California Supreme Court Overturns Banning Ranch’s EIR for Failure to Analyze Environmentally Sensitive Habitat Areas

On March 30, the California Supreme Court rejected the environmental impact report (“EIR”) prepared by the City of Newport Beach for the Banning Ranch project because of the EIR’s failure to properly disclose and consider the presence of “environmentally sensitive habitat areas” (“ESHA”) on the project site.  Following the Court’s opinion, environmental review of all projects within the Coastal Zone will need to consider the potential presence of ESHA on the project site and account for that ESHA when developing project alternatives and mitigation measures under the California Environmental Quality Act (“CEQA”).  All CEQA reviews should also be wary of deferring analysis of impacts under any other “planning and environmental review procedures otherwise required by law or local practice,” which might include wetlands delineation or special status species impacts by state or federal agencies, until after completion of the CEQA review.

Though the case has broad application, a unique set of facts led the Court to arrive at its opinion. Banning Ranch is a 400-acre tract lying outside of the City’s limits but within its sphere of influence and, critically for the Court’s opinion, within the Coastal Zone.  The project proposed to build 1,375 residential units, 75,000 square feet of retail facilities, and 75 hotel rooms.  Because the land is within the Coastal Zone, the project requires a Coastal Development Permit (“CDP”) under the Coastal Act.  However, because the project was not within the City limits, the City had not yet received authority to approve a CDP through the completion of a certified land use plan for the area.  Therefore, the state Coastal Commission would be the agency with CDP authority for the project.

Under the Coastal Act, only the agency with authority to issue the CDP can “designate” ESHA.  The City relied on this in arguing that it was not required, and indeed legally could not designate ESHA for the project.  The Court disagreed, however, finding that the City was not required to “designate” any areas as ESHA, but did need to disclose the potential ESHA on the project site and to examine how the potential presence of ESHA would impact project design and the availability of mitigation measures and project alternatives.  This is especially true, the Court held, where, as here, the City had been presented with substantial evidence from numerous sources that certain areas of the project site were likely to be designated as ESHA by the Coastal Commission.

Critically for CEQA review throughout the state, the Court’s opinion relied on an often overlooked provision of CEQA that requires lead agencies to “integrate the requirements of this division with planning and environmental review procedures otherwise required by law or by local practice so that all those procedures, to the maximum feasible extent, run concurrently, rather than consecutively.” (Public Resources Code, § 21003, subd. (a) (emphasis added).)  The City, the Court ruled, was not allowed to defer the analysis of potential ESHA just because another agency would look at the issue during a later review of the project.  This holding means that lead agencies should exercise extreme caution in their CEQA reviews before deferring the analysis of project impacts under legal or regulatory schemes administered by responsible agencies.