Federal Appeals Court Rejects Challenges to Newhall Ranch EIS and Section 404 Permit

In the latest decision in the long-running legal saga over the proposed Newhall Ranch development in Los Angeles County, the U.S. Court of Appeals for the Ninth Circuit upheld the Army Corps of Engineers’ EIS and Section 404 permit, giving substantial deference to the Corps’ decisionmaking. Friends of the Santa Clara River v. U.S. Army Corps of Engineers, 887 F.3d 906 (9th Cir. 2018).

Background

Newhall Ranch is a proposed large-scale master-planned community in Los Angeles County. The County approved a specific plan for the project that provided for more than 21,000 residential units and 4.4 million square feet of commercial, office, and retail uses. In connection with the project, Newhall Land and Farming Company applied to the Army Corps of Engineers for a permit under Section 404 of the Clean Water Act to discharge dredge or fill material into navigable waters. The Corps, along with the California Department of Fish and Wildlife, prepared a combined EIS/EIR. The EIS/EIR considered eight project alternatives, including Newhall’s preferred alternative, a no-build alternative and six other alternatives.

The Corps issued a Record of Decision that adopted one of the studied alternatives (“Modified Alternative 3”) as the least environmentally damaging practicable alternative. Modified Alternative 3 involved developing less acreage than Newhall’s preferred alternative, at a higher cost per developable acre. The Corps also determined that wastewater and stormwater discharges from the project would not affect endangered steelhead in the Santa Clara River downstream from the project. Based on this “no effect” determination, the Corps did not consult with the National Marine Fisheries Service on impacts to endangered steelhead.

The plaintiffs claimed that the Corps’ decisions violated the Clean Water Act, the Endangered Species Act, and the National Environmental Policy Act. First, the plaintiffs challenged the Corps’ selection of Modified Alternative 3 as the least environmentally damaging practicable alternative. Second, the plaintiffs challenged the Corps’ failure to consult with NMFS. Third, the plaintiffs argued that the EIS did not adequately analyze cumulative impacts on steelhead.

Standing

The court first considered whether the plaintiffs had standing. To have standing to bring claims of procedural violations, a plaintiff must demonstrate that (1) the agency violated procedural rules, (2) those rules protect the plaintiff’s concrete interests, and (3) it is reasonably probable that the challenged action will threaten the plaintiff’s concrete interests. Newhall argued that the plaintiffs could not satisfy the third prong of this test because their interests were limited to recreation and natural resources within the project area, where there were no steelhead.

Rejecting this argument, the court explained that the plaintiffs only needed to show that they would be harmed by the challenged agency action, not that the alleged procedural deficiency would threaten their interests. Thus, the court concluded, the plaintiffs had standing because they were harmed by the Corps’ issuance of the Section 404 permit; it did not matter whether the plaintiffs had an interest in steelhead. The court also held that the plaintiffs showed causation and redressability because there was a reasonable probability that additional analysis could have influenced the Corps’ decision.

Selection of Least Environmentally Damaging Practicable Alternative

Prior to issuing a Section 404 permit, the Corps must analyze project alternatives and select the least environmentally damaging practicable alternative in light of the overall project purpose. The plaintiffs raised several arguments challenging the Corps’ selection of Modified Alternative 3 under this standard.

First, the plaintiffs argued that the Corps used an overly specific project purpose that narrowed the range of available alternatives. The court disagreed. In its environmental analysis, the Corps defined the project purpose as the development of a master planned community that would achieve the basic objectives of the Newhall Ranch Specific Plan and would provide approximately the same range and size of land uses described in the Specific Plan. The court explained that regulations required the Corps to consider, and normally to accept, local land use plans and decisions when determining the overall project purpose. Further, the court held, it was reasonable for the Corps to have rejected alternatives because (1) reductions in available developable areas would prevent the alternatives from meeting elements of the specific plan and (2) cost increases would make the alternatives impracticable.

Next, the plaintiffs argued that Modified Alternative 3 was not the least environmentally damaging practicable alternative because additional measures to minimize environmental impacts were theoretically possible. The court observed that regulations required the Corps to consider costs when determining that an alternative is not practicable. The court concluded that it was reasonable for the Corps to have determined that Modified Alternative 3 was at the outer limit of cost practicability for the project, and that further avoidance measures would not be practicable even if theoretically possible.

