Court of Appeal Confirms AB 32 Target Is Proper CEQA Significance Threshold

by Latham & Watkins LLP

The strongly worded opinion in Center for Biological Diversity v. California Department of Fish and Wildlife (Case Number B245131)(CBD v. CDFW) by the Court of Appeal of California, Second Appellate District has confirmed that analyzing a project’s greenhouse gas (GHG) emissions under the California Environmental Quality Act (CEQA) via a threshold-of-significance derived from California’s GHG emissions reduction goals is appropriate.[1]  This approach commonly has been referred to as “break-from-Business As Usual,” though that or similar terminology has been used for other approaches as well.  Public agencies and developers should take guidance from the Court’s comprehensive endorsement of this threshold-of-significance as a legally appropriate approach under CEQA.[2]

The appropriateness of this threshold has been a subject of controversy and dispute by project opponents and some Superior Court decisions. However, this approach has been approved in two prior Court of Appeal decisions, Friends of Oroville v. City of Oroville, 218 Cal. App. 4th 1352 (2013) (Friends of Oroville) and Citizens for Responsible Equitable Environmental Development v. City of Chula Vista, 197 Cal.App.4th 327 (2011) (Citizens). We previously covered Friends of Oroville on this blog, including its lessons for project proponents using the threshold. With the CBD v. CDFW, Friends of Oroville, and Citizens cases all endorsing this threshold, and no published cases rejecting this standard, it continues to constitute a defensible approach to analyzing GHG emissions under CEQA.

CBD v. CDFW concerns the California Department of Fish and Wildlife’s (Department) certification of an environmental impact report (EIR) for the Newhall Ranch Specific Plan, which encompasses approximately 11,999 acres in the Santa Clarita Valley and represents Los Angeles County’s plan to develop a new community of residential, mixed-use, and non-residential uses within interrelated villages. Build-out would occur over 20 years and the Specific Plan authorizes up to 21,308 residential units, 629 acres of mixed use development, 316 acres of commercial and business park uses, and associated community facilities and open space.

The Department used a break-from-Business-As-Usual threshold-of-significance derived from California’s Assembly Bill (AB) 32. We summarized the basic elements of a break-from-Business-As-Usual (BAU) analysis in our March 19, 2014 Project Development Trends and Updates webcast. Specifically, the EIR inquired whether “the proposed [project’s] [greenhouse gas] emissions impede compliance with the [greenhouse gas] emission reductions mandated in [AB 32]?” The EIR relied upon the California Air Resources Board’s (ARB) assessment in its 2008 AB 32 Scoping Plan that statewide GHG emissions must be reduced approximately 29 percent below BAU in order for California to return to 1990 levels of GHG emissions by 2020. The EIR found that the project’s GHG emissions would be reduced by 31 percent compared to a BAU project and, therefore, were not significant.[3] The CBD v. CDFW Court found the EIR’s threshold-of-significance was a valid method to judge the significance of the project’s GHG emissions impacts, citing to both the 2011 Citizens and the 2013 Friends of Oroville cases: “As we have explained, utilizing this form of environmental analysis has been expressly approved on two occasions by two different Courts of Appeals.”

As we discuss in more detail here, there are multiple emission reductions percentages that both have been used in similar CEQA documents and could be justifiably used in future CEQA documents. The variance in such percentages results from ARB’s on-going revision of future year inventories of GHG emissions, consistent crediting of statewide GHG emissions reduction measures (e.g., the Renewables Portfolio Standard), and recent, minor modifications in global warming potential values of certain GHGs by the Intergovernmental Panel on Climate Change. Accordingly, it is critical that CEQA lead agencies retain flexibility to calculate and apply the necessary break-from-BAU. The CBD v. CDFW opinion beneficially acknowledges that “inherent in the department’s analysis are some projections involving uncertainty in evaluating greenhouse gas emissions” and that any EIR “necessarily involves a degree of forecasting.” The Court concludes that the Department made “a good-faith effort” to “describe, calculate or estimate” the project’s GHG emissions and did not contravene CEQA.

