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California Promises to Streamline Environmental Review for Residential and Mixed Use Projects that Reduce Greenhouse Gas Emissions

October 22, 2008

California has enacted first of its kind legislation that uses the promise of a streamlined environmental review process to incentivize developers to incorporate greenhouse gas reduction strategies into new residential and mixed-use projects The goal of Senate Bill 375 is to give housing developers a reason to build denser projects that reduce vehicles miles traveled and ultimately, greenhouse gas emissions.

California has enacted first of its kind legislation that uses the promise of a streamlined environmental review process to incentivize developers to incorporate greenhouse gas reduction strategies into new residential and mixed-use projects The goal of Senate Bill 375 is to give housing developers a reason to build denser projects that reduce vehicles miles traveled and ultimately, greenhouse gas emissions. It is one way that the State hopes to meet the ambitious carbon emission reduction goals mandated by Assembly Bill 32 – California’s core climate change legislation.

I. Background

In 2006, California passed AB 32 and became the first state to adopt mandatory greenhouse gas emission reductions. That statute established a state economy-wide mandate to reduce greenhouse gas emissions from electrical generation, transportation, and other sources to 1990 levels by 2020. Since that time, at least nineteen states have adopted similar targets, either through legislation or executive order.

Transportation constitutes the single largest source of greenhouse gas emissions in California. Indeed, the California Air Resources Board (CARB) estimates that cars, light trucks, and other transportation sources are responsible for over 40 percent of California’s greenhouse gas emissions.[2] Similar to other states, California is addressing transportation emissions on two fronts -- decreasing tailpipe emissions[3] and reducing vehicle miles traveled (VMTs).

To reduce GHG emissions from VMTs, the state and environmental advocacy groups have increasingly looked to traditional land use planning and permitting regimes, using CEQA as a way to force review of GHG emissions impacts.[4] Local governments, home builders and transportation authorities have pushed back, concerned about the current uncertainty in measuring and mitigating GHG impacts, the loss of control over land-use decisions, and possible loss of highway transportation funding. SB 375 emerged as a compromise to address these competing interests.

II. Senate Bill 375

Signed by California Governor Schwarzenegger (R) on September 30, 2008, SB 375, together with CARB’s October 16 release of a Climate Change Proposed Scoping Plan, more than doubles the original amount of greenhouse gas reductions to be achieved via land use planning. Regional planning agencies are under pressure to achieve these reductions by reducing VMTs. The bill includes transportation funding incentives to promote dense, transit-oriented development and an incentive for private developers - relaxed CEQA requirements for projects that satisfy certain sustainable community criteria.

A. Sustainable Community Strategies

SB 375 directs CARB to establish regional greenhouse gas reduction targets for emissions from automobiles and light trucks for 2020 and 2035. In setting these targets, CARB must consider a list of factors and their effects on greenhouse gas emissions, including the impacts of jobs-housing balance on interregional travel, reductions by improved vehicle emissions standards, and changes in fuel composition.

Each of California’s 18 metropolitan planning organizations (MPOs) must, in turn, devise a sustainable community strategy (SCS) and incorporate it into their regional transportation plans in order to meet the greenhouse gas reduction targets established by CARB. As a blueprint for development within a region, an SCS must coordinate and balance mass transportation, highway, railroad, maritime, bicycle, pedestrian, goods movement, and aviation facilities. CARB then reviews the SCS to confirm that it will meet the region’s targets. Cities and counties that promote developments that meet the SCS requirements will be first in line for state transportation funding. Those that continue to promote sprawling developments will have to look elsewhere for funding.

While SB 375 focuses on regional planning efforts, it specifically states that it does not supercede city or county land use powers, nor are local plans required to be consistent with the SCS. Some California land-use experts note that this may be the bill’s weakest element because the current regional planning structure, which is in the hands of local elected officials, remains unchanged.[5] Unless agencies at all levels take SB 375 and its enforcement seriously, these critics suggest that the law will not have its intended effect. In contrast, members of local planning agencies are concerned that state agencies, particularly CARB, have too much authority under SB 375, and will halt needed transportation projects that have already been locally approved. Whether or not the law has its intended effect, establishing reduction targets and the public process of designing sustainable communities strategies is likely to be a controversial process.

B. CEQA Relief

SB 375 provides relaxed CEQA requirements for two types of development projects, but only if they are consistent with the applicable SCS. The first type of projects are “transit priority projects,” which must contain at least 50 percent residential use, with a density of at least 20 units per acres, and be located within a half mile of a major transit stop or a high quality transit corridor. Only transit priority projects that satisfy a laundry list of sustainable design criteria, including compliance with the SCS, energy and water efficiency, open space preservation, wetland protection, and affordable housing, will be deemed “sustainable communities projects” and earn exemption from CEQA review. Notably, this exemption is narrow, and does not do much to broaden an already established CEQA exemption for in-fill projects.[6] Some critics believe that few project proponents will be able to take advantage of full CEQA exemption, and that this component of SB 375 will remain relatively unused.