Finally, the plaintiffs challenged three aspects of the Corps’ cost methodology: (1) consideration of costs on a per-acre basis rather than per-residential unit or per-commercial floor space, (2) not considering the project’s revenues, and (3) including land acquisition costs. The court held that the Corps’ cost methodology was reasonable and entitled to deference. First, the court determined that it was reasonable for the Corps to evaluate costs per acre given the uncertainty of the type and density of units that would ultimately be developed. Second, the court found that although not required to do so, the Corps had considered revenues in its analysis by evaluating each alternative’s developable acreage, which was the source of revenue for the project. Third, the court held that it was reasonable for the Corps to include land acquisition costs in the costs of each alternative.

ESA and NEPA

Section 7 of the ESA requires a federal agency to consult with NMFS or the Fish and Wildlife Service if its action may affect endangered or threatened species or their critical habitat. The Santa Clara River downstream from the Newhall Ranch site is critical habitat for the Southern California steelhead, an endangered species. The Corps determined that wastewater and stormwater discharges from the project were not likely to adversely affect steelhead, because the concentration of dissolved copper in the project’s discharges would be less than the existing dissolved copper concentration in the Santa Clara River and would be less than the dissolved copper limit for the Santa Clara River set by EPA’s water quality standards.

The plaintiffs challenged the Corps’ “no effect” determination under both the ESA and NEPA. The plaintiffs alleged that the Corps should have consulted with NMFS on impacts to endangered steelhead, and that the EIS did not adequately analyze the cumulative effects of dissolved copper on steelhead. In particular, the plaintiffs argued that a technical memorandum published by NMFS established that dissolved copper concentrations during storm events would cause sublethal impacts to juvenile steelhead smolt.

The court rejected the plaintiffs’ arguments, noting that the agency’s scientific judgment is entitled to substantial deference. The court concluded that the Corps had reasonably determined that the NMFS technical memorandum did not contain the best available scientific information regarding the project’s impacts on steelhead. In addition, the court held that it was reasonable for the Corps to rely on EPA’s water quality standard as a threshold for assessing whether the project would adversely affect endangered species.

 

Development Agreements Cannot Be Adopted By Initiative

A development agreement cannot be adopted by initiative, the California court of appeal ruled in Center for Community Action and Environmental Justice v. City of Moreno Valley, 26 Cal. App. 5th 689 (2018).

The Development Agreement Statute

The Development Agreement Statute (Government Code sections 65864–65869.5) allows a municipal government and a property owner to enter into a contract that vests development rights by freezing the land use regulations applicable to a property. The statute includes procedural and substantive requirements for development agreements, including that “[a] development agreement is a legislative act that shall be approved by ordinance and is subject to referendum.” (Government Code section 65867.5(a).)

Background

The project at issue in this case was a proposed logistics center in Moreno Valley. In 2015, the Moreno Valley City Council approved project entitlements, including a development agreement. Opponents then filed a CEQA lawsuit to challenge the environmental impact report for the project. A group backed by the developer responded by filing a petition for an initiative that would repeal the development agreement ordinance and approve a new development agreement. The initiative development agreement was substantially the same as the agreement the City Council approved for the project. The City Council adopted the initiative, rather than submitting it to the voters. Because voter-sponsored initiatives are not subject to CEQA, no environmental review was completed before the City Council adopted the initiative. Opponents then filed this lawsuit, asserting that a development agreement cannot be adopted by initiative.

The Court’s Decision

Based on the statutory language, statutory scheme, and legislative history, the court determined that the Development Agreement Statute did not permit adoption of a development agreement by initiative.

First, the court found it meaningful that the Development Agreement Statute specifies that adoption of a development agreement is a “legislative act   . . . subject to referendum” but omitted any reference to initiative. This omission, according to the court, indicated an intent by the Legislature to preclude adoption by initiative. The court also found the Development Agreement Statute’s reference to a “legislative body” as providing support for the Legislature’s intent to exclusively delegate power to adopt a development agreement to local governments.

Second, the court determined that the statutory scheme was of statewide concern, which supported inferring a legislative intent to exclude initiatives. In addition, the court explained that the initiative process was inconsistent with the concept of a development agreement as a negotiated contract, because an initiative does not provide any opportunity for the local government to negotiate its terms. The court also observed that adoption by initiative could result in development agreements that did not include all provisions required by the Development Agreement Statute.

