May 7, 2010

California Appeals Court Calls for Clear Analyses in First Decision on Greenhouse Gas Reviews Under CEQA

Holland & Knight Alert
Jennifer L. Hernandez

On April 26, 2010, the California State Court of Appeals issued its highly anticipated decision in Communities for a Better Environment v. City of Richmond,—Cal.Rptr.3d—, 2010 WL 1645906. The case involved a challenge by Communities for a Better Environment and other environmental groups, including the Center for Biological Diversity, the Environmental Defense Center, and the Planning and Conservation League (referred to collectively as CBE), to the environmental impact report (EIR) prepared pursuant to the California Environmental Quality Act (CEQA) for the Chevron Energy and Hydrogen Renewal Project (Clean Fuels Project or Project). The Project involves the proposed replacement and upgrade of equipment and processes at Chevron’s refinery in Richmond, California.

In a strong rebuke to Richmond and Chevron, the Court of Appeals upheld two of the three trial court conclusions regarding the inadequacy of the EIR. Importantly, this case represents the first California appellate-level decision on the adequacy of an EIR’s greenhouse gas (GHG) analysis – one that will not only serve as judicial precedent but is also likely to be looked to for guidance by project proponents and lead agencies in determining how to conduct an adequate GHG review under CEQA. The opinion also emphasizes the importance of providing a clear, transparent project description and GHG analysis in an EIR.


The Clean Fuels Project at the Richmond refinery includes a number of improvements that are required for Chevron to increase its production of fuel mixes that meet California standards, as well as allow the refinery to use a wider range of crude slates than it currently processes. The Project also would make improvements to the refinery that increase its reliability and energy efficiency and decrease the amount of energy it imports.

CBE challenged the Clean Fuels Project’s EIR on a number of issues. The trial court largely sided with CBE, holding that the EIR was legally deficient because it: (1) included an unclear and inconsistent project description regarding whether the Project includes processing of heavier crude slates; (2) improperly deferred the formulation of GHG mitigation measures; and (3) improperly “piecemealed” the Clean Fuels Project, thereby underestimating Project impacts, by not including a hydrogen pipeline that would start at the refinery but travel through a number of jurisdictions. The Court of Appeals considered all three issues; it also looked at other challenges from CBE regarding the adequacy of the EIR’s cumulative impacts analysis and whether new information that arose during the project-approval process required revision and recirculation of the EIR.

The Holding

In its ruling, the appellate court criticized the EIR for being confusing and unsatisfactory as an information disclosure document. It held that: (1) the project description inconsistencies with respect to the processing of heavier crude rendered the EIR inadequate; (2) the EIR was deficient with respect to the analysis and mitigation of GHG emissions; and (3) the EIR was not piecemealed the hydrogen pipeline did not need to be included as part of the Clean Fuels Project. The court declined to address other contested claims about the adequacy of the EIR.

The court also addressed at some length the issue of whether the substantial evidence or independent judgment standard of review was appropriate for each of CBE’s claims. It concluded that the substantial evidence standard, which provides for a generally higher level of deference to the lead agency, did not apply to the question of the adequacy of the project description and the appropriateness of the EIR’s GHG mitigation approach, and instead reviewed these issues de novo, rejecting arguments that the independent judgment test inappropriately substitutes the court’s judgment for the lead agency’s.

The following discussion addresses three key aspects of this noteworthy decision.

1. An EIR Must Include a Clear and Complete Project Description

CBE’s primary challenge in the appeal was to the accuracy of the EIR’s project description. According to CBE, the EIR’s discussion of the types of crude the refinery currently processes compared to the larger range of heavy crudes that could be processed following project approval was so inconsistent that the EIR failed to provide an accurate, complete and stable project description, in violation of CEQA.

The court agreed with CBE. Emphasizing apparent inconsistencies in the EIR, it criticized the City for failing to provide a clear, supported baseline of the current fuel mix against which to compare the changed mix. The court also rejected attempts to remedy the EIR’s inadequacies with evidence submitted later in the process, after the Final EIR was issued but before the City had certified the EIR or approved the Clean Fuels Project.

The court was also critical of evidence, including expert opinion, which relied upon confidential business information that was not made available to the public as part of the EIR process. The court’s opinion on the adequacy of the project description focused on the importance of a transparent environmental review process that yields clear and publicly available information early in the process.

The opinion highlights the difficulty inherent in protecting confidential business information in the CEQA context – and the challenges inherent in the attempt to make EIRs readable for the general public while including enough technical information to respond to increasingly detailed and sophisticated comment letters and reports submitted after the draft and final EIRs are issued.

As the court stated in San Franciscans for Reasonable Growth v. City and County of San Francisco, (1987) Cal.App.3d 1544, 1548, EIRs must not be so “hypertechnical and confusing in their presentation [that they are] incomprehensible to the very people they are meant to inform.” For a complicated, technical project like the Clean Fuels Project, with sophisticated opponents who use subject-matter experts to make their case during and following completion of the final EIR, this case illustrates the difficulty of managing to provide enough information to support project approval. And, as was recently noted by the California Supreme Court in Communities for a Better Environment v. South Coast Air Quality Management District, (2010) 48 Cal.4th 310, 327-28, accurately defining the baseline for a complicated project such as one involving an oil refinery, where environmental conditions change quickly and are subject to factors such as resource scarcity, is inherently challenging.

