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Environmental & Energy

Land Use Roundtable


The perpetual focus of much of the attention of lawyers practicing land use law statewide, the California Environmental Quality Act, or CEQA, is at or near the heart of several major cases awaiting hearings or rulings by the state Supreme Court. Many other cases are on hold pending those decisions. And, as summer wears on and the impacts of the drought bear down on the West, issues of water policy and tough new proposed limits on greenhouse gas emmissions are also on the minds of practitioners.

California Lawyer met for a lively conversation on these and other issues with panelists Michael P. Durkee, Elizabeth Klebaner, and Gregory W. Sanders of Nossaman; James R. Janz of Sideman & Bancroft; and Sarah E. Owsowitz of Best Best & Krieger. The roundtable was moderated by California Lawyer and reported by Cherree P. Peterson of Barkley Court Reporters.

MODERATOR: The California Supreme Court is considering several cases involving CEQA. What are the most important issues in the balance?

SARAH e. OWSOWITZ: From a land use perspective, the most important pending case that I look to is Friends of the College of San Mateo Gardens v. San Mateo Community College District-Supreme Court No. S214061. Sound planning in California has really encouraged large-area plans and massive amounts of advanced environmental review for those plans, with the idea that it will streamline future development in these areas. The question in this case is: What is the standard of review for evaluating a change to one portion of an area plan; what makes it a significant change and a different project?

California Building Industry Ass'n v. Bay Area Air Quality Management District-Supreme Court No. S213478-asks a fundamental question that the court has never addressed, which is whether CEQA looks at the impact of the environment on the project or of the project on the environment. If the court says CEQA requires applicants and developers and lead agencies doing their own projects to look at the impact of the environment on the project, that means, for example, that if your coastline is eroding, it is the problem of the developer who might want to develop anywhere near that coastline, even though that developer obviously did not erode that coastline.

Center for Biological Diversity v. Department of Fish & Wildlife-Supreme Court No. S217763-considers the question of greenhouse gas emissions and how to create a threshold for measuring them. People who oppose the use of the so-called business-as-usual method always talk about it as a "baseline" issue, i.e. is the EIR using a hypothetical baseline when it estimates what the project's emissions would be under business-as-usual. Those who support the use of business as usual, or BAU, methodology talk about it not as a baseline but as a significance threshold.

If SB 32, which would amend AB 32 to require greenhouse gas emissions to fall 80 percent below 1990's levels by 2050, becomes law, or the state Supreme Court rules in Cleveland National Forest Foundation v. San Diego Assn. of Governments-Supreme Court No. S223603-that lead agencies must determine a project's consistency with the governor's executive order concerning greenhouse gases, this could make it very expensive to do any but the smallest projects. Once you have a significant and unavoidable impact-and you almost always would for greenhouse gases if your threshold is very restrictive-mitigation can be extremely costly and perhaps not even currently technologically feasible.

GREGORY W. SANDERS: And this morning the court handed down its decision in City of San Diego v. Board of Trustees of California State University (No. S199557, August 3, 2015)). The court ruled that CSU cannot dodge mitigation on the basis of the Legislature not having earmarked an appropriation for it.

The university argued that, based on dicta in a previously decided case, unless the Legislature specifically earmarked an appropriation for mitigation, the university system was powerless to spend money on it. In fairness, the justices must have weighed heavily the great disparity between the very broad scope of what the university proposes to do statewide versus the rather minuscule cost of mitigation: a $9.9 billion construction budget versus $15 million in mitigation costs.

MICHAEL P. DURKEE: For some time, EIRs have included discussions well beyond the pale of environmental impacts, to the point where proposed regulatory changes needed for the development project are themselves viewed as distinct environmental impacts.

MODERATOR: Wasn't it initially an attempt to make the proceedings and entitlements process more efficient?

DURKEE: Yes. But it has become confused. More and more there's a much wider discussion in the EIR of the project and all of the social, policy and economic issues it raises, not just its environmental consequences. The EIR becomes the locus of the "societal merits analysis" of the project, not just its potential significant environmental effects. Perhaps this reflects the social desire for a more holistic review of a project's strengths and weaknesses.