Third, the court noted that the legislative history was consistent with an intent to prevent adoption of development agreements by initiative. The court cited an amendment to the text of the bill that stated that development agreements would be subject to referendum. Singling out referenda, the court stated, indicated an intent to exclude initiatives. The court also noted that numerous documents in the legislative history referred to referenda, but were silent as to initiatives.

The court also analyzed the meaning of a bill that passed the Legislature in 2017 but was vetoed by the governor, which would have amended the Development Agreement Statute to prohibit adoption by initiative. The court concluded that this bill did not necessarily mean that the current statute would allow adoption by initiative, because the failed bill stated that it would “clarify” the law.

Implications

In holding that a development agreement may not be adopted by initiative, the court’s decision affirms that a development agreement is a contract that must be negotiated by a local government and a property owner. The court’s holding in this case is straightforward, but has important implications for developers. Adoption of a voter-sponsored initiative by the local legislative body has been an important tool in the developer’s toolkit because CEQA does not apply to such an action. Going forward, local legislative bodies can still adopt voter-sponsored initiatives to amend a general plan, zoning ordinance, or other land use regulations, but not development agreements to vest those regulations.

Ban on Short-Term Home Rentals Is a “Development” Subject to the Coastal Act

Underlining the broad and expansive definition of “development” under the California Coastal Act, the Second Appellate District ruled that a coastal homeowners’ association’s ban on short-term rentals is considered “development” subject to the requirements of the Coastal Act. Greenfield v. Mandalay Shores Community Association, 21 Cal. App. 5th (2018)

The Mandalay Shores Community Association is the homeowners’ association for 1,400 residences in a beach community within the City of Oxnard coastal zone. Increasingly concerned about the parking, noise and trash problems caused by short term rentals, the Association adopted a resolution barring home rentals for fewer than 30 consecutive days. Owners who violated the ban would be fined by the Association: $1,000 for the first offense, $2,500 for the second, and $5,000 for each subsequent offense.

A Coastal Commission enforcement supervisor advised the Association that its ban on short term rentals constituted a “development” under the Coastal Act which required a coastal development permit. The plaintiffs, owners of a home in Mandalay Shores, then sued the Association to prevent enforcement of the ban, asserting it violated the Coastal Act.

The trial court denied the plaintiffs’ motion for a preliminary injunction, ruling that the Association’s ban on short term rentals was not a “development” under the Coastal Act.

The court of appeal reversed the trial court judgment, ruling that it had not correctly construed the Coastal Act. The court stated that, because a key goal of the Coastal Act is to maximize public access, “development” is broadly defined to include changes in density or intensity of use of land, and not just alterations of land or water. For example, the court explained, locking a gate that is usually open for public beach access over private land, or posting a “no trespassing” sign on a parcel used for beach access, are both “developments” because they have a significant adverse impact on public use of coastal resources.

Similarly, the court reasoned, preventing non-residents from vacationing—as they had for decades—at Mandalay Shores through the short-term rental of beach homes created a “monetary barrier to the beach.” The Association’s ban was therefore a “development” subject to the provisions of the Coastal Act. The question of whether short-term rentals should be regulated or banned would need to be decided by the Coastal Commission and the City of Oxnard, not a private homeowner’s association.

The appellate court ordered the trial court to grant the plaintiffs’ motion for a preliminary injunction, thereby preventing continued enforcement of the Association’s ban on short-term rentals.

Negative Declaration Survives Challenge Based on Non-Expert Opinion About Noise Impacts

Claims of significant noise impact unsupported by expert opinion, fact, or reasonable inference did not provide grounds for challenging a negative declaration, the court of appeal held in Jensen v. City of Santa Rosa, 23 Cal. App. 5th 877 (2018).

The project, called the Dream Center, would provide emergency shelter for homeless youth and transitional housing for young adults, as well as counseling, health, education, and job placement services. The center would also provide outdoor recreational activities for residents, including a basketball area, pottery throwing area, and garden. The center would occupy a vacant building formerly used as a hospital. A wooden fence and landscaping separated the rear parking lot from an adjacent residential neighborhood.