Communities for a Better Environment also demonstrates the tension in attempting to respond to comments made late in the project approval process. As was made clear in Bakersfield Citizens for Local Control v. City of Bakersfield, (2004) 124 Cal.App.4th 1184, 1201, comments submitted even after issuance of the final EIR must be considered by the lead agency as part of the certification process. According to the Bakersfield court, an agency that fails to consider comments received up until the point of a public hearing on project approval does so at its own risk. “Late hit” comments typically are addressed in the EIR certification staff report or testimony at the lead agency certification proceeding, resulting in the introduction of new information – which generally does not change agency conclusions about the magnitude or significance of project impacts – following issuance of the final EIR. However, the Communities for a Better Environment opinion suggests that providing additional information after issuance of the final EIR may serve as evidence of the EIR’s inadequacy.

It is important to note that the court’s opinion does not necessarily suggest that all information must be included in the body of the EIR, but rather that information critical to determining a project’s impacts – in this case, information demonstrating the appropriate baseline with respect to the current crude slate – must be made available early in the process and in a format that can be scrutinized by the public. In addition (as is discussed below), the court was clearly frustrated with the City’s general failure to disclose information about the Clean Fuels Project and its impacts in a timely manner. Were it not for other flaws it found in the EIR, the court might have been more willing to accept later-offered information to fix the EIR’s project description weaknesses.

2. An EIR Cannot Defer GHG Mitigation Measures Without Identifying a Clear Performance Standard – and Without Providing a Clear Rational and Basis for Concluding That the Performance Standard Will Be Met by Feasible Mitigation

In this case, CBE also claimed that the EIR improperly deferred mitigation of GHG emissions until after the CEQA process was complete, and argued that this left the public out of an important part of the environmental review process.

While acknowledging the emerging nature of GHG science and law, the court was nevertheless critical of the EIR’s analysis of climate change impacts. For example, it noted that the significance of project GHG emissions was not acknowledged until a supplement to the final EIR was released following issuance of the Draft and originally-released final EIR. The supplement to the final EIR was released for public review less than two weeks before the Planning Commission hearing on the EIR, at which time the City invited comments on the Final EIR supplemental discussion on GHG impacts. At the conclusion of this hearing, the Planning Commission certified the EIR. Also criticizing the EIR’s value as a disclosure document, the court faulted the EIR for failing to provide adequate analysis for the GHG analysis.

The court then addressed the GHG mitigation approach in the EIR. This consisted of a commitment to a performance standard of “no-net-increase in GHG emissions,” which was to be achieved through implementation of a mitigation plan that would be developed, and submitted for City Council review and approval, within one year of project approval. The EIR included several examples of mitigation for the City to consider in formulating its plan, but did not require imposition of any particular measures; nor did it assess the feasibility of a menu of mitigation measures that would achieve the no-net-increase standard.

Though recognizing that deferring formulation of specific mitigation measures is appropriate under CEQA when a performance standard is established and a range of feasible measures are identified that can achieve this threshold, the court concluded that this approach was not appropriately implemented in the Clean Fuels Project EIR.

Specifically, deferral of mitigation was improper in this instance because the City: (1) first identified GHG emissions as a significant impact only after both the Draft and Final EIRs had been issued; (2) did not include sufficiently detailed information in the EIR regarding how GHG emissions were quantified; (3) provided no assurance that the mitigation measures to be included in the undisclosed future mitigation plan would be feasible or effective; and (4) created no objective criteria for measuring the plan’s success. The court also stated that, as a result of the late timing of the significance determination, the City was unable to gather sufficient information regarding appropriate, specific mitigation measures to impose.

The court appears to have used CBE’s claim of deferred mitigation to attack the transparency and openness of the environmental review process in general. Although the court’s holding was limited to the question of deferral of mitigation, the discussion and the court’s rationale suggest it was at least partially responding to the EIR’s overall approach to analysis of climate change impacts.

With respect to the deferred mitigation finding, the court did not say that an agency could never defer formulation of specific GHG mitigation measures, but rather that it would have to conduct a more comprehensive GHG evaluation, starting in the draft EIR, and not defer this until after the final EIR or later.

3. No Piecemealing When Record Shows There Is Independent Justification for Related Project(s)

The court also considered CBE’s claim that the EIR improperly left out analysis of a hydrogen gas pipeline that would be used to transport excess hydrogen created by the Clean Fuels Project. The pipeline would be owned and operated by a third party, and hydrogen would be sold to non-Chevron users. In reversing the trial court on this issue, the court upheld the longstanding CEQA principle that an agency does not engage in improper piecemealing or segmentation when two projects have independent justification and are not interdependent.

Implications of the Ruling

In its ruling, the appeals court evidenced its clear frustration with the EIR’s lack of clarity and failure to provide clear, publicly-available justification for its assumptions and analysis. This emphasis extends to the EIR’s climate change analysis, which the court took the opportunity to criticize in general by way of the fairly limited claim of improper mitigation deferral. The court’s decision does not foreclose the option of deferring formulation of specific GHG mitigation measures, but it does list the criteria that must be satisfied to justify such an approach.

Although this ruling does not address the many issues associated with addressing GHG analyses under CEQA, it does make clear that deferral of detailed GHG analysis is not lawful. Given the precedent-setting nature of this decision, project proponents, as well as lead agencies, are expected to look to it for guidance on how to conduct an adequate GHG review under CEQA.

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