ELIZABETH KLEBANER: On the subject of CEQA subsuming larger policy issues, one major reason greenhouse gas emissions analyses are extremely onerous for the regulated community is that local agencies are being asked to formulate state policy on a project-by-project basis. The state and the regional air quality management districts have not established standards to achieve mid-century emissions reduction targets, but project proponents are on the hook to say whether a project proposed today will impede reaching statewide emissions reductions targets by 2050. The California Supreme Court is expected to address this issue in Cleveland National Forest Foundation, supra, 231 Cal.App. 4th 1056.

SANDERS: The CEQA process has made a lot of marginal projects better, but unfortunately the courts have allowed CEQA litigation to run amok. And just to underscore, CEQA documentation has become the Achilles heel of most projects. Most people are stunned at the amount of money that has to front-end a project just to get to the point of starting construction. It's adding significantly to the cost of housing. It's retarding economic progress, and one would hope that the Legislature one of these days would get its arms around this issue and enact some serious reforms.

JAmes R. JANZ: That's a pretty high standard. It's sort of human nature to throw everything into the CEQA basket. And it's political. If politicians can lump it into CEQA, say it ought to be evaluated, and if someone goes and brings a lawsuit to hash out the issue, then they can take their hands off it. They don't have to make a decision.

OWSOWITZ: So now the California Supreme Court's going to remake CEQA.

JANZ: There are two philosophical concerns about CEQA, on a high level. One is that everything keeps getting thrown into the basket, and the basket keeps getting bigger and bigger. And in some sense that really does make it more efficient because you're looking at all the issues. But a lot of people complain that it takes longer and costs more. I think that's the genie that you're going to have trouble putting back in the bottle. You can nibble around the edges and make technical changes in CEQA for things like vehicle miles of travel versus level of service, for example, things that are technical, and refine it, hopefully for the better. But the big philosophical issues, I don't think you're going to change. The other one that you hardly hear about is CEQA cases brought for reasons other than an environmental impact-because it's a union shop or it's a nonunion shop, because it's a developer who's a competitor. Those are some of the biggest complaints about CEQA; they're the most fundamental. But the problem is that they go to the psychology of the person bringing the suit and that's impossible to legislate.

DURKEE: Just because you're a competitor, doesn't mean you don't raise a valid issue.

OWSOWITZ: What I see a lot in CEQA reform is the environmentalists on one side, the developers on the other, and nobody looks at the public agency squashed in the middle. They just say, "Well, we'll pay for it. It will be fine." Many public organizations, special districts, city organizations and county organizations don't have the money or the political might. They're just the mouse in the middle between the developer and the environmental group.

KLEBANER: That is an interesting perspective, as the decision-maker is often viewed as holding all the cards.

OWSOWITZ: Well, to some extent. Also, remember that public agencies have to do CEQA reviews for their own projects and make them legally defensible, and there's nobody funding them. A recent study found that 49 percent of CEQA challenges are brought against public projects.

MODERATOR: How can conditions of approval be improved?

DURKEE: What I like about conditions of approval, and what I've spent lots of energy on is structuring conditions to work in both good times and bad. During the recession, lots of projects went belly up. Perhaps better conditions may have saved them. Better condition drafting does take a little bit more energy, involve a little more cost and require more focus on the part of the public agency staff and the developer. But it can mean the difference between failure and success. By way of example, I might do a 100-unit project. In boom times, those 100 units might sell in a year, and in bad times they might take five years or more to build out. So I'm going to structure that project and its conditions to reflect those two potential realities: I will propose five phases, each of which can stand alone and survive in bad times. I'm going to attempt to structure the conditions so that I'm only doing that infrastructure necessary for each unique phase when I am actually constructing that phase, in order to keep my costs down. But, I will also build in the flexibility to be able to take advantage of a boom market, by having the ability to collapse multiple phases into one phase. If each phase can stand alone, the agency is not going to have a problem with me collapsing those phases into fewer phases, as long as all of the necessary infrastructure is in place when needed to handle project impacts. So I always say to planners, "If it's stopped at phase two, would you be proud of it if it never went further?" Developers want to go fast when the market's there, and if the market's not there, both the developer and the public agency should want the project to stay alive until the market returns.