The City of Santa Rosa adopted a negative declaration and approved a rezoning and conditional use permit for the project. Conditions of approval limited parking in the rear lot to employees during normal operating hours. The city’s negative declaration relied on a noise study prepared by an engineering firm. The noise study concluded that noise impacts would be less than significant because noise would not exceed standards in the city’s general plan or noise ordinance, and would not increase noise levels more than 5 dBA Ldn above existing conditions. (Ldn is the average day/night noise level.)

The petitioners, who lived near the project, asserted there was a fair argument the project would cause significant noise impacts from vehicles in the rear parking lot and from outdoor recreation activities. The petitioners based their main arguments on their own calculations using data taken from a noise study for a different project in the city called Tower Market, a 24-hour convenience store and gas station.

The court held that no substantial evidence supported the petitioners’ claims.

First, the court found that the petitioners misused noise data from the Tower Market study. The petitioners took the Tower Market study’s noise level estimates for passing vehicles, and argued that these estimates exceeded maximum noise levels that they had calculated. The court explained that the petitioners’ calculations showed very little about noise impacts because they did not predict the average noise level over a period of time. Further, the court noted, this methodology was not backed up by any expert opinion.

Second, the court concluded that the petitioners’ argument regarding parking lot noise was grounded on speculation and hypothesis rather than fact, expert opinion, or reasonable inference. The petitioners asserted that cars and trucks could drive through the rear parking lot at all hours of the day and night. The court explained that this claim was “most improbable and not a fair inference from the evidence,” particularly in light of the project characteristics and the conditions of approval. The court also noted that it was “obvious” that Tower Market and the Dream Center were not similar projects: The rear parking lot at the Dream Center would have much less frequent car traffic (especially at night, when employees would not be allowed to park in the rear parking lot) and would have minimal or non-existent truck traffic, as compared to a 24-hour market and gas station.

Third, the court rejected the petitioners’ interpretation of the city’s noise ordinance. The city’s noise ordinance set forth base ambient noise levels based on a property’s zoning and time of day. The petitioners treated these noise levels as thresholds of significance. The noise ordinance, however, specified that the base noise levels were intended to be used for comparative purposes, and noise level is one of twelve factors to be considered in determining whether a noise impact violates the noise ordinance.

Finally, the court rejected the petitioners’ arguments that the noise from outdoor recreation activities (basketball, pottery, and gardening) would be significant. The court held that the petitioners’ methodology was “vague and hard-to-grasp,” was not a “legitimate factual or scientific basis for finding a significant impact,” and was “not supported by expert opinion.”

In this case, the petitioners’ only evidence of significant noise impacts was their own calculations and lay opinion. The court held that this was not enough to support a fair argument of significant impact. The court’s decision in Jensen indicates that petitioners challenging a negative declaration based on noise impacts or other technical issues will need to support their arguments with expert opinion.

Governor Signs Bill Extending the Life of Building Permits to One Year

Governor Brown has signed AB 2913 (Wood), which amends current law to extend the duration of building permits from six months to one year.

Under current law, a building permit is subject to the state Building Standards Code as well as any local ordinances in effect at the time the application for the building permit is submitted. The building permit is valid for six months, and expires automatically unless construction has commenced within that period or the permit is extended by the local jurisdiction under local codes (which is generally a discretionary decision and, in some jurisdictions, is not authorized at all under local law). If the permit expires without an extension, the builder must obtain a new permit, which is subject to any changes in the building code or local ordinances since issuance of the original permit, and may require costly changes in design and payment of additional permit fees.

AB 2913 extends the expiration date of building permits from six to twelve months. It also provides express statutory authorization to the local building official to grant one or more extensions for periods of up to 180 days per extension upon a showing a justifiable cause by the applicant.

Applicant Challenging Denial of Use Permit Must Prove It Is Legally Entitled to Permit

In an unsurprising decision, the Second District Court of Appeal upheld Ventura County’s decision to a deny a use permit that would allow tigers to be kept on property located within a half-mile of a residential area. Hauser v. Ventura County Board of Supervisors, 20 Cal.App.5th 572 (2018).