However, the second category of projects eligible for a streamlined CEQA process is broader. Residential or mixed-use residential projects that are consistent with the SCS, incorporate mitigation measures required by an applicable prior environmental review document, and dedicate 75 percent of the total square footage to residential uses qualify for a CEQA “lite” review process. These projects are not required to discuss growth-reducing impacts, the impact of vehicle emissions on climate change, or analyze a reduced density alternative in their environmental review documents. Significantly, while they may have otherwise prepared either a Negative Declaration or Mitigated Negative Declaration under CEQA, these projects can instead prepare a “sustainable communities environmental assessment” under SB 375. If challenged in court, a sustainable communities environmental assessment is subject to a more deferential standard of review than a Negative Declaration or a Mitigated Negative Declaration. California land-use planning experts expect that more projects will qualify for this streamlined CEQA process, and more like to prevail if their environmental review documents are challenged in court.[7]

Due to compromises from all sides, relief from CEQA is not as broad as originally hoped by the development community. For example, the new law does not apply to commercial developments (unless mixed-use), leaving these project proponents open to possible CEQA lawsuits if they do not account for GHG impacts of their proposed developments.[8] Even for those projects that do meet SB 375’s specific requirements, immunity from legal challenges is not a sure thing. It is not clear whether a local lead agency’s decision that a project is consistent with an SCS can itself be challenged, similar to a CEQA review process. Questions of federal preemption have also surfaced, related to the possibility that an SCS may not comply with the reasonable projections requirement of federal land use planning law.[9] Ultimately, until SB 375 is put into practice, uncertainty remains as to whether developers will benefit from a less stringent but unknown environmental review process under SB 375, or will be better off under the already established and practiced CEQA review process.

Reactions to SB 375

The California Building Industry Association, which opposed earlier versions of the bill, has come out in support of SB 375, along with local governments, affordable housing advocates, and environmentalists. However, local planners remain cautious about ceding control over land use planning and transportation funding to the state, and are concerned about increased traffic congestion.[10] The bill states that certain transportation projects that are programmed for funding on or before December 31, 2011 will not be required to be consistent with an SCS, but this has not swayed opponents concerns that transportation projects funded by the 2006 voter-approved transportation bonds may be cut in light of SB 375’s more stringent requirements. Further, as noted above, the bill does not yet provide a streamlined CEQA process for commercial developments.[11] Finally, implementing SB 375, an inherently complicated and lengthy bill, is certain to raise questions of interpretation, applicability, and legal legitimacy.

Conclusion

Proponents of SB 375 believe that it will significantly reduce emissions associated with transportation. Critics are concerned about increased state influence on land use planning, an area usually reserved for local agencies, as well as the intricate mechanics of implementing the new law. In the middle of the debate are the regional planning agencies, which are now tasked by CARB’s recently released Climate Change Scoping Plan with determining how to reduce greenhouse gas emissions by 5 million metric tons of carbon dioxide equivalent per year.

For more information on climate change regulation and legislation, please contact any member of Marten Law Group’s Climate Change and Sustainability practice group.

[1] The authors wish to thank David Gold and Miles Imwalle of Morrison & Foerster for their insights and assistance in writing this article.

[2] According to CARB, in 1990 greenhouse gas emissions from automobiles and light trucks were 108 million metric tons, but by 2004 these emissions had increased to 135 million metric tons.

[3] While California is implementing a low carbon fuel standard, its regulations to decrease tailpipe emissions have been rejected by EPA and are currently tied up in an appeal pending in federal court.

[4] The state and environmental groups have filed lawsuits against counties and cities alleging that greenhouse gas emissions are “significant” impacts requiring assessment in environmental review documents prepared under CEQA. In the most visible lawsuit, California Attorney General Brown sued San Bernardino County, alleging that it failed to quantify and mitigate greenhouse gas emissions from transportation and land use sources as part of its 20 year comprehensive land use planning update. San Bernardino County settled the lawsuit, agreeing to address greenhouse gases in its land use planning documents. As a result of the San Bernardino County case and other lawsuits challenging private development projects based on greenhouse gas emissions, nearly 500 CEQA environmental review documents addressing climate change have been prepared in 2008 alone. There is still significant regulatory uncertainty about how and when to address climate change issues under CEQA, and official regulatory guidance from the Office of Planning and Research is not expected for another year.

[5] Bill Fulton, “SB 375 is Now Law – But What Will it Do?” See also David Gold, Zane O. Gresham, Mitchell S. Randall, Miles H. Imwalle, “SB 375 Becomes Law, Pushing Greenhouse Gas Reduction to the Forefront of California Transportation, Economic, and Land Use Planning,” October 2, 2008, available at http://www.mofo.com/news/updates/bulletins/14541.html.

[6] CEQA Guidelines Section 15332, available at http://ceres.ca.gov/ceqa/guidelines.

[7] David Gold and Miles Imwalle, Morrison & Foerster, personal communication.

[8] For example, the Center for Biological Diversity filed a lawsuit against a local California air quality district on October 16, arguing that the greenhouse gas emissions of a large proposed “mega-dairy” should be reviewed CEQA. This kind of project would not qualify for an exemption or relaxed CEQA review under SB 375.

[9] David Gold and Miles Imwalle, Morrison & Foerster, personal communication.

[10] See Kevin Hanley, “My View: Steinberg’s SB 375 isn’t a smart growth strategy,” sacbee.com, Sept. 29, 2008, available at http://www.sacbee.com/110/story/1272872.html.

[11] See Kevin Yamamura, “Governor signs anti-sprawl bill,” sacbee.com, Oct. 1, 2008, available at http://www.sacbee.com/110/story/1272872.html.

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