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California Supreme Court Invalidates EIR for Coastal Mixed-Use Development

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by Richard J. McNeil

The California Supreme Court’s recent decision in Banning Ranch Conservancy v. City of Newport Beach, ___ Cal. 4th ___ (2017) (Case No. S227473, Mar. 30, 2017) serves as a cautionary reminder that–as stated by the Court (citing Laurel Heights Improvement Association v. Regents of University of California, 47 Cal. 3d 376, 391-392 (1988)):

The preparation and circulation of an EIR is more than a set of technical hurdles for agencies and developers to overcome. The EIR’s function is to ensure that government officials who decide to build or approve a project do so with a full understanding of the environmental consequences and, equally important, that the public is assured those consequences have been taken into account.

In Banning Ranch, the City of Newport Beach approved an EIR for the development of a 400 acre parcel overlooking the Pacific Ocean (and thus also within the jurisdiction of the California Coastal Commission) for mixed use, including residential, retail and hotel uses.

The fact that the Banning Ranch development was within a coastal zone was at the heart of the dispute because Banning Ranch housed environmentally sensitive habitat areas (“ESHA”) under Section 30107.5 of the Coastal Act.  Under Section 30240(a) of the Coastal Act, such areas are required to be “protected against any significant disruption of habitat values, and only uses dependent on those resources shall be allowed within those areas.”

Although the record was clear that the City of Newport Beach was aware of the potential existence of ESHA on Banning Ranch due to a prior enforcement action by the California Coastal Commission (“CCC”), the City did not analyze ESHA at the site in substantive detail in its draft EIR.

The City already had, in its Notice of Preparation, indicated that it would not issue a Coastal Development Permit for the project (inasmuch as it lacked a certified local coastal program), but that such a permit would be sought by the developer from the CCC after the CEQA process was completed.

A number of commenters (notably, including Coastal Commission staff) raised the City’s omission, as well as the presence of potential ESHA on the Banning Ranch site during the NOP and DEIR comment periods and in fact CCC staff explicitly stated that Section 30240 does not permit “’non-resource dependent impacts to an ESHA area … [r]ather, Section 30240 requires that proposed new development be located outside of ESHA areas.’”

The City of Costa Mesa, located to the north of the project, also suggested that “[g]iven the significance of the project site, the EIR should consider the Coastal Commission thresholds for impacts to wild life and endangered species.”

However, for whatever reasons it may have had, the City elected not to revise its treatment of ESHAs in the final EIR, concluding that the City had “fulfilled its obligation under CEQA to analyze the significant impacts of a project on the physical environment” and that ESHA findings were “within the discretion of the Coastal Commission …”.  (In other words, the City determined to defer the ESHA analysis until the Coastal Commission could review the application for a Coastal Development Permit for the proposed development).

The Supreme Court was critical of this aspect of the City’s review, noting in particular that “[t]he City did not directly respond to staff’s concern about the identification of potential ESHA ‘before land use areas and development footprints are established’ [and] [i]t did not respond at all to the suggestion that ESHA and buffer zone delineations be reviewed by commission staff before the EIR was finalized.”

The Supreme Court, applying de novo review to the question of whether the EIR omitted essential information by not identifying and analyzing potential ESHA on Banning Ranch, concluded that the City’s approval of the EIR violated CEQA.

The Supreme Court reaffirmed that CEQA requires (i) that local agencies integrate the environmental review procedures applicable to a project so that they “run concurrently, rather than consecutively,” (CEQA Section 21003(a); CEQA Guidelines Section 15080); (ii) that the lead agency consult with, and take into consideration the needs of, all agencies which will use its EIR (CEQA Guidelines Section 15006(g) and (i) and Section 15124(d)(1)(c)); and (iii) that an EIR describe a range of reasonable alternatives that would feasibly attain project objectives, specifically including relevant regionally significant impacts, such as coastal zone impacts (such as ESHA).

The Supreme Court reiterated that the “[e]valuation of project alternatives and mitigation measures is ‘[t]he core of an EIR.’” As to the preparation and approval by the City of the Banning Ranch EIR, the Court stated:

No one factor establishes a categorical limit on the scope of reasonably feasible alternatives to be discussed in an EIR … [h]ere, however, the City’s EIR omitted any analysis of the Coastal Act’s ESHA requirements. It did not discuss which areas might qualify as ESHA, or consider impacts on the two ESHA delineated in the Coastal Commission’s consent orders.  As a result, the EIR did not meaningfully address feasible alternatives or mitigation measures.  Given the ample evidence that ESHA are present on Banning Ranch, the decision to forego discussion of these topics cannot be considered reasonable.

The Court further emphasized the importance of the lead agency undertaking a good faith attempt to analyze project alternatives and mitigation measures in view of other agencies’ applicable requirements to the project, such as ESHA, stating:

Here the City … openly declared that it was omitting any consideration of potential ESHA from the EIR, and deferring that analysis to a subsequent permitting process. The City’s approach, if generally adopted, would permit lead agencies to perform truncated and siloed environmental review, leaving it to other responsible agencies to address related concerns seriatim.

Even if solely limited to its facts, Banning Ranch would still be a significant decision because–apart from it being a Supreme Court ruling-the interplay between the Coastal Act and CEQA is of significant impact to the public, to municipalities and to developers (e.g., the new Executive Director of the California Coastal Commission recently noted that California has an $18 billion coastal tourism and recreation economy).

However, because there are numerous other California environmental statutes that contain special resource protections, for example, the California Water Code (which provides for, among other things, special protections for Areas of Special Biological Significance), the California Health & Safety Code (which provides for, among other things, special precautions respecting border zone and hazardous waste properties), as well as various Regional Water Quality Control Board and local air quality management district regulations affecting CEQA review, the potential that the Banning Ranch ruling may be extended to similar regulatory frameworks has the potential to increase the amount of time, the cost, and the complexity (and thus the level of uncertainty) attendant to the more rigorous review the Court suggested may be required in those cases. See, e.g., Sierra Club, et al. v. County of Fresno, 226 Cal. App. 4th 704 (2014), petition for review granted, 178 Cal. Rptr. 3d 320 (2014) (raising the question whether an EIR is adequate when it identifies the health impacts of air pollution and quantifies a project’s expected emissions versus whether CEQA further requires the EIR to correlate a project’s air quality emissions to specific health impacts).