Background. Plaintiff Irena Hauser applied for a conditional use permit that would allow five tigers to be kept on a 19-acre parcel in an unincorporated area of Ventura County. The proposed project would include several tiger enclosures and an arena within a seven-acre area surrounded by a chain link fence. The plaintiff planned to use the tigers in the entertainment business and transport them for that purpose up to 60 times per year.

Neighbors strongly opposed the project and presented a petition to the county which contained roughly 11,000 signatures in opposition.  The planning commission denied the permit application, and on appeal, the board of supervisors did the same, finding the plaintiff failed to prove two elements necessary for a use permit: that the project was compatible with the planned uses in the general area, and that it was not detrimental to the public interest, health, safety or welfare.

The Court of Appeal’s Decision. The court of appeal upheld the trial court’s decision rejecting the plaintiff’s challenge. The court first explained that, as the permit applicant, the plaintiff had the burden to show she was legally entitled to a use permit. She had, however, failed to persuade the board of supervisors that the requirements for a use permit were met. In passing, the court stated that the board’s determination that the requirements were not met did not have to be supported by substantial evidence because it is the absence of evidence of sufficient weight and credibility to convince the trier of fact that leads to that conclusion. Nevertheless, the court undertook a thorough review of the record and found that the board’s decision was amply supported by substantial evidence.

The court noted that it would be appropriate to focus on the evidence that would tend to support the board’s decision rather than the evidence that would tend to detract from it. Where the trier of fact has drawn reasonable inferences from the evidence, a reviewing court does not have authority to draw different inferences, even though they might also be reasonable.

Applying this standard, the court observed that the property was located in an area that contained a significant number of homes and that it was reasonable for the county to conclude that keeping tigers was not compatible with the area’s use. This determination alone was sufficient to deny the permit application.

The court rejected the plaintiff’s argument that the project was compatible with the area’s open space zoning, declaring that a tiger compound surrounded by a chain link fence was not “open space.” Nor was the plaintiff entitled to a use permit simply because similar projects had been approved in other residential areas.

The court also found ample evidence supporting a finding that the tigers posed a danger to the public. Rejecting the plaintiff’s evidence that escaped captive-born tigers pose little risk to the public, the court cited evidence in the administrative record of numerous instances where tigers had escaped, and other instances where they had severely injured or killed people. The court noted that no matter what precautions might be taken to prevent the tigers from escaping, human error was foreseeable, if not inevitable.

The plaintiff further contended that the members of the board of supervisors violated board rules when they met outside of the public hearing with residents and representatives who opposed the project and that, as a result, the plaintiff did not receive a fair hearing before the board. However, the court found no violation because the board members disclosed the meetings as required by the board’s rules. Furthermore, the court noted that board members have both a right and a duty to discuss issues of concern with their constituents. Moreover, the plaintiff had not shown clear evidence of actual bias or that her application was not denied on its merits.

Court of Appeal Decision on Power Plant Licensing May Open Door to Expanded Judicial Review of Licensing Decisions

In Communities for a Better Environment v. State Energy Resources Conservation and Development Commission, 19 Cal. App. 5th 725 (2017), the First District Court of Appeal reversed the trial court’s conclusion that a challenge to the constitutionality of California’s process for judicial review of decisions of the State Energy Resources Conservation and Development Commission (Energy Commission) was not ripe. The practical effect of this decision may be to increase the difficulty in permitting and financing large, non-renewable power plants in California.

The Energy Commission has exclusive authority to license thermal power plants over 50 megawatts, “in lieu of any permit, certificate, or similar document required by any state, local or regional agency, or federal agency to the extent permitted by federal law.” Under Section 25531 of the Public Resources Code, decisions of the Energy Commission are reviewable only by the Supreme Court of California, and the Commission’s factual findings “are final and are not subject to review.” Review by the Supreme Court is discretionary and, in practice, the high court has summarily denied every challenge to an Energy Commission power plant licensing decision since energy deregulation in California in the 1990s.

The trial court dismissed the case on ripeness grounds, concluding that no actual controversy existed between the environmental groups and the Energy Commission that could be adjudicated in the context of a specific factual dispute.

