Photo by Mark Rightmire, Orange County Register/SCNG)

Photo by Mark Rightmire, Orange County Register/SCNG)

On March 30, 2017, in the first of at least three CEQA rulings expected this year, the California Supreme Court issued its long-awaited decision in Banning Ranch Conservancy v. City of Newport Beach.  In a unanimous opinion authored by Justice Carol Corrigan, the Court invalidated an EIR for the coastal development at Banning Ranch approved by the City of Newport Beach.  Despite the fact that the EIR addressed in detail the project’s physical impacts on wetlands and sensitive habitats, the Court nevertheless held that it failed to adequately disclose and consider the controversy surrounding the potential presence of Environmentally Sensitive Habitat Areas (“ESHA”) under the Coastal Act.  This decision falls within a growing line of cases mandating inclusion of non-CEQA regulatory requirements within the confines of the CEQA environmental review process, and in a manner that places ever greater burdens on lead agencies and EIR preparers.

Banning Ranch is a 400-acre tract of largely undeveloped property within both the City’s sphere of influence and California’s coastal zone, and thus requires a coastal development permit under the Coastal Act.  Because the Banning Ranch area had been excluded from the City’s local coastal program, however, the Coastal Commission remained the sole permitting authority under the Coastal Act.  Under the Coastal Act and the City’s own coastal plan, areas qualifying as ESHA receive special protection and “shall be protected against any significant disruption of habitat values” except for those uses “dependent on those resources.”  Further, the City’s General Plan included a provision requiring the City to “[w]ork with appropriate state and federal agencies to identify wetlands and habitats to be preserved and/or restored and those on which development will be permitted.”

In 2008, the project applicant submitted a proposal for development of a residential and commercial village, which included a survey report identifying potential ESHA. The notice of EIR preparation stated that the project included areas that “may be” defined as ESHA and would require a coastal development permit.  There was other evidence in the record regarding the possibility of ESHA onsite, including previous reports on ESHA within a key access roadway and extensive comments submitted by the public and Coastal Commission on the need to identify and evaluate ESHA.  Instead of attempting to delineate or otherwise evaluate those sensitive and habitat areas that might be treated as ESHA, the City in its Final EIR acknowledged the identification of two possible ESHA onsite, but stated that “no conclusions of ESHA can and will be made by the City at this time as part of the EIR process that would in any way bind the Coastal Commission or elucidate on the Coastal Commission’s ultimate conclusions [sic].”

Banning Ranch Conservancy filed suit, urging that the EIR did not adequately disclose or analyze impacts and mitigation measures with respect to ESHA and that the City violated its obligation under the General Plan to work with the Coastal Commission to identify areas to be protected from development.  The trial court disagreed with regard to the EIR’s treatment of ESHA, but granted the writ petition as to the City’s failure to meet its obligations under the General Plan.  The Fourth Appellate District reversed in part, ruling for the City on all grounds.  The Fourth District affirmed that the General Plan did not require the City to work with the Coastal Commission before project approval and that CEQA did not compel the City to “prognosticate as to the likelihood of ESHA determinations and coastal development permit approval.” The court then denied the petitioner’s general plan inconsistency claim, concluding that post-CEQA consultation with the Coastal Commission would have satisfied the General Plan policy requiring consultation in the coastal development permitting process.  The California Supreme Court granted review.

Treating this as a procedural issue reviewed as a matter of law, the Supreme Court found the City’s decision to forgo consideration of ESHA in the EIR was “untenable.”  CEQA, the Court said, “sets out a fundamental policy requiring local agencies to ‘integrate the requirements of this division with planning and environmental review procedures otherwise required by law or by local practice so that all those procedures, to the maximum feasible extent, run concurrently, rather than consecutively.’”  (Citing Pub. Resources Code, § 21003(a); Guidelines, § 15080.)  An EIR must also:  (1) “propose and evaluate mitigation and alternatives that ‘avoid or substantially lessen’ significant effects”; (2) “lay out any competing views put forward by the lead agency and other interested agencies”; and (3) address “in detail” any “major environmental issues raised” in public comments.

Here, the Court held that by “openly declar[ing] that it was omitting any consideration of potential ESHA from the EIR,” the City “ignored its obligation to integrate CEQA review with the requirements of the Coastal Act, and gave little consideration to the Coastal Commission’s needs.”  The Court emphasized that, “[b]y definition, projects with substantial impacts in the coastal zone are regionally significant.”  (Citing Guidelines, § 15206(b)(4),(C).)  The Court acknowledged that while a lead agency is not required to make a “legal” ESHA determination in an EIR, “it must discuss potential ESHA and their ramifications for mitigation measures and alternatives when there is credible evidence that ESHA might be present on a project site.”

The Court determined that the City’s failure to discuss ESHA requirements and associated impacts “resulted in inadequate evaluation of project alternatives and mitigation measures [and] [t]he public was deprived of a full understanding of the environmental issues raised by the Banning Ranch project proposal.”  As such, the Court found that the City had prejudicially abused its discretion.  However, the Court noted that invalidation of an EIR would not always be required where regulatory information is omitted.  Failure to include specific information is only prejudicial where its absence substantially impairs the EIR’s informational function, and the determination regarding prejudice is subject to the “rule of reason”:

“Other regulations may be complex.  Their application may be uncertain.  Practical difficulties with interagency coordination may arise at the EIR stage.  Courts must be careful not to second-guess good faith efforts to coordinate environmental review.”