First District Decision May Be the End of State Lands Commission’s Practice of Exempting Land Exchanges Under CEQA
In Defend Our Waterfront v. California State Lands Commission (Sept. 17, 2015) __Cal.App.4th __, the First District of the California Court of Appeal rejected the California State Lands Commission’s attempt to use a statutory exemption under the California Environmental Quality Act (CEQA) for title and boundary disputes to approve a land exchange for the embattled 8 Washington Street mixed-use project on San Francisco’s waterfront.
The 8 Washington project is located, in part, on filled tidelands currently owned by the City and subject to public trust restrictions on its use, including commerce, navigation and fishery. In order for the site to be used in private development, the City and the developer asked the State Lands Commission to approve a land exchange, in which a suitable private tract would be restricted to public trust uses and then provided to the City in trade for the project site. This type of transaction is common, particularly in San Francisco and other areas where there are significant stretches of filled tidelands, many of which are no longer on the water but cannot be used for non-public trust purposes. The State Lands Commission, which has jurisdiction over all tidelands and submerged lands owned by the state, must approve all such exchanges. In the past, the Commission has often relied on Public Resources Code section 21080.11, which exempts “settlements of title and boundary problems by the State Lands Commission and to exchanges or leases in connection with those settlements” from CEQA review, in approving such exchanges.
For the 8 Washington project, the State Lands Commission approved the proposed exchange in August 2012, finding that it was exempt from CEQA under section 21080.11. An opposition group, Defend Our Waterfront, successfully challenged the State Lands Commission’s approval, arguing that the CEQA exemption did not apply to land exchanges requested to aid private development. The Commission, the City and the developer appealed the trial court’s decision, arguing Defend Our Waterfront failed to exhaust its administrative remedies and the exchange was properly exempt under CEQA.
The Court of Appeal affirmed the trial court in full. With respect to the exhaustion issue, the Court determined that the State Lands Commission failed to trigger the need to exhaust because the online notice posted ten days before the hearing only informed the public of the intent to approve the land exchange, not to invoke a CEQA exemption. The Court rejected the argument that the group had actual notice, noting that such notice does not satisfy the requirements of Public Resources Code section 21177(e) where the agency failed to give the notice required by law.
The Court of Appeal also agreed with the trial court that the statutory exemption, by its terms, was limited to circumstances in which the State Lands Commission resolved a dispute over the title or boundaries of land. The Court of Appeal rejected the appellants’ request to construe “problems” broadly, noting that the express purpose of the land exchange was to remove an impediment to the development of the project. “Although that impediment is undoubtedly a ‘problem’ for the City,” the Court observed, “it is an economic one and not one grounded on the need for the [Commission] to exercise authority to ‘settle’ title and boundary disputes over filled tidelands.”
As a result of the decision, the State Lands Commissions can no longer rely on this exemption for approving land exchanges without a record showing a valid title or property dispute, not just an economic impediment to a project. But this does not mean an end to these transactions – they are too common and valuable for many types of development. Rather, it is likely that developers and cities will need to ensure that any CEQA review prepared for a project can be used by the State Lands Commission to approve any necessary land exchanges.