JANZ: Conditions of approval are often 5, 10, 15, 20 pages long and longer, and include comments from the fire department, the planning department, engineering, transportation, and so forth. So you have to have your architects, your engineer, everybody on board to go through all those conditions and make sure that they all understand. And a lot of them are just technical things that the engineer or the architect would have designed anyway, because they're following the Building Code. And then usually the controversial ones are the ones that filter to the top and become the more global issues. And those are the ones you really have to pay attention to and walk through with your client.

DURKEE: Strangely enough, you put all of this energy into the process, into CEQA, into the politics, into working with staff, and the one place that generally goes fairly unnoticed is the conditions of approval. I regularly find out as I'm reviewing them that certain standard conditions may completely erode the project's otherwise applicable vested right. If you do not timely challenge such a bad condition, the project could end up married to it, despite its vested rights.

KLEBANER: That is a great point. Mitigation measures can be a moving target. At times measures are added on the night the project is approved. It is a really good policy to always coordinate mitigation measures with conditions of approval, and ultimately it may be the most important thing once you get that approval from the decision maker.

OWSOWITZ: Although, ironically, the flexibility of mitigation measures is sometimes what the developer is pushing for. They want it to be "examples include" or "they may" or "if feasible," "if reasonable."

KLEBANER: That is a different issue from conflicting requirements and obligations that can keep a project from going forward.

JANZ: The developer just wants approval.

KLEBANER: There is a middle ground where you can craft a mitigation measure broadly enough to allow flexibility on the back end and avoid issues like improper deferral of environmental analysis.

OWSOWITZ: Yes. You could say that the ratio might be developed in certain ways, but not set the ratio. You always need to set a floor. If somebody wants to go above it, they can go above it, but you have to have a floor.

MODERATOR: What are the implications of Friends of Eel River v. North Coast Railroad Authority (Supreme Court No. S222472)?

JANZ: In full disclosure, I'm an officer and a director of a nonprofit group called The Community Coalition On High-Speed Rail, which is a grassroots organization on the San Francisco peninsula and an amicus in this case. Our group also was a co-plaintiff in litigation on a program-level EIR for high-speed rail; the published decision of the appeal in that case is known as Town of Atherton v. California High-Speed Rail Authority (2014) 228 Cal.App.4th 314. I wasn't counsel, and I'm not speaking for CC-HSR or its counsel. My comments are mine alone. But let me tell you what went on.

There were two lines of parallel legal activity. One was a CEQA case against high-speed rail in the Third District Court of Appeal involving the Bay-Area-to-Central-Valley project-level EIR. The other was a matter before the Surface Transportation Board in Washington, D.C. The High-Speed Rail Authority came in on a demurrer, late in the CEQA appellate case and said CEQA is preempted by the Interstate Commerce Commission Termination Act of 1995 (ICCTA) with respect to the high-speed rail project. Now ICCTA was part of the deregulation of the '80s and '90s under Reagan and George H. W. Bush. I was actually surprised to see it was enacted in 1995, because that was the Clinton era. But one of the things it did was to get rid of the Interstate Commerce Commission and create the Surface Transportation Board. So the California High-Speed Rail Authority went to the STB and petitioned for a declaratory order for exemption from CEQA, the state law. The STB approved that on a two-to-one vote. That action is being appealed in federal court in the Ninth Circuit by most of the parties from the CEQA case and in the D.C. Circuit by Dignity Health, which has a hospital in the Central Valley that would be affected.

In its ruling, the state Court of Appeals said that application of CEQA to the High-Speed Rail Authority project is not preempted, and it cited the market-participant exemption, which is an exception to the regulatory preemption for state policy. So, whereas California may be restricted from imposing a policy that affects a private railroad, it's not preempted in applying that policy to itself as the operator of a railroad.

Now comes Eel River. Here both the trial court and the First District Court of Appeal determined that application of CEQA was preempted by ICCTA. Eel River concerns the action by a state-formed sub-entity, which is not an agency of state government, but was formed pursuant to state powers, called the North Coast Railroad Authority. So it's not exactly in the same position as the California High-Speed Rail Authority, which is a state agency, but it's darn close. The state requested that the Third District decision be de-published. The Supreme Court declined to de-publish it, so there's a clear conflict between the districts before the Supreme Court.

