Pending Updates to California Climate Change Analysis Provide Limited Answers to Difficult Questions

California has seen over a decade of controversy and confusion regarding how to apply the state’s environmental impact review statute (the California Environmental Quality Act, or “CEQA”) to questions about the greenhouse gas emissions and climate change impacts of proposed projects. Currently pending updates to the CEQA Guidelines, drafted by the Office of Planning and Research (“OPR”) and under consideration by the California Natural Resources Agency, purport to answer two of the major questions in this field: (1) how to determine the significance of a project’s greenhouse gas emissions; and (2) how to conceptualize the environmental effects of transportation impacts.

Unfortunately, the update currently provides almost no direct guidance on the first question, which has been one of the most vexing questions to date. The update provides much greater guidance on the second question, clearly replacing the old level-of-service (“LOS”) analysis, which focused on traffic congestion, with analysis of vehicle miles traveled (“VMT”), which focuses on climate impacts. However, much of the important guidance on this issue is consigned to a non-regulatory technical advisory.

Ultimately, OPR and the California Air Resources Board (“CARB”) will need to do more to provide agencies and project developers with the tools necessary to perform the climate impact analysis that California courts demand. In the meantime, the pending updates likely provide the best opportunity for the next several years to obtain greater regulatory certainty. The public comment period on the last stage of review is currently open, and will close on March 15.

I. Background

California has often been at the forefront of legislative and regulatory solutions to environmental problems. The state’s approach to climate change is no different. From Governor Schwarzenegger’s signing of the California Global Warming Solutions Act of 2006, committing the state to reduce greenhouse gas emissions to 1990 levels by 2020, to Governor Brown’s leadership of subnational entities at and following the 2016 United Nations Climate Change Conference in Paris, the state of California has aspired to be a global leader in addressing climate change.

One often overlooked mechanism by which this occurs is CEQA. Since 1970, CEQA has required all development projects subject to public approval to undergo environmental impact review and to adopt all feasible measures to mitigate significant environmental impacts. Due to both statutory directives and court decisions, the analysis of greenhouse gas emissions and climate change impacts has become a more and more prominent part of this review over the past decade. This trend has been marked by controversy and confusion.

The potential uncertainties surrounding the analysis of a project’s climate change impacts are legion. Before even reaching the question of how to perform the technical measurements of greenhouse gas emissions, agencies must grapple with such questions as:

• What emissions are appropriately attributed to the project? The power source used to turn its lights on? The fuel source used to gets its employees to work? The fuel source used to get its power source’s employees to work?
• What constitutes a significant contribution to climate change? A relatively large contribution per employee? Per customer? Per revenue dollar? For the region? For a new project? For a new project in this particular sector of this particular size?
• How do you assess whether a project is contributing its fair share toward the state’s greenhouse gas reduction goals? Which state reductions goals need be analyzed?

The answers to such questions have been in flux. The answers matter because a project must mitigate to the extent feasible all emissions that exceed the threshold of significance.

On January 26, 2018, the California Natural Resources Agency released its Notice of Proposed Rulemaking to adopt the proposed update to the CEQA Guidelines submitted by OPR last November.[1] The public comment period is open through March 15, 2018, and two public meetings will be held on March 14 and 15, in Los Angeles and Sacramento.

II. Determining the Significance of Impacts from Greenhouse Gas Emissions

In 2007, the California legislature passed SB 97, requiring OPR and the Natural Resources Agency to update the CEQA Guidelines to address the analysis and mitigation of greenhouse gas emissions. Among other changes, this resulted in the addition of CEQA Guidelines section 15064.4, which addressed the means for determining the significance of impacts from greenhouse gas emissions. Section 15064.4 became effective in March 2010.

As several recent high-profile California Supreme Court cases have illustrated, it has not been easy for project developers and lead agencies to figure out how to apply section 15064.4. The leading decision on the matter is Center for Biological Diversity v. California Department of Fish and Wildlife (2015) 62 Cal.4th 204 (“Newhall Ranch”).

Newhall Ranch concerned the analysis of a project’s role in achieving the state’s 1990-levels-by-2020 goal, as set forth in the California Global Warming Solutions Act of 2006, otherwise known as AB 32. AB 32 tasked CARB with promulgating enforceable emissions reduction measures to achieve the “maximum technologically feasible and cost-effective [greenhouse gas emissions] reductions,” as well as with preparing a periodically updated scoping plan to measure progress toward and make recommendations for meeting the 2020 goal. CARB published the initial Scoping Plan in 2008.[2]The Scoping Plan determined that the 2020 goal would be met by a statewide greenhouse gas emissions reduction of 30% below “business as usual.” CARB based the business-as-usual scenario on what the state’s 2020 emissions would be without any of the greenhouse gas emissions reductions measures discussed in the Scoping Plan (including those already required by laws other than AB 32).

