Why California's Courts Should Revisit the Ceqa Unusual Circumstances Exception

Written by Patrick M. Huber¹

INTRODUCTION

Under the California Environmental Quality Act (CEQA), public agencies must conduct environmental review of projects that may have a significant effect on the environment.² As directed in statute, the Secretary of Natural Resources (Secretary) has identified classes of projects that do not have a significant effect on the environment.³ These classes of projects are "exempt" from CEQA's environmental review requirements. However, there are exceptions to the exemptions.⁴ The subject of this article is the "unusual circumstances exception" (exception).⁵

In 2015, the California Supreme Court overhauled the exception jurisprudence in Berkeley Hillside Preservation v. City of Berkeley (Berkeley Hillside).⁶ The Court's decision preceded a surge in the usage of categorical exemptions, which continues to rise.⁷ As public agencies apply categorical exemptions more often, challengers will more frequently try to require agencies to conduct environmental review. Consequently, petitioners will increasingly test Berkeley Hillside's rules and guidance.

Although the Court resolved conflicts among the lower courts, Berkeley Hillside and its progeny created new problems in the exception jurisprudence. The high and lower courts should reconsider these holdings. Otherwise, the flaws in the jurisprudence will result in courts misapplying CEQA. After a brief review of the exception and Berkeley Hillside, this article will explore flaws in the jurisprudence and suggestions for practitioners to address them.

THE UNUSUAL CIRCUMSTANCES EXCEPTION AND BERKELEY HILLSIDE

"The most commonly raised exception is the 'unusual circumstances' exception," which appears in the CEQA Guidelines.⁸ It states that "a categorical exemption shall not be used for an activity where there is a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances."⁹ Before 2015, California Courts of Appeal interpreted the exception inconsistently and applied varying standards of review.¹⁰ As seasoned CEQA practitioners know, the standard of review often determines the outcome of a challenge. Under the substantial evidence standard, courts must uphold an agency's finding "if there is any substantial evidence, contradicted or uncontradicted, to support it."¹¹ This deferential standard prohibits courts from second guessing agencies' subject matter expertise. Conversely, under the fair

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argument standard, if any substantial evidence supports "a fair argument that a project may have a significant effect on the environment, the lead agency shall prepare an [environmental impact report] even though it may also be presented with other substantial evidence that the project will not have a significant effect."¹² This non-deferential standard ensures that agencies err on the side of conducting environmental review when there is conflicting evidence.

In Berkeley Hillside, the California Supreme Court sought to establish a uniform test for the exception and address the inconsistent standards of review. The case involved the City of Berkeley's consideration of an application to demolish an existing house and construct a "6,478-square-foot house with an attached 3,394-square-foot 10-car garage."¹³ In approving the application, the City relied on two categorical exemptions: Class 3 (new construction or conversion of small structures)¹⁴ and Class 32 (in-fill development projects).¹⁵ Challengers conceded that the project fit into the two exemptions. However, they argued that the exception rendered the exemptions inapplicable because of the project's "'unusual size, location, nature and scope.'"¹⁶

The Court established a test for applying the exception: a party seeking to invoke the exception must show that: (1) unusual circumstances exist and (2) that there is a reasonable possibility of a significant effect on the environment due to the unusual circumstances.¹⁷ The Secretary declined to define "unusual circumstances," but the Court adopted guidance to determine whether unusual circumstances exist: "[a] party invoking the exception may establish an unusual circumstance without evidence of an environmental effect, by showing that the project has some feature that distinguishes it from others in the exempt class, such as its size or location."¹⁸ The Court also resolved the standard of review inconsistency, holding that both standards apply in a two-prong test. The unusual circumstances inquiry (prong one) is subject to the deferential substantial evidence standard, and the reasonable possibility inquiry (prong two) is subject to the non-deferential fair argument standard.¹⁹ After establishing the test, the Court remanded the case to the Court of Appeal.²⁰ On remand, the Court of Appeal deferred to the City's finding of "no unusual circumstances," upholding the trial court's denial of the petition.²¹

THE COURTS SHOULD REVISIT BERKELEY HILLSIDE AND ITS PROGENY

In Berkeley Hillside, the California Supreme Court resolved the standard of review conflict and established a test. However, parties and courts struggle to follow the Court's guidance and achieve logical results. Consequently, the decision and its progeny need refinement. As discussed below, courts should: (a) reconsider the unusual circumstances inquiry; (b) determine whether categorical exemptions apply before considering the exception; and (c) abandon the implied findings doctrine.

COURTS SHOULD RECONSIDER THE UNUSUAL CIRCUMSTANCES INQUIRY

Whereas CEQA requires a fact-based assessment of environmental impacts, the unusual circumstances inquiry is abstract and inherently subjective.²² Unusualness has no metric. Consider this hypothetical: all fusion power plants are categorically exempt from CEQA, and California hosts three existing fusion plants. A utility proposes a fourth fusion plant that would be the same as the existing three except that it would be 50 percent smaller. Does the smaller design constitute an unusual circumstance? Before answering, note that Berkeley Hillside directs parties to consider a project's size for prong one.²³ Many practitioners would conclude that the smaller design presents no unusual circumstances yet struggle to articulate why.

The common-sense answer is that although literally unusual compared with the existing, larger plants, the smaller-design plant could not be "unusual" under the exception because it would not affect the environment differently than the existing, larger plants. This rational response, however, would depart from the Berkeley Hillside framework. Recall that the exception applies if (1) unusual circumstances exist and (2) there is a reasonable possibility of a significant effect.²⁴ The smaller design's potential to meaningfully affect the environment any differently than the larger plants pertains to risk (or "reasonable possibility") of a significant effect. Thus, this common-sense answer is appropriate for prong two. Arguing that a project is not unusual because of its likelihood of a significant effect blurs the sequential prongs of the test. To correctly apply the Court's test, lower courts and practitioners must apply the two prongs discretely. In sum, courts and practitioners must determine prong one first without regard to prong two, the likelihood of environmental effects.

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This sequential process prohibits courts and attorneys from considering prong one in an environmental context even though it would benefit the analysis. Environmental context makes sense in a CEQA case, and it would also meaningfully focus the first prong inquiry. Prong one's lack of an environmental context denies parties an intuitive beacon for their analyses and, instead, allows them to argue that any difference constitutes an unusual circumstance.

Following Berkeley Hillside, parties have taken advantage of the overly broad inquiry by arguing that irrelevant features distinguish projects. In one case, a party argued that a proposed gasoline station's retractable bollards (thick metal posts to block traffic) distinguished it from other gasoline stations.²⁵ In another case, a party argued that Pacific Gas and Electric Company's criminal conviction constituted an unusual circumstance for re-leasing of existing infrastructure.²⁶ In another case, a party argued that the proximity of a proposed carwash to residences constituted unusual circumstances even though the same site was previously a carwash.²⁷ Including the environmental context in prong one would rein in these types of arguments rather than let boundless subjectivity drive the inquiry. Although none of these parties prevailed, the overly broad test invites challenges based on arbitrary differences.

Also, consider the burden on courts and agencies in responding to these...