September 23, 2010

CEQA Update: Water Supply Assessment Case Injects Unwanted Uncertainty for Renewable Energy Projects

Holland & Knight Alert
Chelsea Maclean

In a recent decision, Center for Biological Diversity v. County of San Bernardino (CBD) (2010) 185 Cal.App.4th 866, the court held that an environmental impact report (EIR) prepared pursuant to the California Environmental Quality Act (CEQA) for a 160-acre open air composting facility was inadequate since, among other reasons, a water supply assessment had not been prepared as required by the Water Code. Prior to this decision, no one has focused on a need for water supply assessments for outdoor industrial uses occupying over “40 acres,” particularly where there are few employees and low water needs, and lead agencies have not generally required water supply assessments for small utility-scale solar or wind projects located on over 40 acres. This case, however, injects unwanted and unwelcome uncertainty for permitting requirements related to such renewable energy projects.

Case Summary

In the San Bernardino case, the composting facility, which was proposed as an open air facility with no buildings on site, would have used only 1,000 gallons of water a day (1.10 acre feet of water a year). This is considered a fairly de minimis water use (compared, for example, to a 160-acre, 650-dwelling-unit (four units per acre) residential development, which would use approximately 780 acre feet of water per year). The project proposed that the water for dust suppression would come from one of three sources: groundwater; water imported by truck; or a combination of both. The court found that the EIR was inadequate with respect to its consideration of water supply and that the project was required to obtain a water supply assessment pursuant to Water Code Section 10912 et seq.

According to the published decision, it was undisputed that a water supply assessment had not been prepared for the proposed composting facility and that the information in the EIR pertaining to water supply was sparse. No consideration was given to the stability of the groundwater source or from what source water would be trucked. Many citizens, as well as the Mojave Water Agency (the water district serving the property), voiced concern about the EIR’s cursory analysis of water demand and supply for the proposed project. Despite the arguments that the Water Code’s water supply assessment requirements were not intended to apply to an open air facility or to de minimis water use, the court disagreed on both counts.

The water supply assessment statute requires water supply assessments when a city or county determines a proposed project is subject to CEQA and is also a “project” within the meaning of Water Code Section 10912(a). As is relevant here, Water Code Section 10912(a)(5) defines the term “project” to include a “proposed industrial, manufacturing, or processing plant, or industrial plant planned to house more than 1,000 persons, occupying more than 40 acres of land, or having more than 650,000 square feet of floor area.” The court determined that under the plain meaning of Section 10912(a)(5), the proposed project qualified as a “project” because the composting facility is a processing plant conducted on more than 40 acres of land.

The court rejected the county’s assertion that subdivision (a)(5) applies only to “large scale buildings located on large square footage or plots of land.” The court explained:

The Water Code does not define the term “processing plant” but the term “plant” is commonly defined as including the land, as well as buildings, machinery and fixtures, used in carrying out a trade or industrial business … . Had the Legislature intended the statute to apply only to processing operations conducted in large buildings, we presume it would not have included acreage as a separate factor in addition to square footage of a physical structure. An open-air composting facility is a “project” within the meaning of a subdivision (a)(5) of section 10912 if it meets the acreage threshold, even if the only structures on site are small ones.

The court also rejected the county’s argument that 10912(a)(5) applies only to operations with substantially higher water demands than those estimated for the proposed composting facility since the statutory limitation contains no limitations pertaining to water usage. Accordingly, the EIR was deemed to be inadequate since it did not include a water supply assessment.

Application to Renewable Energy Projects

Arguably, energy generation is not an “industrial, manufacturing, or processing plant” and therefore would not be a “project” under the statute. However, there is now uncertainty as to whether renewable energy projects would be viewed similar to the facility in the CBD case, as they are both open air facilities generally located on more than 40 acres of land. As with the facility in CBD, photovoltaic solar and wind projects also tend to have only de minimis water needs. For example, a 307-acre photovoltaic solar project would require approximately 2 acre feet a year; a 73-acre wind project with 68 turbines would require approximately 5.6 acre feet a year. Thus, a solar panel or wind operation occupying more than 40 acres could be interpreted to fall within the same definition of a “project,” thereby requiring the preparation of a water supply assessment prior to project approval.

As many such operations are proposed in dry climates where water supply is sparse and commitments for water supply from over-extended water districts may be hard to come by, the CBD decision has injected unwanted uncertainty into the question of whether water supply assessments are needed for even smaller utility-scale renewable energy projects. As is true in all permitting processes, careful planning, accurate identification of water needs and sources, and up-front communication with water districts and lead agencies provides the best opportunity for smooth entitlement processing.

Holland & Knight lawyers are highly experienced in permitting and entitlement work for projects in California including, for example, renewable projects ranging from 20 MW to 750 MW.

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