In an approach rejected by the Court of Appeal in this most recent decision, the trial court in CBD v. CDFW affirmatively determined not to utilize the “substantial evidence” standard of review (which commonly is applied in CEQA cases by reviewing courts) when assessing the EIR’s selection of the baseline and threshold-of-significance. As the Court of Appeal explained: “Rather, according to the trial court, judicial review consists of an assessment of whether the department proceeded in a manner prescribed by law in making a threshold determination.” The Court of Appeal disagreed that this less deferential standard of review was appropriate and emphasized that the lead agency has discretion in deciding how to identify baseline GHG emissions, against which project emissions would be measured, and to determine the significance of a project’s GHG emissions. The Court extensively cited to the California Supreme Court’s decision in Neighbors for Smart Rail v. Exposition Metro Line Const. Authority (2013) 57 Cal.4th 439 (Neighbors for Smart Rail), which holds that CEQA does not mandate an inflexible, uniform rule for the determination of existing conditions (i.e., the CEQA baseline). Since Neighbors for Smart Rail was decided after briefing had been completed in CBD v. CDFW, the Court ordered supplemental briefing that significantly benefited the Department.

The Court’s discussion of ENVIRON International Corporation’s technical addendum, which supported and informed the EIR’s analysis, was quite complementary and noted its contribution to the substantial evidence supporting the Department’s analysis of GHG emissions: “The department’s environmental baseline and significance conclusions, premised in part upon the ENVIRON International Corporation technical update and the air resources board scoping report, are supported by substantial evidence.” The Court, at some length, summarized the meticulousness of the technical addendum, which is not surprising given the Court’s laudatory comments during the February 5, 2014 oral argument in CBD v. CDFW. The Court’s discussion of these technical issues highlights the importance of an extensive and rigorous inventorying of GHG emissions by a competent environmental consultant. By contrast, in other EIRs using this same approach to GHG emissions analysis, courts have found that complete and consistent information on all aspects of the project’s emissions, and the current emissions at the site, was not presented for that specific project.[4]

Finally, the Court went out of its way to address a November 4, 2009 letter penned by Deputy Attorney General Timothy E. Sullivan (AG Letter), perhaps because the trial court opinion cited to it. Notably, the AG Letter forms the foundation of a critique by some groups that the break-from-BAU approach to analyzing GHG emissions inevitably results in use of an impermissible “hypothetical” baseline. This critique was raised at the February 5, 2014 oral argument repeatedly by counsel for CBD, which was not well-received by the Court. In its decision, the Court expressed a similar sentiment: “The project as originally conceived was not hypothetical. It consisted of anticipated real construction on and development of presently open space. Plaintiffs’ repeated characterizations [that] some hypothetical project was analyzed have no merit.” The Court’s opinion demonstrates an understanding that the break-from-BAU approach when properly applied does not alter the traditional CEQA baseline; rather, it uses the concept of BAU as measurement tool to assess the significance of a project’s GHG emissions “because the scientific community could not quantify when a particular increase [in GHG emissions] was significant.” Indeed, the Court agreed with the Department that “the trial court’s ruling, as do some aspects of plaintiffs’ analysis, conflated the baseline with the significance determination.”

[1] Aspects of the opinion also address exhaustion of administrative remedies, standards for “incidental take” of endangered species and permissible impacts on endangered species due to mitigations plans, and determination of economic infeasibility in rejecting project alternatives – all of which will be important precedent in other CEQA cases. We will be addressing these other aspects of the opinion in future postings to this blog.

[2] At the time of posting, the portion of the Court’s opinion addressing analysis of GHG emissions has not been certified for publication. Portions of opinions that are “unpublished” may not be cited in other court cases under California court rules. However, it is expected that the litigants or third parties may request to have the entire opinion published in the near future, and the Court of Appeal or California Supreme Court may act on this request.

[3] As noted by the Court, the 31 percent reduction should be considered conservative because the project’s independent efforts to reduce GHG emissions were not credited in the underlying calculation. In other words, the project likely would have shown a larger reduction from BAU if such efforts were credited.

[4] See, e.g., Friends of Oroville.

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Latham & Watkins LLP

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