REAL ESTATE UPDATE – SUPREME COURT LIMITS CEQA CHALLENGES

An “Unusual Circumstance” California Supreme Court Decision Limits CEQA Challenges

It took the California Supreme Court 46 pages to clarify the availability of California Environmental Quality Act (“CEQA”) exemptions.  The long-awaited decision in the Berkeley Hillside Preservation, et al. v. City of Berkeley case addressed a couple of crucial issues faced by developers of in-fill projects and other projects commonly understood to have insignificant impacts on the environment justifying blanket exemption from compliance with CEQA.

CEQA exemptions[1] are very important as they streamline the development process by eliminating entirely (when there is no challenge) compliance with CEQA with the expense and delay attendant to Initial Studies, Negative Declarations and Environmental Impact Reports.

Commonly used CEQA Exemptions are for construction of single-family homes, and infill developments of less than 4 acres.  The issue in the Berkeley Hillside case was the “exception” to the single family home exemption, commonly asserted by opponents of development projects.  This exception pertained to possible significant environmental impacts from an otherwise-exempt project due to “unusual circumstances.” 

If the “exception” to the exemption applied, CEQA compliance is mandatory even for relatively small projects. 

The issue in Berkeley Hillside was whether “unusual circumstances” were mandatory for the applicability of the “exception” and what standard of review applied in an agency’s finding regarding the issue of “unusual circumstance.” 

The Supreme Court in its lengthy and detailed analysis found that “unusual circumstances” (not just possible environmental impacts) must be established by a project opponent, that the burden was on the project opponent to establish such unusual circumstances, and that the agency decision regarding the existence of “unusual circumstances” would be reviewed under the generally applicable abuse of discretion standard.  The abuse of discretion standard is quite deferential to a local agency’s determination and upholds an agency action if there is substantial evidence in the record to support the agency’s action, even if there is conflicting and opposing evidence. 

This finding is very important as it greatly limits the applicability of the “exception,” thereby avoiding CEQA compliance for normally-exempt activities.  The Court expressly held that the mere existence of “possible significant environmental impacts” alone does not constitute an “unusual circumstance.”  A reasonable application of the Berkeley Hillside decision should preclude the application of the unusual circumstance exception to most projects (the “usual” project).

However, the decision is not a complete victory for the development community as the Supreme Court held that when an “unusual circumstance” is found by an agency, the determination of whether or not there is a “reasonable possibility of a ‘significant environmental impact’ is subject to the much lower standard of whether or not a fair argument can be made that the project may have a significant environmental impact.  This lower “fair argument” standard is the lowest legal standard under California law and is used in determining whether a non-exempt project can satisfy its CEQA requirement by way of Mitigated Negative Declaration rather than a full Environmental Impact Report. 

THE TAKE AWAY:

The bottom line is, projects claiming a CEQA exemption should be much more defensible under the decision of Berkeley Hillside, and the exemption should be upheld so long as there is substantial evidence in the record to support the determination of a local agency.  However, if the local agency does find an “unusual circumstance,” the exemption will likely not be available.  In the practical terms, the determination of a possible significant environmental impact under the “fair argument” test almost ensures the applicability of the unusual circumstance exception (the non-availability of the CEQA exemption) as it can be argued that almost any project “might” have a significant environmental impact.

The development community gained much more than it lost in the Berkeley Hillside decision and we can now wait to see how lower courts define “unusual circumstance.”  Gregory N. Weiler is a 30-year partner in Palmieri, Tyler, Wiener, Wilhelm & Waldron LLP, specializing in transactional real estate and land use.  Telephone:  (949) 851-8238/E-mail:  gweiler@ptwww.com.