And then there's a quick side bar. There's a local entity called Caltrain, which is trying to electrify its line on the peninsula from San Francisco to San Jose and was appropriated something like $670 million by the state Legislature in high-speed rail funds. Caltrain prepared an EIR that was challenged by many of the same entities involved in the Atherton case. And Caltrain took the position before they went out with their EIR that, look, we're going to do everything we can to comply with CEQA, but if you challenge us we're going to play the STB card and say that we're exempt. Well, they were challenged and they went to the STB, and were denied! The STB, now with only two members, who are of opposite allegiances, held that Caltrain was a commuter railroad and not subject to the STB's jurisdiction.

All right. Back to Eel River. The outcome of this case could determine whether the California high-speed rail project will continue to be subject to CEQA or not. The eyebrow-raising aspect of this case is that the Attorney General's office, in its amici briefs on behalf of the California EPA and other agencies, is arguing for preemption by the federal government of a state law, where you would normally think the State would be arguing in support of state law.

DURKEE: They want the rail.

OWSOWITZ: I think there are 11 lawsuits that are stayed pending the outcome of the Supreme Court's ruling in Eel River. It begs this fascinating question that is not per se a land use or CEQA question, but the judge in Sacramento Superior Court who's hearing the cases was very clear that he didn't really care what the STB said. They didn't have any precedent over him. He's a state court judge. So there are enormous interesting questions, not just about federal preemption, but the interaction of federal regulatory bodies, federal courts, and state courts.

KLEBANER: Whereas the Court of Appeal in Eel River deferred to STB decisions on preemption.

SANDERS: Similar to crude by rail. It's only relatively recently that crude by rail proponents have asserted federal preemption. When one of the crude-by-rail projects in California started out, for example, there was no consideration given to the preemption issue. So they have gone through a lengthy, expensive CEQA process that may have been unnecessary.

DURKEE: Well, it's a beautiful stalking horse. It's something you can absolutely hide behind to save political face. Is there any CEQA document Atherton would support, or is it more that the location of the train anywhere on the peninsula is considered the wrong neighborhood in which to place it?

JANZ: I'm not on the Atherton City Council anymore so I don't really speak for them, but I would say if one designed a route or a construction method that had less impact on the community, they would have less reason to be concerned. They want to use the existing CalTrain right-of-way, which of course was never designed to carry as many tracks as they want, as well as freight. It's trying to shoehorn a project into a location where it doesn't fit very well.

The other interesting thing is that there were lots of studies done of high-speed rail before the current proposal was approved in 2008, and each one said come up through the Central Valley and into the Bay Area through the Altamont Pass and then spread out to San Jose and San Francisco. It was only the last iteration where some High-Speed Rail Authority board members who were from San Jose wanted to come to San Jose first that they decided to take the Pacheco pass.

OWSOWITZ: I do think settlement in these lawsuits is possible. Bakersfield settled with a commitment from the High-Speed Rail Authority to do a supplemental CEQA on a more circuitous route around Bakersfield. And that's not an unreasonable use of a CEQA lawsuit. Whether we agree or don't agree with someone's being offended by the noise of a train, it is still a noise and an impact to the environment. These are your classic CEQA petitioners, if that makes sense. They really are concerned with the noise, the vibration, the blockage.

JANZ: And the visual impact. The other real problem with the high-speed rail cases, however they come out, is that the state is saying it's a $68 billion project, at the low end, while they have $13 billion, at best. There's no money coming from the feds with the Republican congress. No private party has stepped up to offer any funding. Even if they spent $13 billion-which would mostly be in the Central Valley on rerouting an existing rail line for Amtrak-then what? Any kind of settlement that might be reached would be all contingent on something happening someday. But there's no money out there to do it.

MODERATOR: In closing, what challenges do you see for housing growth, given the available water supply and the governor's order setting new greenhouse gas reduction targets?

