are sufficient vacancies in existing buildings to accommodate the newly licensed businesses and the new businesses would have little to no effect on traffic patterns.

By ruling that the ordinance is a project subject to CEQA, the city of San Diego will have to go back to the drawing board and determine whether the ordinance falls under any project exemption to CEQA. If no exemption applies, the city would then have to go on to conduct additional environmental review by, among other things, gathering evidence regarding any actual environmental effects and providing the public and other interested agencies with its findings.

This decision demonstrates the expansiveness of CEQA, and confirms that agencies do have to consider theoretical environmental impacts when determining project status without considering whether these potential impacts will actually occur. CEQA is a powerful tool in California, and this decision could lead to additional obstacles and uncertainty for cities and other agencies considering the authorization of new businesses such as marijuana dispensaries. While CEQA helps to ensure that agencies take environmental impacts and mitigation of those impacts into consideration, as the court notes, "finding a proposed activity is subject to CEQA can lead to additional costs, in time and money, for both a public agency and a private applicant." Once a proposed project falls under CEQA, there are additional opportunities for public input and potential challenges to those projects, which could also lead to additional delay and expense. This decision also does not provide limits as to what constitutes a "business of an entirely new type," and if read expansively, could have a wide reaching effect on what activities are subject to CEQA.

While the ultimate effects of the court's decision on the development of marijuana dispensaries specifically are yet to be seen, this decision indicates that ordinances allowing for and regulating new dispensaries will likely be projects for purposes of CEQA, and cities considering similar ordinances, as well as the individuals and businesses seeking permits, will need to give the possible environmental effects of the ordinances and subject businesses additional consideration. 