California Supreme Court Rules that "Established Levels Of Particular Use" are Baseline for CEQA Analysis

On March 15, 2010, the California Supreme Court held that that for the purpose of determining environmental impacts under the California Environmental Quality Act (CEQA), the measure of the environment's state absent the proposed project (the "baseline" for environmental analysis) must be based on actual physical conditions and not the maximum levels set forth in applicable permits. CEQA requires California public agencies pursuing or approving a project to prepare environmental impact reports (EIRs) if they determine that a project may have a "significant effect on the environment."¹ A "significant effect on the environment" is defined as a "substantial, or potentially substantial, adverse change in the environment."² The potential adverse changes considered in a CEQA analysis include, but are not limited to, those to water, air, land, wildlife and natural resources; however, the focus of this California Supreme Court holding was on the potential effects to air quality as a result of the proposed project.

In Communities for a Better Environment v. South Coast Air Quality Management District, ConocoPhillips had argued that the baseline level to consider was the level of nitrogen oxide that it was allowed to emit under its current permit, not the level of nitrogen oxide it was actually emitting. The South Coast Air Quality Management District had agreed with this analysis and, based on the company's permit levels, had determined that the proposed project at the ConocoPhillips refinery would not result in any environmental impact. Environmental groups challenged the Air District's decision.

The California Supreme Court disagreed with the Air District's approach and held that the CEQA baseline should be set at "established levels of particular use" and not at the "merely hypothetical conditions allowable under the permits." The Court further held that a CEQA baseline set at permit levels was "illusory," misled the public, and was "inconsistent with CEQA and the CEQA guidelines."

As part of its analysis, the California Supreme Court ruled that setting the CEQA baseline at current operating levels did not impinge on any of ConocoPhillips's vested rights to operate at permitted levels because:

1. The permits do not give ConcoPhillips the right to pollute the air at a particular level;
2. Denial of the new project does not in any way affect vested rights associated with the permits of an older project; and
3. Any potential impingement of vested rights would not justify the Air District's failure to undergo the appropriate environmental review.

This decision could have broad-reaching effects by potentially penalizing sources operating below permitted levels and encouraging an increase in emissions to those levels to increase the CEQA baseline for new project analysis. With the California Supreme Court's dismissal of any statute of limitations argument, even long-standing permitted levels could be impacted.

A copy of the slip opinion for this case is located here.

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