JANZ: The whole concept of meeting long-term greenhouse gas limits and handling population growth in the state affects RHNA, the regional housing needs allocation process. Because that was designed to get new development to have people live in the places where they already are. But, of course, it doesn't make the development happen. It only says you have to plan the ability to make it happen in case a developer comes along and wants to build something. Despite the fact people are predicting a good chance of an El Niño event this next year, other people are also saying look on a long-term basis. California may be subject to very long-term periods of drought, up to a decade or more. And if it happened in the past, it could happen again. And, if we have decades of droughts like we have had in the last year, that would be absolutely devastating.

OWSOWITZ: It begs the question can we support our existing population. I agree.

DURKEE: But where should it go? I look at all these beautiful, very expensive enclaves that will fight to the last man and woman to never have affordable housing. It's just traditionally been the case. We talk supportively about high-speed rail, but we don't want high-speed rail in our backyard. We talk supportively about affordable housing, just not in our backyards. We're hypocrites. You say, in the Bay Area, it should be rental units where there's less greenhouse gas generated by commuting. But Joe and Jane six-pack who are working two jobs and have two kids want to own a house. And the only house they can afford is over the hill.

So are you telling them they can't have the house because it's better for society if they rent closer in? And then the rent they would pay here may be more than the mortgage they pay there? I don't know what the answer is, but I have not seen a political will by public agencies closer to urban employment centers to provide more affordable housing. Maybe a regional government system could overrule such local parochial thinking, but I do not see cities and counties ever ceding power to such a regional body.

SANDERS: And that's where the courts come in.

DURKEE: The courts can't decide that you're going to have regional government.

SANDERS: Yes, but regional governments do exist. The San Joaquin and Foothil/Eastern Transportation Corridor Agencies are regional agencies that built three toll roads in Orange County. The California Supreme Court in the COST case (Committee of Seven Thousand v. Superior Court (1988) 45 Cal. 3d 491), held that the City of Irvine cannot stop construction, for example.

DURKEE: Agreed. There's all sorts of regional governments for services and major transportation infrastructure. But, I cannot see our local land use authorities-cities and counties-ever ceding their local land-use power to a larger, more powerful regional government that could overrule their decisions. Perhaps on my tombstone it will say: "He was wrong about this one," but I will still take that bet.

SANDERS: It may not be up to them. Like lots of other areas where the political establishment advocates, the courts fill the void. One of these days, I predict, there will be a very significant lawsuit, well-funded with lots of good facts, that will take on the whole affordable housing issue. And it's going to wind its way through the court system, and the political establishment will be very sorry for abdicating.

Michael P. Durkee is a partner with Nossaman's San Francisco office, where he practices land use, elections, and local government law in both administrative and judicial proceedings. He represents developers, builders, property owners, cities, counties, special districts, and interest groups in all aspects of California local government, elections, and land use entitlement, review, approval processes and litigation in both state and federal courts.

James R. Janz, a partner at Sideman & Bancroft in San Francisco, has more than 30 years of experience as a land use and real estate attorney, with a decade of service as a planning commissioner and eight years as a city councilman. He is also a licensed civil engineer and urban planner. In addition to private practice, Janz has served as in-house counsel for a corporate restaurant group, and as general counsel for a hotel developer.

Elizabeth Klebaner is a senior associate at Nossaman and a member of its environment and land use group. She advises public-agency and private-sector clients on CEQA and NEPA compliance and administrative law issues. Ms. Klebaner also represents clients in writ proceedings. Prior to joining Nossaman, she represented labor and environmental groups in regulatory proceedings before the California Energy Commission and the California Public Utilities Commission.

Sarah E. Owsowitz, of counsel with Best Best & Krieger in Walnut Creek, focuses on CEQA and land use advice and litigation. She represents both public and private clients in administrative proceedings and litigation and has substantial experience in obtaining entitlements and preparing and defending CEQA documents and approvals for large-scale retail projects, as well as renewable energy, water, logistics, and mixed-use projects.

Gregory W. Sanders is a senior partner with Nossaman in Irvine. He specializes in land use entitlement, environmental and real estate transactional matters. Mr. Sanders represents real estate development companies and investors, landowners, telecommunications companies, and government agencies throughout California on general plan, zoning and environmental issues, permitting of complex real estate development projects, and real estate purchases, sales, and leases.


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