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In POET, LLC v. California Air Resources Board, 2013 Cal. App. LEXIS 554, the Fifth District Court of Appeal reversed the trial court’s decision denying plaintiffs’ petition for a writ of mandate seeking invalidation of California Air Resources Board (“ARB”) approval of low carbon fuel standards (“LCFS”) regulations for non-compliance with CEQA. In an unpublished part of its opinion, the court further ruled that ARB violated the Administrative Procedures Act (“APA”) by failing to include consultant e-mails in the rulemaking file. Nevertheless, the court allowed the regulations to remain in effect, pending completion of CEQA- and APA-compliant proceedings.

The Global Warming Solutions Act of 2006 (“AB 32”) directed ARB to devise and implement strategies to reduce carbon emissions. As part of its compliance with this mandate, ARB developed LCFS performance standards imposing a limit on the annual average carbon intensity of fuels used by regulated parties. In approving the LCFS standards, ARB’s Board delegated to the Executive Officer the duty to respond to environmental issues.

Plaintiffs filed a petition for writ of mandate to set aside the LCFS regulations, alleging the Board had violated CEQA by: (1) approving the regulations prior to completion of environmental review; (2) delegating partial decision-making authority to its Executive Officer; and (3) improperly deferring mitigation for increased NOx emissions. The trial court denied plaintiffs’ petition and plaintiffs appealed. On appeal, plaintiffs raised an additional argument that ARB had violated the APA by failing to include relevant consultant e-mails in the rulemaking file.

The court first held an environmental document prepared pursuant to certified regulatory program must be completed before a lead agency may approve a project. The court then determined that the principles regarding the timing of project approval enunciated in Save Tara v. City of West Hollywood, 45 Cal. 4th 116 (2008), applied to ARB’s actions. A review of the language of the Board’s resolution, agency press releases, and subsequent notices of decision led the court to conclude that ARB had approved the regulations for CEQA purposes at the Board hearing, having committed itself to a particular course of action that foreclosed the Executive Officer’s ability to consider the full range of alternatives.

Next, the court considered whether the Board had improperly delegated decision-making authority to the Executive Officer. The court observed that CEQA’s basic purpose of informing decision-makers about possible environmental effects would be frustrated if the two functions—project review and environmental review—could be performed by different people. The court therefore held that, while delegation may be authorized, splitting the decision-making authority was improper.

The court then examined whether ARB had improperly deferred mitigation for increased NOx emissions from biodiesel. ARB stated it would conduct rulemaking at the end of a test program to ensure no NOx increase and would partially mitigate this impact by promulgating fuel specifications. But because ARB had not established objective performance criteria to measure whether the stated goal would be achieved, the court held it had improperly deferred mitigation.

The court concluded that ARB’s approval of the LCFS regulations should be set aside, but that, on balance, the environment would be better served by allowing the regulations to remain in effect pending ARB’s compliance with CEQA. However, the court prohibited ARB from stepping up enforcement beyond the 2013 levels until it complies with its legal obligations.

The decision-making body of the lead agency cannot delegate authority to certify an EIR pursuant to CEQA while retaining approval authority for a project.
Certified regulatory programs remain subject to the limitations set forth in Save Tara related to timing of project approval.
Courts can, and should, consider the consequences of setting aside a project when crafting the remedy for a CEQA violation.

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