California Court of Appeal Rejects Refinery Plan for Failure to Quantify GHG Impacts and Specify Mitigation

In a unanimous opinion, the California Court of Appeal recently rejected an Environmental Impact Report (EIR) evaluating the potential expansion of an oil refinery on the grounds that the EIR failed to quantify the greenhouse gas (GHG) emissions created by the refinery’s expansion and identify specific mitigation for those impacts.[1] The opinion was issued in the case of Communities for a Better Environment v. City of Richmond.[2] The decision follows a trend that begun three years ago of using state and local environmental review statutes to force climate change analysis of proposed projects.[3] By one count, 34 such cases have been filed or decided since 2007, and in many of them, additional analysis of GHG impacts has been required.[4]

Background

The case arose out of an effort to retrofit a Chevron oil refinery in Richmond, California, about 10 miles north of Oakland. Five residential neighborhoods are located within a one-mile radius of the refinery. Chevron first submitted permit applications to upgrade the refinery five years ago. The modifications were designed to allow the refinery to accept a different mix of crude oil from a wider variety of sources,[5] allowing Chevron to increase production of gasoline that meets California Air Resources Board (CARB) standards and decrease production of gasoline not meeting CARB standards by an equivalent amount.

In June 2005, the City required Chevron to prepare an EIR for the project. The draft EIR was published in May 2007 and a final EIR was published in January 2008, following a public hearing and after receipt of public comments. The final EIR did not characterize project’s climate change impact as significant, claiming such a determination was “too speculative.”[6] However, in May 2008, the City issued a revised EIR in which it stated that the project’s GHG emissions would “most likely be a significant effect on the environment.” Based on that conclusion, the City required Chevron to describe and adopt measures to “mitigate and avoid” those impacts.[7]

The mitigation plan, which was ultimately approved by the City, required Chevron to hire an expert to complete an inventory of GHG impacts and identify mitigation measures “within one year of Project approval.”[8] This approach was challenged by the project’s opponents, who maintained that the revised EIR neither identified nor adopted specific mitigation measures for GHG impacts.

Three citizens groups[9] appealed the City’s decision to approve the EIR under the California Environmental Quality Act (CEQA),[10] raising three major arguments: First, the opponents argued that the EIR did not quantify and mitigate increased GHG emissions that would result from the modification. Second, they maintained that the EIR failed to disclose or analyze the fact that the project would increase the refinery’s ability to process lower quality and more contaminated crude oil. Finally, they argued that the EIR did not assess the impacts from a new pipeline for the transport and sale of excess hydrogen.

The trial court found for the citizens groups on all three counts. It held that the EIR violated CEQA because it allowed Chevron to defer preparation of a mitigation plan for the project’s GHG impacts until a year after the project’s approval, and also because it was “unclear and inconsistent as to whether [the P]roject will or will not enable Chevron to process a heavier crude slate than it is currently processing.”

Deferring the Quantification and Mitigation of GHG Impacts Violates CEQA

On appeal, the California Court of Appeals largely upheld the trial court. The appellate court noted that the draft EIR predicted a “net increase in CO2 of 898,000 tons per year,”[11] yet failed to “state conclusions about the extent of any impacts or potential mitigation.” In their briefing, amici pointed out that mitigating 898,000 metric tons of GHG emissions would be equivalent to taking 160,000 cars off the road.[12]

The appeals court also held that California’s Global Warming Solutions Act of 2006 constituted an “express acknowledge[ment] that greenhouse gases have a significant environmental impact.”[13] The court also pointed to the California Air Pollution Control Officers Association’s white paper (released in January 2008) which discussed how to determine whether a project’s GHG impacts were significant under CEQA, as well as EPA’s GHG Endangerment Finding under the Clean Air Act (which the court acknowledged came during the pendency of the appeal).[14]

In addition, the Court of Appeals held that the EIR failed to identify the specific mitigation measures to address the increased GHGs from the project and that deferring development of mitigation until a year after approval violated CEQA.[15] “No effort is made to calculate what, if any, reductions in the Project’s anticipated greenhouse gas emissions would result from each of these vaguely described future mitigation measures. … [T]he development of mitigation measures, as envisioned by CEQA, is not meant to be a bilateral negotiation between a project proponent and the lead agency after project approval; but rather, an open process that also involves other interested agencies and the public.”[16] Ultimately, the court held that “the City’s decision to approve the Project, after giving the City Council final approval over a mitigation plan that Chevron formulates a year later outside the EIR process, does not satisfy CEQA’s requirements.”[17]

Failure to Acknowledge the Ability to Refine “Heavy” Crude Also Violates CEQA

The Court of Appeals also rejected the EIR based on the failure to specifically acknowledge that the proposed modifications to the refinery would allow Chevron to handle heavy crude oil with higher sulfur content than that currently being processed. The final EIR stated that “a change to a substantially heavier crude slate … would not be a foreseeable consequence of the Proposed Project.”[18] However, a Form 10-K filed with the SEC by Chevron identified the central purpose of the project as “enabling the processing of heaver (lower gravity) crude.”[19] When the California Attorney’s General’s office learned of this possibility, it advocated imposing a “crude-cap,” which would impose a requirement in the conditional use permit issued for the project ensuring that the refinery would not switch to lower grade crude. In correspondence to the City, the AG’s office stated that “[i]f this Project enables Chevron to use a different, dirtier crude mix with greater polluting potential, this fact is not disclosed” and the EIR “is legally deficient under CEQA on this issue.”[20]

The court ultimately agreed with the Attorney General’s description, as well as the holding of the trial court, namely, that the EIR’s project description did not specify whether the Project enabled the Refinery to process heavier crude and, on that basis as well, violated CEQA.[21]

For more information, contact Steve Jones or members of our Climate Change or Litigation practice groups.