In its October 14 decision in Union of Medical Marijuana Patients, Inc. v. City of San Diego, the Fourth Appellate District weighed in for the second time this year on whether a city ordinance regulating medical marijuana dispensaries is subject to CEQA review. As in the first case, which was brought by the same petitioner (Union of Medical Marijuana Patients, Inc. v. City of Upland, decided on March 25), the appeals court held that the ordinance was not a “project” for purposes of CEQA.

On March 11, 2014, the City of San Diego City Council adopted Ordinance No. O 20356, an interim ordinance amending the City’s municipal code to regulate the establishment and location of commercial medical marijuana consumer cooperatives that dispense marijuana to qualified patients and caregivers (“Ordinance”). The Ordinance provides that such cooperatives may operate in certain zones in the City pursuant to a conditional use permit, but contains three significant restrictions on siting:

1. Only four cooperatives are permitted in each of the City’s nine City Council districts;
2. Cooperatives must be located 1,000 feet from public parks, churches, childcare centers, playgrounds, minor-oriented facilities, residential care facilities, schools and other cooperatives; and
3. They must be located 100 feet from residential zones.

The City commissioned an analysis of how these restrictions would actually apply in the City, and determined that only 30 cooperatives could actually be located in the City, with one of the nine districts unable to accommodate any cooperative, and two of the nine districts only able to accommodate three cooperatives.

The City’s Development Services Department concluded that the Ordinance was not subject to CEQA because it is not a “project” as defined by CEQA Guidelines Section 15378: “Adoption of the ordinance does not have the potential for resulting in either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. Further projects subject to the ordinance will require a discretionary permit and CEQA review, and will be analyzed at the appropriate time in accordance with CEQA.” As a result, the City Council enacted the Ordinance without any CEQA review. The Union of Medical Marijuana Patients, Inc. then filed a petition for writ of mandate challenging the City’s approval of the Ordinance as non-compliant with CEQA. The trial court denied the petition and entered judgment in favor of the City, and petitioner appealed. The Fourth District (Division One) affirmed.

The Fourth District first rejected petitioner’s argument that because the Ordinance is a zoning ordinance, its enactment constitutes a project, as a matter of law, regardless of whether it may result in a physical change in the environment. Petitioner relied on section 21080(a) of CEQA, which states that:

[e]xcept as otherwise provided in this division, this division[ ] shall apply to discretionary projects proposed to be carried out or approved by public agencies, including, but not limited to, the enactment and amendment of zoning ordinances, the issuance of zoning variances, the issuance of conditional use permits, and the approval of tentative subdivision maps unless the project is exempt from this division. [emphasis added]

Petitioner argued that, under this provision, any enactment of a zoning ordinance necessarily constitutes a project subject to environmental review. The court recognized that a prior appellate decision (Wal Mart Stores, Inc. v. City of Turlock (2006) 138 Cal.App.4th 273, 286) had acknowledged that this is one arguable reading of section 21080(a), and that another decision (Rominger v. County of Colusa (2014) 229 Cal.App.4th 690) had determined that one type of project mentioned in section 21080(a) – approval of a tentative subdivision map – is categorically a “project” under CEQA. However, the Fourth District here rejected such a “bright-line rule” because section 21080(a) “does not stand alone within CEQA and should not be read in isolation. Indeed, [that section] expressly states that its provisions apply ‘[e]xcept as otherwise provided [in CEQA].’” Section 21065 defines a “project” as an activity undertaken by a public agency “which may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.” As such, “the most reasonable interpretation of section 21080(a)” – which is that adopted by CEQA Guidelines section 15378 – is that the enactment and amendment of zoning ordinances is an “illustration” of an activity undertaken by a public agency, which may constitute a “project” under CEQA, but it is not a “project” unless it also “meets the second requirement in section 21065, namely that it ‘may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.’”

The Fourth District then analyzed the Ordinance under section 21065, to determine whether its enactment constituted a “project” under CEQA because it would result in a reasonably foreseeable indirect physical change in the environment. As discussed below, the court rejected each of petitioner’s three contentions on this point.

Petitioner first argued that the Ordinance would result in the closure of existing, illegal cooperatives and force patients to travel “great distances” to obtain medical marijuana at cooperatives established under the Ordinance, resulting in traffic and air pollution impacts. The court found that this argument was based on a “fundamental assumption that is unsupported by evidence and is unduly speculative” – namely, that patients would travel farther to obtain medical marijuana after the enactment of the Ordinance than previously. The court noted that, prior to the enactment of the Ordinance, the City had taken action to abate the operation of illegal cooperatives as nuisances (including closure of over 100 of them), and the Ordinance did not increase the authority of the City to undertake such abatement proceedings in the future. Moreover, the Ordinance was “intended to increase access to medical marijuana in the City by affirmatively allowing the legal establishment of the cooperatives in the City where none existed before,” and undisputed evidence in the record showed “patients will have several different locations throughout the City to obtain their medical marijuana without having to travel especially long distances.”

Petitioner next argued that the Ordinance would cause patients in the City to cultivate marijuana indoors themselves, rather than travel to cooperatives located at a distance from their residences, and that such indoor cultivation would increase electricity usage and have other environmental impacts. The appeals court also rejected this argument, finding that it was based on the same “unwarranted assumption” that the Ordinance would make it “more difficult for patients to access medical marijuana in the City because it will cause current illegal cooperatives to close and will locate legal cooperatives in inconvenient locations.” In addition, the court found that the argument was based on a further assumption – that a significant number of patients would decide to cultivate marijuana themselves rather than travel to inconveniently located cooperatives – which “rests on pure speculation,” much like the similar argument that the court rejected in the City of Upland case.

Finally, petitioner argued that the establishment of cooperatives under the Ordinance may result in new construction activity that will have an impact on the environment. The appeals court found this argument unavailing, given that it was “purely speculative” to assume that the cooperatives would require any new construction, when they could be located in existing, vacant commercial buildings. In addition, because the Ordinance requires that cooperatives obtain a conditional use permit, in cases where a new building would be constructed, “the appropriate review under CEQA for that specific construction project will be required to be performed by the City at that time.”

For these reasons, the Fourth District concluded that the enactment of the Ordinance did not constitute a “project” subject to CEQA, because it did not have a potential for resulting in a reasonably foreseeable indirect physical change in the environment. As such, the court affirmed the trial court judgment for the City.

As more and more local jurisdictions enact zoning ordinances and other laws to regulate medical marijuana dispensaries – and, if Proposition 64 passes in November, to regulate the sale and use of recreational marijuana – we expect there will be many more legal challenges to such regulations, both under CEQA and pursuant to other legal theories. Ultimately, some of the key issues, such as the proper interpretation of CEQA section 21080(a), may end up in front of the California Supreme Court.