This session's California Environmental Quality Act ("CEQA") reform bill, Senate Bill 743 ("SB 743") packs a potentially large punch, but only for a narrow group of projects. SB 743 is the brainchild of Senator Darrell Steinberg (D-Sacramento), who made CEQA reform a top political priority for 2013. While Senator Steinberg's primary objective was to deliver on a promise to NBA Commissioner David Stern to streamline approval of the Sacramento Kings arena project, SB 743 also provides new rules of general applicability that significantly benefit select projects. First, with regard to projects in transit priority areas, SB 743 reduces the scope of CEQA's impact analysis and may also change the standard traffic evaluation. Second, SB 743 substantially expedites judicial review of so-called "environmental leadership development projects." Thus, while many will be disappointed that SB 743 does not completely overhaul CEQA, certain project proponents will benefit tremendously from the new rules.
SB 743 combines elements of two seemingly defunct pieces of legislation, Assembly Bill 900, the Jobs and Economic Improvement Through Environmental Leadership Act of 2011 ("AB 900"), and Senate Bill 731 ("SB 731"). AB 900 became law in 2011, but one of its key provisions relating to judicial streamlining was deemed unconstitutional by Alameda County Superior Court Judge Frank Roesch in April 2013. As described below, SB 743 incorporates revised streamlining procedures in an effort to cure the constitutional concern. Senator Steinberg promoted SB 731 as his primary CEQA reform bill until the Governor convinced him to abandon the effort last week. Key provisions of SB 731 were designed to benefit projects in transit priority areas by precluding the analysis of certain environmental impacts and modifying the standard evaluation of traffic impacts. SB 743 was heavily revised during a one-day journey that began in the Assembly and concluded with the bill's late-night passage in the Senate. The most important statewide provisions can be broken down as follows:
1. Reduced CEQA Analysis for Urban Infill Projects
SB 743 provides that if a project qualifies as either a residential, mixed-use residential, or an employment center project and is located on an infill site within a transit priority area, the lead agency cannot consider either aesthetic or parking impacts to be significant under CEQA. Accordingly, for certain infill projects, impacts which would otherwise require mitigation or even the adoption of a statement of overriding considerations under CEQA, such as diminished views of public spaces or increased glare, cannot be considered significant environmental impacts.
2. New Guidelines to be Developed for Measuring Traffic Impacts in Transit Priority Areas
CEQA traffic analyses have traditionally focused on whether a project would increase traffic congestion, i.e., degrade existing levels of service on relevant streets and highways. SB 743 calls for the Office of Planning and Research to develop new guidelines which would deemphasize traffic congestion, and instead focus on reducing greenhouse gas emissions, promoting multi-modal transportation, and ensuring land use diversity within transit priority areas. The new guidelines may base the traffic analysis on such factors as a project's contribution to total traffic trips, total vehicle miles traveled, and trip generation rates, although SB 743 does not mandate use of these factors. Once the Natural Resources Agency certifies the new CEQA guidelines for measuring traffic impacts, increases to traffic congestion generally cannot be considered significant environmental impacts under CEQA within transit priority areas. Transit priority areas are located within one half mile of existing rail stations, ferry terminals, and major bus routes, or which are identified in regional transportation plans.
3. Environmental Leadership Projects Get Streamlined Review
Harkening back to AB 900, SB 743 provides for streamlined judicial review of projects that are designated as "environmental leadership development projects" by the governor. Under the new law, CEQA challenges will still be first heard in superior court, but all litigation, including any appeals, must be concluded within 270 days (9 months) of the certification of the administrative record.
To qualify as an environmental leadership development project, the project must satisfy certain criteria, including the project would (1) result in a minimum investment of $100,000,000 in California upon completion; (2) create high-wage, highly-skilled jobs and pay prevailing wages during construction; and (3) not result in any net additional greenhouse gas emissions. Whereas AB 900 required a project seeking expedited judicial review to obtain a certified environmental impact report by June 1, 2014, SB 743 extends this deadline until January 1, 2016.
4. While Limited in Scope, SB 743 Offers Possibilities for Developers
Assuming SB 743 is signed by the Governor, the new legislation will provide considerable benefits for a select group of projects. Where possible, developers would be wise to structure their projects so as to take advantage of SB 743's provisions for streamlining judicial review and limiting the scope of potential environmental impacts under CEQA. Indeed, careful planning in the conceptual phases of a project could yield major benefits in the project approval and litigation phases. For example, a condominium developer in an urban area could avoid mitigation to counter parking impacts by developing an "infill site" as specifically defined under SB 743. Similarly, while qualifying as an environmental leadership development project is obviously difficult, a savvy developer would at least weigh the costs of satisfying the threshold criteria (e.g., promoting a project with no net greenhouse gas emissions) in order to obtain the cost savings generated by truncating the inevitable CEQA lawsuit. Thus, SB 743, while not providing something for everyone, may lead to substantial benefits for qualifying projects.