The California Supreme Court heard oral arguments in an important case we’ve been following involving CEQA’s definition of a “project” on the afternoon of June 4, 2019, and took the matter under submission.  The case – Union of Medical Marijuana Patients v. City of San Diego (California Coastal Commission, Real Party in Interest), No. S238563 – involves a City of San Diego ordinance authorizing (as a new use in industrial/commercial zones) and restricting the location and manner of operation of medical marijuana dispensaries within the City, and plaintiff’s challenge to the City’s determination that its adoption of the ordinance was not a “project” for purposes of having to undergo CEQA review.  The Court’s grant of review encompassed the issues whether the particular ordinance is a CEQA project and also whether zoning ordinances in general are CEQA projects.

The questioning at oral argument was dominated by Chief Justice Tani Cantil-Sakauye, who observed early on that the binding precedent of Muzzy Ranch Co. v. Solano County Airport Land Use Com’n (2007) 41 Cal.4th 372 (“Muzzy”) “did not spend a lot of time on” the “project” issue, which she characterized as presenting a “straightforward analysis,” while adding “as it usually is at that early stage” of the CEQA process “given that no administrative record [yet] exists.”  In response to Justice Groban’s question about “what is the level of inquiry” at this early stage, plaintiff’s counsel argued it is a “low threshold” consistent with the “foremost principle” of liberally interpreting CEQA, noting that the required “categorical” approach to the “project” determination issue gets the agency “thinking further about the project down the line.”  He further argued that changing existing precedent to allow agencies to dispense with CEQA analysis based on an early “no project” determination would have the very real harm of forever foreclosing consideration of alternatives or mitigation measures that could mitigate or avoid project impacts.

In arguing against the City’s position that environmental analysis of the ordinance would be “speculative,” counsel argued that the City could actually have created a dispensary facility location map through analysis and computer modeling, but refused to do that and, moreover, admitted it would not be able to rely on the “common sense” exemption because there may be significant environmental impacts from dispensaries.  The Chief Justice pointed out that it was unnecessary to use an exemption argument to show an activity was a CEQA project.

Addressing the second argument that zoning ordinances are categorically CEQA projects, plaintiff’s counsel argued for a “bright line” rule in light of case law that has consistently held that any ordinance that authorizes or limits land use is a CEQA project because “land is by its nature the essence of what the environment is.”  Asserting the relevant test in this regard should ask whether the agency’s action is allowing or limiting land uses, counsel argued this has always been the way courts have looked at the issue dating back to the seminal CEQA decision of Bozung.  He further argued that allowing an agency to simply say that such a land use ordinance has no potential for impact to the physical environment is not enough to ensure informed agency decision making or to assure the public that environmental considerations have been taken into account; rather, the agency must be forced to actually look at and think about the possibility of effects.  Counsel further noted, in responding to the City’s “flood of litigation” argument, that a categorical, “bright-line” rule that land use ordinances are CEQA projects would not affect the appropriate subsequent use of options – such as exemptions and negative declarations – that would avoid unnecessary CEQA review.

In response to questions from the Chief Justice and Justices Liu and Groban regarding the relevant statutory language of Public Resources Code §§ 21065 and 21080, plaintiff’s counsel argued that the courts have always consistently interpreted the activities specifically listed in § 21080(a) – i.e., zoning ordinances, variances, tentative subdivision maps, and conditional use permits – as types of discretionary activities that may have a physical effect on the environment, and that this would be so with or without the statutory language.

Justice Groban inquired about the “space in between” the “categorical” project determination and the common sense exemption, and the “rule” for determining whether something is “capable” of an impact.  The Chief Justice suggested the definition of “project” was even broader than plaintiff was advocating because a “change” in land use was unnecessary under Muzzy, which held potential displacement effects of simply freezing existing land use regulations in place rendered a regulation a project under CEQA.

While conceding that a zoning ordinance would “normally satisfy” the categorical test for a “project,” the City’s counsel argued that Public Resources Code § 21065 imposes a “causation” requirement for all discretionary activities that is not negated or rendered surplusage by § 21080’s examples of projects subject to CEQA; he further argued that Muzzy’s analysis looked at causation.  Justice Liu asked why § 21080 “is there,” and Justice Kruger asked “what factors can you look at” in making the project determination.  When the City’s counsel responded to Justice Kruger’s question by stating “something that must be in the record supported by evidence,” Justice Kruger asked how that differed from the inquiry that must be undertaken once an agency determines there is a project and then proceeds to determining whether the common sense exemption applies.  City’s counsel responded that the next step would be to get an expert and study the potential impacts in more detail.

The Chief Justice pressed the City’s counsel further about his response that “record” evidence would be considered in making the “project” determination.  She stated she was “unclear” about what “record” would exist at the “early stage” involved here, and further stated her understanding there would not yet be any “record” because there would have been no CEQA “study” – something that would come only after the “project” determination had been made.  Justice Groban pointed to the risk of a “piecemeal” analysis if CEQA review were done on a “dispensary-by-dispensary” basis, and inquired whether the City should analyze “what happens writ large” if three dozen dispensaries are permitted.  The Chief Justice, further addressing the City’s and Court of Appeal’s position that the ordinance’s potential for resulting in physical impacts was “speculative” and not “reasonably foreseeable,” asked whether this wasn’t “in the eye of the beholder,” noting that “certainly” building 30 dispensaries “will have some sort of effect.”

In addressing a potential mootness issue raised by state legislation (SB 94), the City appeared to concede the case wasn’t moot by acknowledging the issues presented “will likely repeatedly come up.”

In brief rebuttal arguments, plaintiff’s counsel emphasized that substantial evidence wasn’t relevant, that the question of law whether an activity is a project “relies on undisputed facts in the record,” and that the dictionary definition of “speculative” is “based on a guess rather than information.”  He argued the City should have studied the effects, especially vis-à-vis project-generated traffic, of its decision whether to allow dispensaries concentrated in one area (which would result in more travel) or dispersed throughout the city (which would generate less travel, but would have different impacts).  He argued that CEQA wants cities to look at these issues, and look at whether the common sense exemption should apply, and in concluding further argued that while § 21080 was unnecessary to conclude the City’s ordinance here was a CEQA “project,” that statute does list “really good examples” of such projects.

While predictions are inherently uncertain, based on the Supreme Court justices’ questions and comments at the oral argument (which anyone can review by accessing the archived video on the Supreme Court’s website), it appears to me that the Court is likely to reverse the Court of Appeal’s decision that the ordinance at issue was not a CEQA “project” and hold that the City was required to conduct environmental review under CEQA – i.e., at the very least a “second tier” review for exemptions and an initial study if none apply – before adopting it.  Such a decision would be unsurprising, given the categorical inquiry that is made at the initial tier of the three-step CEQA process, and would certainly be consistent with the well-established principle that CEQA must be interpreted in a manner that provides the fullest possible protection to the environment within the reasonable scope of its statutory language.  In any event, CEQA practitioners will undoubtedly look forward with interest to the Court’s opinion on the issues presented, which should be issued within 90 days from the June 4 submission of the case, or by not later than September 2, 2019.  Stay tuned…