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California Supreme Court Clarifies Standard of Review for Agency Decision Concerning Preparation of an EIR for a Modified Project

On September 19, 2016, the California Supreme Court held that an agency is required to prepare an Environmental Impact Report (EIR) whenever there is substantial evidence that the changes to a project for which a negative declaration was previously approved might have a significant environmental impact not previously considered for the project as originally approved.   Friends of College of San Mateo Gardens v. San Mateo County Community College District (2016) 1 Cal.5th 937.

Background

In satisfaction of its California Environmental Quality Act (CEQA) obligations, the San Mateo Community College District (District) published an initial study and mitigated negative declaration analyzing the physical environmental effects of implementing a facilities plan that included the proposed rehabilitation of a building complex that included a classroom, lab structure, lath house and surrounding garden space.  The mitigated negative declaration stated that the plan would not have a significant effect on the environment.  The District later revaluated the proposed renovation, and decided that it would instead demolish, rather than renovate, the complex and replace it with a parking lot and then renovate two other buildings that had been scheduled for demolition.  The District determined that a subsequent or supplemental EIR was not required and addressed the changes through an addendum to the negative declaration, in which it indicated that the project changes would not result in new or substantially more severe impacts than disclosed in the original initial study and negative declaration.

Plaintiff, Friends of the College of San Mateo Gardens, challenged the District’s decision to prepare the addendum and sought an order directing the District to prepare an EIR.  The trial court found that the demolition project was inconsistent with the approved plan and its impacts were not addressed in the negative declaration.  In this case, the Court of Appeal affirmed, concluding that, as a threshold matter, the proposed demolition project was a “new” project, rather than a modification.  The Court of Appeal followed the appellate court decision in Save Our Neighborhood v. Lishman, 140 Cal.App.4th 1288 (2006), wherein the court concluded that whether a proposal constitutes a “new project” is a threshold question of law that the court must consider in determining whether an agency decision not to prepare a supplemental EIR was appropriate.  Relying on the “new” project standard, the Court of Appeal found that “under the straightforward facts of the present case we can decide, as a matter of law, that the demolition project is a ‘new project.’”

Supreme Court Review

The District appealed to the California Supreme Court.  On review by the Supreme Court, Plaintiff argued that the “new” project determination that the Court of Appeal adhered to is necessary before considering whether Public Resources Code section 21166 and CEQA Guidelines section 15162 apply.   Once a project is subject to environmental review, sections 21166 and 15162 limit the circumstances under which a subsequent EIR must be prepared.  Section 21166 provides that “no subsequent or supplemental environmental impact report shall be required” unless at least one or more of the following occurs:  (1) “[s]ubstantial changes are proposed in the project which will require major revisions of the environmental impact report,” (2) there are “[s]ubstantial changes” to the project’s circumstances that will require major revisions to the EIR, or (3) new information becomes available.  Section 15162 provides that no subsequent EIR shall be prepared unless, “[s]ubstantial changes are proposed … which will require major revisions of the previous EIR or negative declaration due to the involvement of new significant environmental effects or a substantial increase in the severity of previously identified effects.”

The Supreme Court rejected Plaintiff’s argument regarding the requirement for a “new” project determination.  The Court reasoned that Plaintiff would have courts determine whether an agency’s proposal qualifies as a “new” project, in the absence of any standards to govern the inquiry.  The Supreme Court, clearly concerned about the absence of a benchmark and the likelihood of arbitrary results, observed that some might view drastic changes to a project as a new project and others may characterize the same changes as a modified project.  Acknowledging that the central purpose of CEQA is to ensure agencies and the public are informed of the environmental effects of a project, the Court indicated that a decision to proceed under subsequent review provisions must rest on a determination that the original environmental document retains some value.

The Supreme Court held that the question is not whether an agency’s proposed changes render a project new in an abstract sense.  Instead, when there is a change in plans, circumstances, or available information after a project has received initial approval, the agency’s environmental review obligations turn on the value of the new information to the still pending decision-making process.  The Supreme Court held that if the original environmental document is still valuable, then the agency must proceed to determine whether project changes will require major revisions to the environmental document because of the involvement of new, previously unconsidered significant environmental effects.

With respect to the standard of review of a lead agency’s decision not to prepare a supplemental EIR, the Supreme Court concluded that whether an environmental document remains relevant despite changed plans or circumstances – like the question whether an initial environmental document requires major revisions due to changed plans or circumstances – is a predominantly factual question.  The question is for the agency to answer first, and for the courts to decide whether the agency’s decision is supported by substantial evidence.

Among other arguments, Plaintiff asserted that CEQA Guidelines section 15162 creates a loophole for projects initially approved by negative declaration by allowing agencies to evade their obligation to prepare an EIR based on the more demanding “fair argument” standard, so long as the potential environmental effects are caused by changes in the project after the negative declaration has been approved.  Plaintiff noted that, when an agency initially proposes a project, an EIR is required whenever a “fair argument” can be made, based on substantial evidence that a project may have a significant impact on the environment.  See Pub. Resources Code, § 21082.2, subd. (a).  This is the case even if there is evidence to the contrary because it could be fairly argued that the project might have a significant effect on the environment.  When, however, an agency proposes a change to a project, CEQA Guidelines section 15162 prohibits the agency from requiring an EIR unless substantial evidence exists that substantial changes will require major revisions to the previous EIR or negative declaration due to new significant environmental effects or an increase in severity of effects.

The Supreme Court dispatched with this argument by reasoning that the “substantial evidence” test that Plaintiff relied on for the “loophole” argument does not refer to whether there is substantial evidence that the project, as modified, will have a significant effect on the environment.  Rather, it refers to whether there is substantial evidence that the modifications will involve “substantial changes” that require “major revisions of the previous EIR or negative declaration” due to new or more significant environmental effects.  The Supreme Court noted that this distinction is important because whether major changes are required depends on the original environmental document.  A negative declaration is permitted where this is no substantial evidence the project may cause a significant effect on the environment, and an EIR is required when a project and its alternatives may have a significant effect on the environment.  For a project approved by a negative declaration, a major revision will be required “if the proposed modification may produce a significant environmental effect that had not previously been studied.”  The Court observed that “if the project modification introduces previously unstudied and potentially significant environmental effects that cannot be avoided, then the appropriate environmental review would no longer be a negative declaration, but an EIR.”  The Supreme Court ultimately held that the substantial evidence standard that CEQA Guidelines section 15162 prescribes requires an agency to prepare an EIR when there is substantial evidence that the changes to a project for which a negative declaration has been approved might have a significant impact not previously considered for the project as originally approved.  The Supreme Court explained that this rule forecloses an agency from avoiding preparation of a subsequent or supplemental EIR to address new, unstudied potentially significant environmental effects.  In this respect, there is not a “loophole” as asserted by the Plaintiff.

For more information please contact Aaron A. Ferguson at (916) 446-7979 or aferguson@somachlaw.com.

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