In County of Butte v. Dep’t of Wat. Resources (2022) 13 Cal.5th 612, issued on August 1, 2022, the California Supreme Court carved out a role for the California Environmental Quality Act (“CEQA”) even where the project is largely governed by a federal proceeding.  The case arose in connection with the relicensing of the Oroville Dam by the Federal Energy Regulatory Commission (“FERC”).  The Federal Power Act (“FPA”) (16 U.S.C. § 791, et seq.) delegates to FERC the authority to license hydroelectric dams; the FPA has “a significant preemptive sweep.”  Despite a comprehensive federal process for licensing dams, the Supreme Court held that state agency review under CEQA was not entirely preempted.  As significant as the ruling itself is the strident dissent, penned by outgoing Chief Justice Cantil-Sakauye.

Preemption

“The Supremacy Clause provides that ‘the Laws of the United States’ (as well as treaties and the Constitution itself) ‘shall be the supreme Law of the Land . . . any Thing in the Constitution or Laws of any state to the Contrary notwithstanding.’”  (U.S. Const.] Art. VI, cl. 2.)  As such, Congress may preempt—or invalidate—state law through federal legislation.

In a recent California Supreme Court case, Friends of the Eel River v. North Coast Railroad Authority (2017) 3 Cal.5th 677 (“Eel River”), the Court held that “when it comes to considering preemption of state-owned or state-operated projects, we apply a presumption that ‘protects against undue federal incursions into the internal, sovereign concerns of the states.’”  More specifically, the Court provided that “[t]o determine the reach of the federal law preempting state regulation of a state-owned [project,] we must consider a presumption that, in the absence of unmistakably clear language, Congress does not intend to deprive the state of sovereignty over its own subdivisions to the point of upsetting the usual constitutional balance of state and federal powers.”  In Eel River, the court concluded that CEQA was not preempted by the Interstate Commerce Commission Termination Act of 1955 (“ICCTA”).

Background

Prior to the expiration of Oroville Dam’s existing FERC license, the California Department of Water Resources (“DWR”), the operator of the Oroville Dam, and other stakeholders negotiated a settlement agreement governing operations of the dam for submission in FERC’s relicensing proceeding.  In 2006, FERC issued an environmental impact statement (“EIS”), as required by the National Environmental Policy Act (“NEPA”).  After DWR entered the settlement agreement, DWR prepared and published an environmental impact report (“EIR”) under CEQA.  The EIR served to inform DWR’s decision-making regarding the particular terms it should request from FERC in the renewed license.  In particular, it provided feasible mitigation measures that must be incorporated into the facilities’ operations.

The Counties of Butte and Plumas challenged the EIR’s sufficiency and DWR’s relicensing application.  Following a complicated procedural history, the Third District Court of Appeal initially found that its authority to review the EIR was preempted by the FPA. The California Supreme Court, however, granted review and sent it back to the Third District with directions to reconsider the case in light of Eel River.  On reconsideration, the Court of Appeal found that Eel River was distinguishable because of material differences between the FPA and the ICCTA, the federal law at issue in Eel River  Accordingly, the Court of Appeal again found that the Counties’ challenge was preempted and dismissed the CEQA challenge to DWR’s relicensing application.

The Opinion

The California Supreme Court granted review of the Third District’s opinion on reconsideration.  The case presented the narrow issue of the extent to which the FPA preempts CEQA when the state is acting on its own behalf and exercising its discretion in pursuing a license for its own project.

Justice Liu, writing for the majority, determined that the FPA does not preempt CEQA when the application sought by the State is for its operation of facilities on its own behalf.  Specifically, the Court held: “Nothing in the FPA suggests Congress intended to interfere with the way the state as owner makes these or other decisions concerning matters outside of FERC’s jurisdiction or compatible with FERC’s exclusive licensing authority.”  (Id. at p. 3.)  Despite acknowledging that the FPA “was created to facilitate development of the nation’s hydropower resources, in part by removing state imposed roadblocks” and that the FPA grants FERC “express authority” to require modification to projects and its plans or specifications (id. at pp. 11-12), the Court found that the FPA does not preempt CEQA, either via conflict preemption or field preemption.  Although holding that FPA did not preempt state law permitting challenges to a state agency’s EIR, the Court explained that “no state court can issue a remedy that conflicts with federal law.”  Therefore, the Court went on, “the fact that CEQA is not categorically preempted does not mean that no CEQA applications or remedies are preempted by the federal scheme.”  (Id. at p. 23.)  Accordingly, the Court held that the Counties could not seek injunctive relief that would interfere with the federal licensing process or challenge the terms of the settlement agreement submitted in the FERC relicensing proceeding, but the Counties could challenge the sufficiency of the EIR.  (Ibid.)  In addition, the Court found that Eel River’s rationale applied, even under FPA.  For these reasons, the Court reversed and remanded for proceedings determining the sufficiency of the EIR.

In dissent, Chief Justice Cantil-Sakauye, joined by Justice Corrigan, concluded that CEQA was preempted by the FPA.  The dissent was particularly concerned about the potential for conflict between the mandatory mitigation measures that frequently result from an EIR.  If those measures conflict with FERC’s determinations in the relicensing process, an untenable conflict could result.  FERC’s determinations would have preemptive effect, but the state agency that conducted the CEQA environmental review and adopted a mitigation monitoring program would have based its finding that significant environmental impacts had been mitigated on measures that would not be implemented, due to FERC’s preemption.  Moreover, since CEQA may be enforced by private entities, the potential for litigation and delay is unavoidable.  The Chief Justice noted:  “as this case glaringly demonstrates, the private enforcement provisions of CEQA stand as an inevitable impediment to the congressional purpose of granting to FERC exclusive control over the hydropower licensing process.  FERC’s licensing regulations were clearly designed to render unnecessary the application of state environmental review statutes.”

The majority opinion responded to this concern by noting that if certain mitigation measures are omitted from the license granted by FERC, “then FERC has simply exercised its discretion to dictate the terms of the license offered, preempting any particular applications or enforcement mechanisms of CEQA that conflict with that authority,” and CEQA will have nevertheless performed its function of informing the state entity’s decision-making.  (Id., p. 27.)

The majority opinion of the Supreme Court presents a challenge to the practical reality when a state agency lacks discretion to alter its project or add mitigation measures and yet must undertake a lengthy CEQA process and the potential for costly and time-intensive litigation that so often follows.  Indeed, this opinion, which finds FPA not preempted despite FPA’s broad-sweeping authority over hydropower licensing and relicensing, adds to the already complex nature of CEQA as it relates to projects undertaken by state agencies.