New California Supreme Court Decision Affects the Environmental Review for Modifications to Existing Operations

Communities for a Better Environment v. South Coast Air Quality Management District

On March 15, 2010, the California Supreme Court issued its highly anticipated ruling in Communities for a Better Environment v. South Coast Air Quality Management District. The Supreme Court's decision changes the rules for determining CEQA "baseline" conditions when modifications are proposed at existing facilities. The Supreme Court rejected the use of maximum permitted operational levels as the baseline, but will continue to allow businesses with fluctuating output or volume to account for these fluctuations in selecting an appropriate baseline.

The case arose from ConocoPhillips' proposed modifications to a Los Angeles-area cogeneration plant, several boilers, and other facilities, as part of a project to produce ultra-low sulfur diesel fuel. These facilities were subject to existing air pollution permits from the South Coast Air Quality Management District. The project was expected to increase emissions from these facilities; however, the increases would not exceed the maximum emissions allowed under the existing permits. In its CEQA review, the air district used the maximum permitted emissions levels to establish the baseline, and did not consider the anticipated increase in emissions as part of the project. The air district's negative declaration was challenged by a variety of groups which claimed an EIR should have been prepared.

The Supreme Court's analysis began with CEQA Guidelines section 15125, which provides that the baseline "normally" consists of the physical environmental conditions existing at the time the environmental review is commenced. The Court acknowledged that a snapshot of operations at that time does not always represent typical operational conditions: "A temporary lull or spike in operations that happens to occur at the time environmental review for a new project begins should not depress or elevate the baseline..." The Court noted that state appellate courts had addressed the issue by approving alternative methods for describing the baseline when operations are characterized by fluctuating output. However, each of these cases, in the Court's view, held firm to the principle that the baseline "must be the 'existing physical conditions in the affected area.'" The Supreme Court found that the maximum permitted operations was not "a realistic description of the existing conditions," and that using the existing permits to establish the baseline therefore violated CEQA. Importantly, the Supreme Court did not attempt to dictate an alternative method for calculating the baseline, but rather left the issue to the CEQA lead agency's determination.

The decision is important to business of all types, but has particular application to existing operations with fluctuating volumes or output. Prior to the decision, agencies could use maximum permitted levels of operation to establish the baseline if actual operational levels at the beginning of the CEQA review did not represent typical past conditions. The Communities for a Better Environment decision significantly limits this approach. Now, the baseline for fluctuating operations cannot be established solely upon permitted levels of operation. The Supreme Court's decision, however, largely preserves lead agencies' discretion to select an alternative baseline that recognizes the effects of actual past operations.

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