California Supreme Court Clarifies Standards for CEQA Categorical Exemption Challenges | Practical Law

California Supreme Court Clarifies Standards for CEQA Categorical Exemption Challenges | Practical Law

The California Supreme Court clarified the standards for reviewing challenges to the unusual circumstances exception to CEQA's categorical exemptions, reversing the ruling of the California Court of Appeal.

California Supreme Court Clarifies Standards for CEQA Categorical Exemption Challenges

by Practical Law Real Estate
Published on 05 Mar 2015 • California
The California Supreme Court clarified the standards for reviewing challenges to the unusual circumstances exception to CEQA's categorical exemptions, reversing the ruling of the California Court of Appeal.
On March 2, 2015, in Berkeley Hillside Preservation v. City of Berkeley, the California Supreme Court clarified the applicable standards of review for determining whether the unusual circumstances exception is applicable for a real estate development that would otherwise fall under a categorical exemption under the California Environmental Quality Act (CEQA) (No. 5201116, (Cal. Mar. 2, 2015)).

Background

The City of Berkeley approved a use permit to build a 6,478 square foot house with an attached 3,395 square foot garage. The City zoning adjustment board found that the project was exempt from CEQA review under Class 3 (construction of limited numbers of new, small facilities or structures) and Class 32 (in-fill development) categorical exemptions (Cal. Code Regs. tit. 14, §§ 15303 (a), 15332).
The Berkeley Hillside Preservation (BHP) brought an action against the City, claiming that the home fell under the unusual circumstances exception to the CEQA categorical exemptions because its extremely large size would impact the environment. The unusual circumstances exception applies to projects that will have "a significant effect on the environment due to unusual circumstances" (Cal. Code Regs. tit. 14, § 15300.2(c)).
The trial court denied BHP's petition, and the Court of Appeal reversed, agreeing with BHP that the unusual circumstances exception precluded the City from relying on the stated exemptions. The Court of Appeal found that:
  • The fact that the proposed activity may have a significant effect on the environment by itself triggers the unusual circumstances exception.
  • The standard of judicial review of the agency's decision should be whether the record contains evidence of a fair argument of a significant effect on the environment.
The City appealed the Court of Appeal's decision and the California Supreme Court heard the appeal.

Analysis

Triggering the Unusual Circumstances Exception

On appeal, the California Supreme Court first analyzed the Court of Appeal's holding that a potentially significant environmental effect is by itself enough to trigger the unusual circumstances exception. The Court found that the lower court's ruling was contrary to the legislature's intent, as it had included the phrase "unusual circumstances" in the statute for a reason.
The Court held that the unusual circumstances exception requires that there be both:
  • An unusual circumstance that justifies removing the project from the exempt class.
  • A reasonable possibility of a significant environmental impact due to the unusual circumstance.
A party may also establish an unusual circumstances exception with evidence that the project will have a significant environmental impact

Standards of Review

The Court then looked to the proper standard of judicial review of agency findings for projects where the unusual circumstances exception is applied. The Court held that there should be two different standards of review:
  • An agency's determination of whether an unusual circumstance exists must be reviewed under the more deferential substantial evidence standard.
  • The finding as to whether that unusual circumstance gives rise to a reasonable possibility of significant environmental impact must be reviewed under the fair argument standard.
The court reasoned that since determining whether a project presents unusual circumstances is essentially a factual inquiry, courts should affirm the agency's finding if it is supported by substantial evidence on record. However, an agency's finding as to whether there is a reasonable possibility that the circumstance will produce a significant effect on the environment must be reviewed under the less deferential standard of whether the project opponent submitted substantial evidence supporting a fair argument that a significant effect may occur.
The Supreme Court reversed the Court of Appeal and remanded the case for a decision based on the new standards.

Practical Implications

This significant decision from the California Supreme Court provides important guidance for California developers and agencies by clarifying the two-prong standard of review. An initial agency finding that unusual circumstances exist to except a project from a categorical exemption will be more difficult to overturn. And the less deferential standard applied to determining whether there is a potential environmental impact from the project increases the likelihood that a more comprehensive CEQA review will be required.