Supreme Court Reins in CEQA

Supreme Court Ruling In Hillside Development Case Strengthens CEQA Exemptions

By Arthur F. Coon

The California Supreme Court took a significant step to rein in the California Environmental Quality Act (CEQA) by strengthening its regulatory exemptions in a long-awaited March 2 ruling that should hearten California property owners, developers and brokers.

Enacted in 1970 and interpreted by the Court shortly thereafter to apply to private development projects requiring government approval, CEQA has become one of California’s most litigated statutes. Its burdensome, lengthy and expensive environmental and public review process for non-exempt development projects is familiar to many real estate and land use professionals, as well as to the cities and counties that must approve significant development projects.

Coon
Coon

While often a bane to developers, CEQA is a boon to project opponents litigating to stop development based on CEQA noncompliance. Plaintiffs need generally only produce some credible evidence supporting a “fair argument” that a project “may” have a significant adverse environmental impact to subject that project to CEQA’s most onerous level of environmental scrutiny—the requirement to prepare a full Environmental Impact Report (EIR). This low threshold “fair argument” test has made CEQA a perennial favorite in the litigation arsenal of environmental groups, NIMBYs, labor unions and even business competitors opposing new housing, commercial, mixed-use or infrastructure projects—and it has underscored the need for clear, practical rules governing the operation of its numerous regulatory or “categorical” exemptions.

In Berkeley Hillside Preservation v. City of Berkeley, a neighborhood group opposed the City’s approval of a 6,478-square foot house and 3,394-square foot garage proposed by Lotus 1-2-3 founder Mitch Kapor for construction on a steeply sloped, wooded lot in the Berkeley Hills. The neighbors hired an expert architect/engineer and challenged the City’s determination that regulatory exemptions for “small facilities or structures” and “in-fill” development projects applied to exempt Kapor’s mansion from CEQA review. The neighbors claimed the house was too big, seismically unsafe and would have environmental impacts so as to trigger an “unusual circumstances” exception to the exemptions. While the trial court agreed there was evidence of potential impacts, it found no “unusual circumstances” and upheld the City’s approval; the Court of Appeal reversed; and the Supreme Court granted review, and—after a 3-year wait—reversed again and remanded for further proceedings consistent with its decision.

In essence, the Supreme Court rejected the neighbors’ and the Court of Appeal’s position that merely presenting evidence that an otherwise-exempt project may have impacts is sufficient to defeat a CEQA “categorical” exemption. Rather, an opponent must make a two-part factual showing that (1) “unusual circumstances” exist, and (2) significant environmental impacts may result from those unusual circumstances. The determination on the first element made by the lead agency approving a project will be granted substantial judicial deference and will be overturned only if unsupported by any substantial evidence. Only the second prong of the “unusual circumstances” exception is subject to the low-threshold “fair argument” test—that is, once a project opponent succeeds in establishing that “unusual circumstances” exist, it then need only make a “fair argument” that significant impacts may result from those circumstances to establish the exception and defeat the exemption. Alternatively, an opponent may be able to establish both prongs of the exemption circumstantially if it offers “convincing evidence” that a project “will” cause significant impacts.

The Supreme Court’s decision represents a significant victory for developers, local agencies and others relying on CEQA’s categorical exemptions. The State Office of Planning and Research has adopted over 30 such exemptions for “classes of projects” found not to have significant effects, including (among many others) exemptions for certain infill development projects, historical resource rehabilitation, regulatory enforcement activities, minor land divisions in urbanized areas, minor alterations to land, construction of limited numbers of new, small facilities or structures, and operation, repair, maintenance and minor alteration of existing facilities with negligible or no expansion of existing use.

In fashioning a pragmatic solution to thorny legal issues surrounding categorical exemptions that had divided California appellate courts prior to its decision, the Supreme Court has provided a new analytic framework that should promote predictability and decrease the vulnerability of exemptions to litigation. For state and local lead agencies and the development community, that’s definitely a step in the right direction.

Arthur F. Coon is a Walnut Creek-based partner and co-chair of the Land Use Practice Group at Miller Starr Regalia. He may be reached at arthur.coon /at/ msrlegal.com.

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