In a case with potentially significant ramifications for environmental review in California, the California Supreme Court has ruled that the use of “categorical exemptions” from environmental review allowed under the California Environmental Quality Act (“CEQA”) must be permitted unless unusual circumstances warranting environmental review are demonstrated by substantial evidence. This ruling overturned an earlier decision of the lower court of appeal, which held that a “fair argument” that there was a reasonable possibility of such unusual circumstances was sufficient to require review.
Under CEQA, all development projects that could have a significant impact on the environment generally require at least some level of environmental review. The agency responsible for overseeing the environmental review of a project (the “lead agency”) may find, after performing its initial review, that there is no substantial evidence that the project will have a significant impact on the environment (a “negative declaration”), or it may find that the potential impacts of the project warrant the preparation of a full environmental impact report (“EIR”).
Within this analytical framework, however, CEQA also provides that certain types of projects are “categorically exempt” from environmental review. These particular types of projects have been exempted because they have been deemed minor in nature and unlikely to pose a risk of causing environmental harm. Even so, in the event “unusual circumstances” exist with respect to a particular project, the lead agency may require environmental review of the project under CEQA.
Among the categorical exemptions allowed under CEQA are single-family homes and in-fill projects. Relying upon these two categorical exemptions, the City of Berkeley (the “City”) approved the construction of an approximately 6,500 square foot house with an approximately 3,400 square foot attached 10-car garage in a heavily wooded hillside area without requiring environmental review. The City’s action was challenged both administratively and in court by a group of interested persons on the grounds that the house was unusual based on its size and location, and that there was evidence showing a reasonable possibility of adverse environmental impact, thus meriting environmental review. The trial court ruled in favor of the City, finding substantial evidence to support the City’s use of the categorical exemptions, and concluding that the project was not unusual. The court of appeal reversed, finding that the City could not approve the project relying on those categorical exemptions because the challengers had made a “fair argument” that unusual circumstances existed because of the reasonable possibility that the project may have a significant impact on the environment.
In a 5-2 decision, the California Supreme Court concluded that the court of appeal misapplied the language of CEQA when it found that the reasonable possibility of a significant environmental impact constituted an unusual circumstance for purposes of setting aside a categorical exemption. The Court reasoned that the appeals court’s reading of this language did not give meaning to the separate provision requiring a finding of unusual circumstances to warrant environmental review, independent from whether the project had a potential impact on the environment, thus improperly treating that language as surplus. In order to correct this error, the Court held that a challenger could either present evidence of an unusual circumstance, along with a reasonable possibility of a significant environmental effect, or show the existence of unusual circumstances based upon evidence that the project will have a significant environmental effect. The Court then ruled that, while the question of whether the project would have a significant environmental impact was properly subject to review by the courts under the “fair argument” standard of review, thus giving more leeway to the challengers, the issue of whether there were unusual circumstances with regard to the project would be subject instead to the substantial evidence standard of review, which would be more deferential to the City and its findings.
By its decision in this case, the California Supreme Court has provided lead agencies in this state with a clear advantage over those who would challenge its use of categorical exemptions.
The case is Berkeley Hillside Preservation et al. v. City of Berkeley, et al., S201116, California Supreme Court.