California Supreme Court rejects use of maximum permitted operational levels as CEQA baseline for environmental review of refinery project

In Communities for a Better Environment v. South Coast Air Quality Management District, the California Supreme Court affirmed the appellate court’s decision and held that analyzing the “worst case” emission impacts of a new refinery project against the existing facility’s maximum permitted emission levels was inconsistent with the California Environmental Quality Act (Pub. Resources Code, §§ 21000, et seq. “CEQA”). The Court reasoned that the refinery project differed from proposals in past cases that simply modified a previously analyzed project or continued operation without significant expansion.

In this case, the defendant, South Coast Air Quality Management District (“District”) prepared a negative declaration analyzing the impacts of Real Party in Interest, ConocoPhillips’ proposal for an ultra low sulfur diesel fuel project, and concluded that the project did not have the potential to adversely affect the environment. The District acknowledged that in a “worst-case scenario” the project would create hundreds of pounds of additional nitrogen oxide (NOx) emissions per day (in excess of the District’s 55 pounds per day standard), however the District did not consider the emissions to be part of the project because the emissions did not exceed the maximum levels allowed under existing permits.

The Court of Appeal held that the new refinery and increased use of the existing equipment should have been evaluated as part of the project, not as part of the baseline, and the Supreme Court agreed. The Court relied on the general rule that the “physical environmental conditions,” as they exist at the time environmental analysis begins, “will normally constitute the baseline physical conditions by which a lead agency determines whether an impact is significant.” (CEQA Guidelines, § 15125(a).) The Court further cited a line of cases finding that the proper CEQA baseline was the existing physical conditions in the affected area, even when a plan or regulation allowed for greater development or more intense activity than had actually occurred. The Court concluded that comparing the proposed project to what could happen, rather than to what was actually happening, was inconsistent with established CEQA baseline principles.

The District and ConocoPhillips argued that application of the general rule would defeat the company’s vested rights and circumvent CEQA’s statute of limitations. The Supreme Court rejected both arguments. First, the Court questioned the presence of any vested rights, noting that existing permits did not give ConocoPhillips a vested right to pollute the air at a particular level, and certainly did not give it any rights for the ultra low sulfur diesel fuel project. Even if a vested right did preclude imposition of a particular measure or condition necessary to mitigate the project’s impacts, the Court concluded that CEQA still requires analysis of those impacts. “An applicant’s vested rights might constitute a valid reason to forgo particular mitigation measures,” the Court stated, “but are not an excuse to avoid realistic CEQA analysis.” Second, the Court rejected the statue of limitations argument, finding that the challenge was only to the new diesel project and would not affect ConocoPhillips’ ability to continue its existing operations.

The Supreme Court distinguished the matter from a line of cases that relied on maximum operational levels allowed under existing permits. In each case, the Court noted, the subject project was “merely a modification of a previously analyzed project and hence requiring only limited CEQA review . . . or as merely the continued operation of an existing facility without significant expansion of use and hence exempt from CEQA review.” The same could not be said for the ultra low sulfur diesel fuel project, as it was adding a new refinery to the facility and would require increase operation of other equipment. Finally, the Court concluded that the record—specifically the data in the negative declaration—supported a fair argument that the project will have a significant adverse effect on the environment, and affirmed the Court of Appeal’s direction to prepare an EIR.

For more information regarding this case or other CEQA and land use matters, please contact Timothy Cremin or Brian Crossman at 800.464.3559.