Second Appellate District Expands Baseline Analysis in Upholding Environmental Impact Report for Refinery Project Intended to Help Reduce Air Pollutants

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Last month, the Second Appellate District upheld the South Coast Air Quality Management District’s (“Air District”) Environmental Impact Report (“EIR”), which the Air District prepared to analyze the environmental impacts of a refinery project that was intended to increase compliance and help reduce air pollution.  Communities for a Better Environment v. So. Coast Air Quality Mgmt. Dist., Case No. B294732 (Apr. 7, 2020).  The project applicant owns and operates two adjacent oil refining facilities in Southern California, and sought to improve the integration of both facilities to allow flexibility in product outputs, which also increased the refinery’s compliance with air regulations, and thus helped reduce air pollutants.  As explained in greater detail below, the decision is particularly noteworthy because the court appears to have expanded the “baseline” analysis tied to air emissions, which is used to measure pre-project vs. post-project impacts to the existing environment.

The Air District’s review of the underlying project took three years and the Air District’s Draft EIR was the subject of over 2,000 public comments, which included comments totaling 1,112 pages from the plaintiff that later challenged the project.  Significantly, 1,798 comments or 85% supported the project—likely because the EIR found that the main environmental impact of the project would be to reduce air pollution; and the Air District’s Final EIR was lengthy and robust, containing 6,075 pages of public comments alone.

In 2017, the plaintiff challenged the Air District’s EIR as inadequate under the California Environmental Quality Act (“CEQA”).  After the trial court held that the Air District’s EIR complied with CEQA, the plaintiff appealed.

On appeal, the plaintiff challenged the Air District’s EIR based on four main issues: (1) that the EIR used the wrong “baseline” in relation to the project’s air emissions; (2) that the Air District failed to obtain information about the pre-project composition of crude oil for the refinery processes, instead simply concluding that post-project input would remain within the refinery’s “operating envelope”; (3) that the EIR did not explain how the Air District calculated a “6,000 barrel” figure, which was rooted in changes to a Heater air permit and a Delayed Coker Unit that could increase throughput by 6,000 barrels per day; and (4) that the EIR did not disclose either the existing volume of crude oil from the refinery processes as a whole, or the refinery’s unused capacity.  The Court of Appeal rejected the plaintiff’s arguments on all four issues.

On the first issue, which was the only portion of the court’s decision split on a 2-1 vote, the majority concluded that the Air District properly used its discretion to adopt a logical and conventional baseline.  More specifically, the Air District used a 98th percentile or “near-peak” baseline based on the refinery’s worst air pollution emissions during a two-year interval before the project.  The Air District’s approach then excluded the top two percent of the data from the baseline as extreme or unrepresentative outliers.  The Air District’s baseline analysis then compared the actual pre-project “near-peak” emissions with projected peak emissions after the project was completed.  This approach followed the United States Environmental Protection Agency’s use of a 98th percentile baseline to regulate air pollution at the national level.  Although the plaintiff argued in part that the Air District should have used an “average” value baseline, the majority concluded that the Air District’s approach was based on substantial evidence, and thus complied with CEQA.

This case is the next in a series of complex decisions that started in 2010 addressing what constitutes a permissible baseline for purposes of CEQA.  In Communities for a Better Environment v. South Coast Air Quality Management Dist. (2010) 48 Cal.4th 310, the California Supreme Court invalidated a project EIR on the basis that it improperly used a “projected baseline” in evaluating refinery expansion.  Although the facility was not operating at fully permitted capacity, the EIR used “permit limits” as the baseline for measuring project impacts, rather than current conditions reflecting actual emissions.  A series of cases have since refined when agencies may use a projected baseline, culminating in the Supreme Court’s decision in Neighbors for Smart Rail v. Exposition Metro Line Construction Authority (2013) 57 Cal.4th 439.  In that case, the Court held that while existing conditions is the normal baseline under CEQA, factual circumstances can justify an agency departing from that norm when necessary to prevent misinforming or misleading the public and decision makers, if that decision is supported by substantial evidence.  (Id. at p. 448-449.)

In this case, the court upheld use of the 98th percentile baseline, finding that the Air District’s baseline approach was supported by substantial evidence. Specifically, the court found that it was appropriate for the Air District to look to federal regulatory guidance to establish a baseline, that the 98th percentile did, in fact, reflect “existing conditions,” because it took data from actual operating days (albeit a subset), and that there was no requirement that the Air District used an averaging approach instead.

On the second issue, the court observed that CEQA did not require the EIR to detail input crude oil composition because this information was “immaterial” to assessing the project’s environmental impacts.  As the Air District pointed out in its briefing, the underlying crude oil composition could not change because processing crude oil with a different composition would require the refinery to make other equipment adjustments.  “Because the report disclosed the project would make no such changes, more information about crude oil composition was immaterial.”

On the third issue, the court found that the plaintiff forfeited its right to contest how the Air District determined the 6,000 barrel per day figure tied to changes to a Heater air permit and a Delayed Coker Unit because the plaintiff never previously raised the issue before the Air District.  Thus, this specific issue was forfeited on appeal.

Finally, the court concluded CEQA did not require the Air District to list or disclose in the EIR the refinery’s pre-project volume or the amount of crude oil the refinery processes as a whole, or the refinery’s unused capacity.  Because the Air District’s EIR explained why the project would not increase the refinery’s overall throughput, and was otherwise based on substantial evidence, the court concluded this additional information was immaterial.

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