On appeal, defendants argued that the trial court’s determination was correct because the groups were seeking a purely advisory opinion on the constitutionality of a statute, unmoored to any concrete factual dispute regarding an actual Energy Commission decision. The appellate court disagreed, finding that the dispute was sufficiently concrete for adjudication. Prior decisions had found cases to be unripe when “a factual context was necessary” to resolve the legal issue. But here, no factual context was necessary “or even useful,” according to the court, because the constitutionality of Section 25531 would be implicated in every future judicial review of an Energy Commission power plant licensing decision. The court also determined that ripeness should not operate to bar adjudication of the dispute before it because the consequences would be lingering uncertainty in the law despite the widespread public interest in the answer to a particular legal question.

Although the effect of this decision is merely to send the case back to the trial court for further adjudication, the court’s concern that the failure to address the constitutionality of Section 25531 would result in a “lingering uncertainty” suggests that the court found some merit to the environmental groups’ arguments. Without legislative intervention, the decision portends a more uncertain future for the development of large thermal power plants in California. Smaller power plant projects (under 50 megawatts) regulated by other state and local government agencies experience significant delay and increased risks from a complicated approval and permitting process. Larger plants licensed by the Energy Commission may soon confront the same challenges. The decision may have limited impact, however, as recent forecasts produced by the Public Utilities Commission show no appetite for new natural gas plants.

Major Changes Proposed to Endangered Species Act Regulations

The U.S. Fish and Wildlife Service and National Marine Fisheries Service recently published three proposed rules that would make major revisions to the regulations implementing portions of the Endangered Species Act. The proposed rules would change the criteria and procedures for (1) establishing protections for “threatened” species; (2) the listing and delisting of species and the designation of critical habitat; and (3) the interagency consultation process under Section 7 of the Endangered Species Act, which is used to determine whether a federal action would jeopardize a listed species’ continued existence or result in an adverse modification of the species’ designated critical habitat. Our complete report on the proposed changes, by Donald Baur, Marc R. Bruner, William G. Malley, Bradley H. Oliphant and Laura Godfrey Zagar is available here.

Significant Changes Proposed to NEPA Regulations

The Council on Environmental Quality (CEQ) has issued a notice of proposed rulemaking regarding potential changes to the CEQ regulations under the National Environmental Policy Act. The proposed revisions to the CEQ regulations could potentially have far-reaching effects because NEPA requirements are largely defined in the regulations themselves, which have remained essentially unchanged for nearly 40 years. The current deadline to submit comments is July 20, 2018, but it is likely that CEQ will receive and grant requests to extend the comment period. Our Update discussing the potential changes to the regulations, by Bill Malley, Laura Zagar, Chris Chou and Jacob Aronson, is available here.

Court Rejects Interpretation of Medical Marijuana Collective as a “Medical Office” under City’s Zoning Code

The Sixth District Court of Appeal has held that a medical marijuana collective is not a “medical office” as defined in San Jose’s Municipal Code. J. Arthur Properties, II, LLC v. City of San Jose, 21 Cal. App. 5th 480 (2018)

Plaintiffs opened a medical marijuana collective in 2010 at a site zoned Commercial Office. At the time, San Jose’s Municipal Code did not regulate any type of marijuana-specific uses and allowed medical offices in Commercial Office zoning areas. The City Council amended the Municipal Code in 2014 to regulate and permit medical marijuana uses in certain industrial zoning area but not in Commercial Office areas. Plaintiffs received a compliance order in 2014 stating that medical marijuana collectives were not permitted in Commercial Office zoning areas, effectively requiring them to discontinue their business at the site.

Plaintiffs sued, contending that their marijuana collective should continue to be allowed as a legal, nonconforming use. The Sixth District Court of Appeal disagreed. San Jose’s Municipal Code defines medical office as “offices of doctors, dentists, chiropractors, physical therapists, acupuncturists, optometrists, and similar health related occupations, where patients visit on a daily basis.” Plaintiffs argued that medical marijuana collectives should be considered medical offices because they provide a medical and health-related service. The court declined this broad interpretation, observing that medical marijuana collectives did not fall under any of the enumerated uses listed in the definition and that a medical marijuana collective is not a “similar health related occupation.” Emphasizing that the enumerated uses typically involve the on-site treatment of patients by a physician or other professional, the court found no evidence that medical marijuana collectives provided a similar service. Instead, “members of collectives are patients of the physicians who prescribed marijuana.”

Accordingly, the court held that the collective had never been a permitted use to begin with and hence could not be a legal nonconforming use.

 

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