In 2010, the California Department of Fish and Wildlife (“CDFW”) published the final Environmental Impact Report (“EIR”) for the Newhall Land and Farming Company’s Newhall Ranch development project in Los Angeles County.[3] In the Newhall Ranch EIR, CDFW used AB 32 and CARB’s 2008 Scoping Plan to determine its greenhouse gas emissions significance threshold and whether the project’s greenhouse gas emissions would be above or below the level of significance. Specifically, CDFW proposed that greenhouse gas emissions significance was best determined by conformity with the state’s 2020 goal, and articulated this goal as a 30% reduction in greenhouse gas emissions below what the project would look like in the business-as-usual scenario. Running its numbers, CDFW calculated that greenhouse gas emissions from Newhall Ranch would already be 31% below a hypothetical business-as-usual version of the development, and therefore were not significant.[4]

The California Supreme Court held that estimated contribution to AB 32’s statewide 2020 goal, as calculated in CARB’s 2008 Scoping Plan, was an appropriate methodology for determining greenhouse gas emissions significance.[5] The Court rejected the contention that use of the Scoping Plan’s business-as-usual scenario involved a hypothetical baseline contrary to CEQA’s requirement to accurately describe the existing environmental setting.[6] The Court explained that the business-as-usual scenario was employed as a means of measuring contribution to AB 32’s goal, and not as a way of comparing the project to existing local conditions. Given that greenhouse gas emissions have an impact only cumulatively and on a global scale, the Court agreed with CDFW that comparison to existing local conditions would not provide a sufficiently informative measure of significance. The Court also clarified that no absolute numerical threshold was required for greenhouse gas emissions given the notable lack of consensus about the appropriate threshold.

The Court went on to hold, however, that the EIR failed to support with substantial evidence its conclusion that project-specific reductions of 30% below business-as-usual levels were consistent with statewide reductions of 30% below business-as-usual levels.[7] In particular, the Court found that the EIR failed to account for two things: First, it is likely easier for a new development to implement greenhouse gas emissions reduction measures than for an existing development to do so. Thus, in order for the entire state to meet its 30% reduction target, new construction may need to reduce more than 30%. Second, business-as-usual emissions in a particular locality, such as the relatively suburban Santa Clarita Valley, with its correspondingly high levels of vehicle usage, may be considerably higher than statewide business-as-usual emissions. The Court did not fully explain the implication of this second failing, but one could argue that greenhouse gas emissions reductions are easier to obtain in a location with disproportionately high emissions than in a location that is already implementing most measures currently feasible to keep its emissions down. Thus, projects in a high-emissions location may need to reduce more than 30% below local business-as-usual emissions for the state to feasibly meet its 30% reduction target on average.

However, the Court did not hold that new projects’ greenhouse gas emissions are necessarily significant if they fail to reduce emissions by more than 30% below business as usual. The Court held only that the Newhall Ranch EIR failed to support its conclusions on this matter with substantial evidence because it neither discussed nor provided any evidence regarding the two failings that concerned the Court.[8]

The Court was silent as to the acceptable means of gauging a project’s business-as-usual emissions. However, it is important to keep in mind that the assessment of a project’s appropriate greenhouse gas emissions reduction relative to business-as-usual levels will have to take into account the methodology used to determine the project’s business-as-usual emissions. For instance, if Newhall Ranch based its business-as-usual emissions on statewide residential density averages, it likely would not need to provide for a greater-than-average reduction below the Santa Clarity Valley business-as-usual scenario.

In dicta, the Court suggested that potential options for properly evaluating greenhouse gas emissions significance might include: making a determination about the particular reduction required from that type of project in that location in order to be consistent with AB 32; analyzing consistency with regulatory plans addressing greenhouse gas emissions reductions from that type of project; analyzing consistency with local climate action plans, greenhouse gas reduction plans, or sustainable communities plans; and/or using established numerical thresholds.[9]

The Newhall Ranch developers responded to the Court’s suggestions by adopting a “Net Zero Newhall” strategy,[10] safeguarding its CEQA review by ensuring that the project would result in no net greenhouse gas emissions at all.

