In Communities for a Better Environment v. South Coast Air Quality Management District, the California Supreme Court held that the California Environmental Quality Act (Pub. Resources Code, §§ 21000, et seq. (“CEQA”) requires an agency analyzing the “worst case” emission impacts of a new refinery project to analyze emission impacts of a new refinery project against the existing facility’s actual current emissions, and not with the facility’s maximum permitted emission levels. The Court reasoned that the refinery project differed from proposals in past cases that simply modified a previously analyzed project or continued operation without significant expansion. The Court’s decision is an important clarification of CEQA baseline principles. Projects that involve more than a mere modification of a previously analyzed project, or involve significant expansion of existing operations, need to be analyzed against actual physical conditions, not maximum permitted conditions.
Defendant South Coast Air Quality Management District (“District”) had prepared a negative declaration analyzing the impacts of ConocoPhillips’s proposal for an ultra-low-sulfur diesel fuel project, and concluded that the project would not adversely affect the environment. The District acknowledged that, in a “worst-case scenario,” the project would create hundreds of pounds of additional nitrogen oxide (NOx) emissions per day (in excess of the District’s 55 pounds per day standard). However the District did not consider the emissions to be part of the project because the emissions did not exceed the maximum levels allowed under existing permits. The Court found this to be an improper application of the general rule that the “physical environmental conditions,” as they exist at the time environmental analysis begins, “will normally constitute the baseline physical conditions by which a lead agency determines whether an impact is significant.” (CEQA Guidelines, § 15125(a).) Accordingly, the Court concluded that it was inconsistent with established CEQA principles to compare the proposed project to what could lawfully happen under the existing permits, rather than to what was actually happening.
The Supreme Court distinguished the matter from a line of cases that relied on maximum operational levels allowed under existing permits. In each case, the Court noted, the subject project was “merely a modification of a previously analyzed project and hence requiring only limited CEQA review ... or as merely the continued operation of an existing facility without significant expansion of use and hence exempt from CEQA review.” The same could not be said for the ultra-low-sulfur diesel fuel project, as it was adding a new refinery to the facility and would require increase operation of other equipment. Finally, the Court concluded that the record—specifically the data in the negative declaration—supported a fair argument that the project will have a significant adverse effect on the environment. The Court thus affirmed the Court of Appeal’s direction to prepare an EIR.