Every CEQA analysis begins with the threshold question of whether the activity is a “project” as defined by Public Resources Code section 21065 and 21080. In Union of Medical Marijuana Patients, Inc. v. City of San Diego, the California Supreme Court held that regardless of the nature of a project, CEQA applies if it “may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment….”  (Pub. Resources Code §21065.)

In so holding, the Court rejected the argument that the categories of activities listed in Public Resources Code Section 21080(a) are projects as a matter of law; rather, they are examples of activities that might be projects under CEQA. The Court further held that in determining whether the activity is a project, the agency’s task is not to look at the actual impact of the activity, but rather to look at whether “the theoretical effects … are sufficiently plausible to raise the possibility that the activity ‘may cause … a reasonably foreseeable indirect physical change in the project.’” (Union of Medical Marijuana Patients, Inc. v. City of San Diego (August 19, 2019, S238563) __ Cal.5th__ [p. 35, quoting Pub. Resources Code §21065].) 

This case arose when the City of San Diego adopted an ordinance regulating the location,  operation, and establishment of medical cannabis dispensaries within the City. The key provisions of San Diego Ordinance No. O-20356 (Ordinance) amended various City zoning regulations to specify the number of dispensaries, direct where the dispensaries could be located, and place other limits on operation. The City determined that adoption of the Ordinance was not a project and did not conduct CEQA review. The City based this determination on its conclusion that the Ordinance did not have the potential for resulting in a direct or reasonably foreseeable indirect change in the environment, and that future projects would require discretionary use permits and additional review.

The Union of Medical Marijuana Patients (UMMP) filed a Petition for Writ of Mandate, arguing that the adoption of the Ordinance was a project subject to CEQA. Disagreeing with the City’s conclusion, UMMP claimed the Ordinance had potential for indirect environmental effects, including increased traffic, increased cultivation of marijuana, and shifting of unique development impacts of dispensaries.

The Trial Court and the Court of Appeal both upheld the City’s determination that the Ordinance was not a project.  The California Supreme Court reversed.

As a threshold matter, the Court first evaluated UMMP’s argument that because “amendment of a zoning ordinance” is explicitly referenced in Section 21080, it is per se a project under CEQA. Section 21065 defines a project as

an activity which may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and which is any of the following: (a) An activity directly undertaken by any public agency. (b) An activity undertaken by a person which is supported, in whole or in part, through contracts, grants, subsidies, loans, or other forms of assistance from one or more public agencies. (c) An activity that involves the issuance to a person of a lease, permit, license, certificate, or other entitlement for use by one or more public agencies.

The Court acknowledged that there is a potential for Section 21080 (a) to be read in a way that overrides this definition. It states:

Except 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.

Considering the provisions together, the Court concluded that the legislature intended for the term “project” in Section 21080 to be governed by the definition assigned in Section 21065. Accordingly, Section 21065 is the prevailing definition of “project,” and 21080 (a) simply offers generic examples of the types of discretionary activities to which CEQA could apply. Policy considerations favor this interpretation, as there is no reason to impose the costs of CEQA when there is no potential for an impact on the environment. Moreover, the legislature amended the language in Section 21065 for the purpose of prohibiting CEQA from being used to delay or kill activities with no direct or indirect effect on the environment.

The Court then turned to the City’s decision that the Ordinance did not qualify as a project under Section 21065. The Court interpreted Muzzy Ranch v. Solano County Airport Land Use Commission (2007) 41 Cal.4th 372 as holding “a local agency’s task in determining whether a proposed activity is a project is to consider the potential environmental effects of undertaking the type of activity proposed, ‘without regard to whether the activity will actually have environmental impact.’” (UMMP v. City of San Diego, __ Cal.5th [at p. 30, quoting Muzzy Ranch, 41 Cal.4th at 381.) Since determination of an activity’s status as a project occurs at the inception of agency action, the agency need not consider “the activity’s actual impact in the specific circumstances presented.” (Id. at p. 33) At this stage, the potential effects may only be rejected as speculative if “the postulated causal mechanism underlying its occurrence is tenuous.” (Id. at p. 36.) Thus, the Court held that the City erred in determining the Ordinance was not a project because the Ordinance had potential for a reasonably foreseeable indirect change in the environment due to reasonably foreseeable retail construction and change in traffic patterns.

The Court reversed the Court of Appeal and directed it to vacate the denial of the writ of mandate and remand the case to the trial court.