The currently pending update to CEQA Guidelines section 15064.4 purports to incorporate the holdings of Newhall Ranch.[11] The proposed update would first clarify that greenhouse gas emissions analysis is mandatory, not just recommended. It would add an instruction to consider the project’s incremental contribution to the effects of climate change, which OPR’s commentary says will discourage an incorrect focus on the quantity of emissions. The update would also add an instruction to select the appropriate time frame for analyzing emissions on a project-by-project basis. Finally, the update would direct lead agencies to use current science and take into account current state regulatory schemes at the time of its analysis.

This final point incorporates a key caveat to the California Supreme Court’s recent decision in Cleveland National Forest Foundation v. San Diego Ass’n of Governments (2017) 3 Cal.5th 497 (“SANDAG”). SANDAG upheld an EIR that did not analyze compliance with a state executive order establishing the goal of reducing statewide emissions to 80% below 1990 levels by 2050, but emphasized that the analysis undertaken would not necessarily be sufficient in the future, and that “planning agencies like SANDAG must ensure that CEQA analysis stays in step with evolving scientific knowledge and state regulatory schemes.”[12]

Realistically, however, none of the proposed changes to the CEQA Guidelines section 15064.4 give greater direction on the most contentious issue under this section to date: determining the threshold of significance. Unless clear numerical thresholds become scientifically established, and in circumstances in which no applicable regulatory scheme is available for guidance, Newhall Ranch still requires agencies to determine each project’s unique role in achieving statewide greenhouse gas emissions reduction goals.

III. Determining the Significance of Transportation Impacts

In 2013, the California legislature passed SB 743, requiring OPR to make fundamental changes to the way transportation impacts are analyzed under the CEQA Guidelines. The statute, commonly understood as an attempt to facilitate the building of a new arena in downtown Sacramento for the city’s basketball team, the Kings, required these transportation analysis changes to apply only to so-called transit-priority areas. However, OPR’s proposed Guidelines updates would require the new analysis in most circumstances, allowing a two-year grace period for agencies to transition.

The relevance of this change to the Kings arena illustrates why OPR would prefer the change statewide. Historically, the Sacramento Kings had played home games in a facility about six miles north of downtown, in a location with no connections to the region’s heavy or light rail transportation networks. The vast majority of attendees traveled to the arena by car. The new arena was proposed to be located in the heart of downtown, where it would have extensive connections to heavy and light rail service and be within walking distance of a large employment area. In addition, the likely difficulties with congestion and parking would actually encourage attendees from further away to take mass transit rather than drive. The new arena proposal was challenged as having significant environmental impacts in the form of traffic congestion. Yet the new proposal was likely to reduce the net environmental effects of vehicles relative to the old arena by significantly decreasing the number of cars on the road and how far they had to drive. For purposes of climate change, the new arena would be much better than the old arena. SB 743 addressed this discrepancy by decreeing that the relevant transportation impact under CEQA would be the total effect on vehicle miles traveled, not the effect on traffic congestion.

As a general matter, avoiding traffic congestion impacts means building projects further apart, which creates greater distances for vehicles to drive and makes it more difficult to provide efficient mass transit. The result is higher greenhouse gas emissions. By contrast, in a transportation impacts analysis focused on vehicle miles traveled, the way to avoid impacts is to build densely and close to transit. The result is lower greenhouse gas emissions. Accordingly, OPR has consistently taken the position that the new analysis should apply to virtually all projects statewide, not just those carved out by SB 743.

The proposed update to the CEQA Guidelines adds a new Guidelines section 15064.3.[13] Section 15064.3 replaces LOS analysis, which focused on road-time delays and traffic congestion, with VMT analysis, which focuses on how much the project will make people drive. It advises lead agencies that the transportation impacts of projects located near an existing major transit stop or along a high-quality transit corridor, as well as projects that decrease VMT compared to existing conditions, should be presumed less than significant. It leaves the determination of how to analyze the transportation impacts of roadway capacity projects up to lead agencies. And it permits discretion about whether to express VMT in absolute terms, per capita, per household, or by another measure.

In November 2017, the same month that OPR submitted the proposed CEQA Guidelines updates to the Natural Resources Agency, OPR separately published a Technical Advisory on Evaluating Transportation Impacts in CEQA. The purpose of the Technical Advisory “is to provide advice and recommendations, which agencies and other entities may use at their discretion.” Because its contents are separate from the CEQA Guidelines, the Technical Advisory carries no regulatory force and is not subject to further public review during the Natural Resource Agency’s consideration of the proposed Guidelines updates.

