On May 20, 2021, Governor Newsom signed into law Senate Bill No. 7, the “Jobs and Economic Improvement Through Environmental Leadership Act of 20216” (the “Act”), which repealed and added Chapter 6.5 to Division 13 of the Public Resources Code (sections 21178 through 21189.3).  The new Act, which was immediately effective as an “urgency” statute, essentially modifies and reenacts former 2011 legislation that was repealed by its own terms on January 1, 2021.  Like the former leadership act, the new legislation authorizes the Governor, until January 1, 2024, to certify certain “environmental leadership development projects” (“leadership projects”) that meet specified requirements for streamlining benefits related to CEQA.  (Pub. Resources Code, §§ 21180, 21181.)  To qualify for CEQA streamlining benefits under the new Act, the Governor must certify a project as a leadership project before January 1, 2024.  (§ 21181.)

In addition to residential, retail, sports, cultural, entertainment, or recreational use in-fill site projects certified as LEED Gold or better by the USGBC, and meeting certain other requirements (15% greater transportation efficiency than comparable projects where applicable, and consistency with applicable policies of an MPO-accepted sustainable communities strategy (“SCS”) or alternative planning strategy (“APS”)), and certain clean renewable energy-related projects (§ 21180(b)(1)-(3)), the statute now defines leadership projects to include infill-site, SCS/APS-consistent housing development projects, as defined, resulting in investment in the state of between 15 and 100 million dollars upon completion.  (§ 21180(b)(4)(A).)  To be eligible for certification, the housing development project must also dedicate at least 15% of its units as affordable to lower income households, or more if required by a local inclusionary zoning ordinance, and except for use as a residential hotel may not be used to any extent for rental units with less than 30-day terms or other transient lodging use, or for manufacturing or industrial use.  (Ibid.)  Eligible housing development projects may be residential only, mixed use with two-thirds of the square footage designated for residential, or transitional or supportive housing.  (§ 21180(b)(4)(B).)  Multifamily residential projects must provide unbundled parking unless applicable legal affordability restrictions preclude unbundling.  (§ 21184.5.)

Certification applicants must supply all evidence or materials the Governor deems necessary to make a decision (§ 21182), and the Governor may certify a leadership project for streamlining benefits before the lead agency certifies an EIR if certain conditions are met, including (for non-housing development projects) a minimum $100 million investment; compliance with a host of specified labor-related requirements (for all projects); the project will result in no net additional GHG emissions (for all projects); the applicant agrees to make binding and enforceable all its mitigation obligations; and the applicant agrees to pay trial and court of appeal costs for the “streamlined” (i.e., expedited) litigation challenges provided for by the Act, as well as the costs of administrative record preparation concurrent with the lead agency’s review and consideration of the project (for all projects).  (§ 21183.)

The Act’s extensive labor-related requirements (§ 21183.5) essentially require that all certified projects use a skilled and trained workforce at all contractor and sub-contractor tiers, and payment of at least prevailing wages for construction workers, whether secured through a project labor agreement or otherwise, as specified.  While as noted above, all projects must demonstrate they will not result in any net additional GHG emissions, additional specific GHG quantification/mitigation requirements apply to non-housing development leadership projects, including the prioritization of available types of mitigation.  (§ 21183.6.)

The Governor’s certification findings are not subject to judicial review (§ 21184(b)(1)), require Joint Legislative Budget Committee concurrence as specified (§ 21184(b)(2)), and the Governor is authorized to issue APA-exempt guidelines regarding the application and certification process.  (§ 21184(c).)  OPR may charge certification applicants fees for costs incurred by the Governor’s office in implementing the law.  (§ 21184.7.)

As alluded to above, the Act further directs the Judicial Council to adopt a rule of court establishing procedures requiring CEQA actions challenging the EIR or approvals for a Governor-certified leadership project to be resolved (including appeals), to the extent feasible, within 270 days of the filing of the certified administrative record with the court.  (§ 21185.)  The CEQA administrative record must be prepared by the lead agency currently with the administrative process, made available to the public in electronic format (as specified), and certified within 5 days of project approval.  (§ 21186(a)-(j).)

The Governor may also certify a project alternative analyzed in an EIR, as specified.  (§ 21187.5.)  If a lead agency fails to approve a certified project before January 1, 2025, the certification expires.  (§ 21189.1.)  In uncodified sections of the Act, the time period for lead agency approval of certified projects under the former leadership law is extended to January 1, 2022, and the Legislature finds that no local reimbursement is constitutionally required for any state-mandated costs of the law.

While this Act has been much-ballyhooed by the Governor’s office as majorly-impactful pro-housing litigation, it may actually end up benefitting only a select few ultra-green mega-projects.  The Act’s strict and complex conditions and requirements – including its requirements of no net GHG emissions and its stringent labor-related provisions – will undoubtedly place its streamlining benefits out-of-reach for a great many housing development projects throughout the state.