HIGHLIGHTS:

• In Banning Ranch Conservancy v. City of Newport Beach, et al., the Supreme Court of California concluded that the City of Newport Beach (City) failed to sufficiently disclose and analyze impacts as well as a reasonable range of alternatives to a mixed-use project given a California Coastal Commission staff decision that approximately 80 percent of the site contained "environmentally sensitive habitat areas" (ESHA) under the Coastal Act, which prohibits development in such areas.
• The City disagreed with the Coastal Commission staff conclusion and the full Coastal Commission would have been required to decide the ESHA issue (as a subsequent responsible agency) under the Coastal Act, so the Environmental Impact Report (EIR) did not include a map showing ESHA boundaries or analyze alternatives that considered the legal infeasibility of development within ESHA.
• The Court rejected the City's contention that the substantial evidence standard should be applied to the City's rejection of the Coastal Commission staff's ESHA conclusion, and applied the "de novo" standard of review as to whether the lead agency appropriately integrated responsible agency input into the Draft and Final EIR. As a result, the Court gave no deference to the lead agency's determination that ESHA are not present on the project site.
• The case reaffirms the need for lead agencies to fully disclose and consider the jurisdictional claims and regulatory opinions of responsible agencies under the California Environmental Quality Act (CEQA).

In Banning Ranch Conservancy v. City of Newport Beach, et al., the Supreme Court of California held that lead agencies need to expressly disclose and consider the jurisdictional claims and regulatory opinions of responsible agencies under the California Environmental Quality Act (CEQA). In its opinion, issued on March 30, 2017, the Court found that the City of Newport Beach (City) failed to analyze impacts and mitigation for environmentally sensitive habitat areas (ESHA) identified by the California Coastal Commission, even though the City disagreed with the Coastal Commission that the project site contained ESHA.The Court's decision importantly conveys that if a lead agency disagrees with the findings of a responsible agency, the lead agency must nevertheless expressly disclose its disagreement – and to the extent that the disagreement affects the significance of an impact, the lead agency needs to support the explanation of its disagreement with substantial evidence. Further, even if the lead agency does this, it is unclear whether the lead agency would be afforded deference as to its conclusion to disagree with the responsible agency.

Case Background

The City prepared an Environmental Impact Report (EIR) for the Banning Ranch project, which is a proposed mixed-use development that would include up to 1,750 residential units in addition to retail and hotel uses. The project is located in a coastal zone under the California Coastal Act, which provides protections of ESHA – including a prohibition on non-habitat-dependent uses in such areas. Although the official ESHA determination by the Coastal Commission would take place after the City's consideration of the EIR (during the Coastal Commission's permitting process), an abundance of "credible evidence" in the record showed that the Coastal Commission (through consent orders applying to portions of the project site, comment letters and other communications) identified approximately 80 percent of the project site contained ESHA. In the final EIR, the City acknowledged the presence of ESHA, but did not disclose a map of the ESHA identified by the Coastal Commission, and did not consider in its impacts or alternatives analysis the legal infeasibility of developing on ESHA under the Coastal Act if the Commission itself ultimately agreed with the ESHA determination.

The Court's Decision

In another dilution of the traditional "substantial evidence" standard applied to the factual conclusions presented by lead agencies in EIRs, the Court identified this ESHA dispute as a procedural issue warranting a "de novo" standard of review. It is unclear, however, whether the Court would have afforded deference under a substantial evidence standard of review to the City's conclusion had the City explicitly discussed and substantiated with substantial evidence its disagreement with the Coastal Commission.

However, this case could be read as being consistent with California Native Plant Society v. City of Rancho Cordova (2009) 172 Cal.App.4th 603, in which the lead agency, the City of Rancho Cordova, was given deference as to its decision to disagree with responsible agencies. In that case, responsible state and federal agencies with jurisdiction over vernal pools and seasonal wetlands affected by the project unanimously disagreed with the lead agency's conclusion that the mitigation measures reduced the project's impacts to these resources to a less than significant level. However, in that case, the lead agency substantiated its disagreement and the court upheld Rancho Cordova's decision to disagree with these responsible agencies, finding that the petitioners did not carry their burden to show that there was no substantial evidence supporting Rancho Cordova's finding that the mitigation measures reduced the impacts to less than significant levels.

Had the City in Banning Ranch Conservancy explicitly disclosed its disagreement with the Coastal Commission and substantiated its conclusion that no ESHA are present on the project site with substantial evidence, it is possible that the Court would have refrained from using its own judgment to determine that ESHA impacts should have been analyzed.

Conclusion

This case affirms the need for a lead agency to expressly disclose any disagreement with the legal conclusions of a responsible agency, to support the lead agency's disagreement with substantial evidence and to disclose the consequences to the project (e.g., in requiring more mitigation or in requiring avoidance or reconfiguration of some project site area or feature). These steps will be key if the responsible agency's staff conclusion is ultimately upheld by the responsible agency's decision-maker after the lead agency completes the CEQA process. As a practical matter, in an EIR context such a disagreement can generally be well-framed as an alternative to more easily allow for a thorough discussion of the implications of the consequences of the responsible agency's opinions on multiple impact topics.

Unlike the Coastal Commission, other responsible agencies generally do not have the authority to totally ban development, so in most circumstances the lead agency can continue to satisfy its responsible agency consultation duties in the ordinary course (e.g., through the scoping process and in responding to comments on the lead agency draft CEQA document). Where a responsible agency's conclusion renders all or a portion of the project legally infeasible, as a practical matter this conclusion at minimum supports the need for full disclosure of the responsible agency's opinion and consideration of a project alternative that is legally feasible.