The Technical Advisory provides considerable detail regarding recommended methodologies and significance thresholds. In most cases, OPR recommends a transportation impact significance threshold of a per capita or per employee VMT that is 15% lower than “existing development.” The thresholds and methodologies described in the Technical Advisory will likely improve regulatory certainty for agencies and developers. However, its usefulness is limited because the Technical Advisory will not necessarily be given the same “great weight” that California courts give the CEQA Guidelines,[14] and because the Technical Advisory is limited to transportation impacts and not any other climate change impacts.

IV. CARB 2017 Scoping Plan Update

In 2016, the California legislature expanded on AB 32 with the passage of SB 32, codifying Governor Brown’s 2015 executive order setting a 2030 statewide greenhouse gas emissions target of 40 percent below 1990 levels. Both the statute and the executive order directed CARB to update its Scoping Plan accordingly. CARB has also been cognizant of the 2050 statewide greenhouse gas emissions target of 80 percent below 1990 levels, which has not been codified. In November 2017, CARB released the final version of its most recent Scoping Plan.

Due to Newhall Ranch’s endorsement of using CARB’s Scoping Plan to help determine a project’s greenhouse gas emissions significance threshold, each five-year update of the Scoping Plan has the potential to alter CEQA greenhouse gas emissions analyses. Unfortunately, CARB has not provided guidance on how a project-specific analysis should be compared to its own statewide, or even industry- or region-wide analyses.

Indeed, the type of project-level greenhouse gas emissions analyses and mitigation now required under CEQA do not directly constitute any of Governor Brown’s “five pillars” of California’s climate change solution, nor are they a focus area of CARB’s Scoping Plan work.[15] Rather, CARB and the Governor are focused on: (1) increasing vehicle fuel efficiency, (2) increasing the use of renewable energy, (3) increasing building efficiency and making heating fuel cleaner, (4) reducing emissions of methane and other short-lived climate pollutants, and (5) managing open lands for better carbon storage. Though any of these considerations may impact greenhouse gas emissions analysis or suggest possibilities for greenhouse gas mitigation, none actually crystallize the Newhall Ranch concept that new development may need to do more than existing development to mitigate greenhouse gas emissions.

Greater collaboration between OPR and CARB would be helpful. Indeed, when first tasked with updating the CEQA Guidelines to address greenhouse gas emissions by SB 97, OPR asked CARB to recommend the methodology for setting significance thresholds. In 2008, CARB responded with a Preliminary Draft Staff Proposal suggesting a significance threshold of 7,000 metric tons of CO2 equivalent emissions per year for operational emissions from new industrial projects. This was set with the goal of finding 90% of new industrial projects to have significant impacts and thus require mitigation. In the same draft proposal CARB suggested that the significance threshold for commercial and residential projects should be based primarily on compliance with a suite of stringent performance standards. Yet the draft proposal was never finalized, and OPR did not incorporate it into Guidelines section 15064.4. The questions regarding appropriate significance thresholds remain unanswered.

V. Conclusion

Though major changes to OPR’s proposed updates to the CEQA Guidelines will likely be a difficult sell, stakeholders should take advantage of the current public comment period with the Natural Resources Agency to seek what greater guidance and certainty they can. Going forward, project developers and agencies need OPR and CARB to devise the tools to satisfy the climate change analysis demanded by the courts. The issues are complex, and the task before OPR and CARB is not easy. But the greenhouse gas emissions analysis of new projects deserves statewide clarity.

For more information, please contact any of the members of our Permitting and Environmental Review team.

[1] See OPR, Current CEQA Guidelines Update.

[2] See CARB, AB 32 Scoping Plan.

[3] Newhall Ranch, supra, 62 Cal.4th at 214.

[4] Id. at 218.

[5] Id. at 224.

[6] Id. at 225.

[7] Id. at 225–28.

[8] Id. at 227.

[9] Id. at 228–30.

[10] See http://netzeronewhall.com.

[11] See Natural Resources Agency, Notice of Proposed Rulemaking; see alsosupra, note 1.

[12] SANDAG, supra, 3 Cal.5th at 514–19.

[13] See Natural Resources Agency, Notice of Proposed Rulemaking; see alsosupra, note 1.

[14] Newhall Ranch, supra, 62 Cal. 4th at 217.

[15] See CARB, 2017 Scoping Plan at 2.

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