In Sunflower Alliance v. California Department of Conservation (2024) 105 Cal.App.5th 771, the First District Court of Appeal held that a project that would turn an existing oil well into an injection well to pump water back into an aquifer (Project) was exempt from CEQA under the Class 1 exemption for minor alterations to an existing facility, reversing the trial court. In doing so, the Court concluded that any expansion of the well’s use was negligible because the environmental risks of injecting the water were insignificant.

Oil wells commonly produce low quality groundwater along with each barrel of oil. Under federal and state law, this excess “produced water” can be injected back into an oil-bearing aquifer provided that certain conditions, such as not allowing injected water to escape the aquifer or harm people and the environment, are met. The state agency charged with permitting these injection wells is the California Department of Conservation’s Division of Geologic Energy Management (CalGEM).

In 2020, the Project proponent, who owns other oil wells near the Project and uses trucks to haul 300 barrels of produced water to distant disposal sites 10 times per week, applied to CalGEM for a permit to convert a former oil well into a Class II injection well. After extensive review by CalGEM, the State Water Resources Control Board, and the Regional Water Quality Control Board, CalGEM approved the Project with several regulatory conditions and found that the Project was exempt from CEQA under the Class 1 categorical exemption as a “minor alteration” to an existing facility involving “negligible or no expansion” of the well’s former use.

Sunflower Alliance, a group whose stated mission is to resist fossil fuels and work for climate justice, filed a petition for writ of mandate challenging CalGEM’s approval on the grounds that the Class 1 exemption did not apply to the Project. Although the trial court was inclined to agree with CalGEM that the physical modification to the well would be minor and fit within the exemption, the trial court determined that the exemption did not apply because changes in use—for injection as opposed to extraction—would be ”significantly different.” The Project proponent timely appealed, and, although CalGEM decided to return to the writ and not appeal, CalGEM’s subsequent briefing on the merits was accepted by the Court as an amicus curiae brief.

On appeal, Sunflower Alliance argued that the Class 1 exemption should not apply to the Project because wastewater injection was an entirely new use of the well, and was therefore an impermissible expansion. In response, Project proponents and CalGEM argued that the degree of such a change was determinative and the Project’s change in use or purpose would not be significant. The Court found flaws with both approaches, and, instead of focusing on the actual changes in use or purpose of the well, the Court determined that the CEQA guideline’s use of the word “negligible” was intended to allow changes or expansions in use that are inconsequential and to exclude changes that threaten environmental harm. In employing this novel approach, the Court stated: “when a modified project is put to a new use, the change in use is unimportant, as far as CEQA goes, if the risk of environmental harm from the new use is negligible.”

Following this rule, the Court determined that the Project entailed only modest conversions to the existing well and that the environmental risks were negligible given the robust regulatory framework in place for permitting these types of injection wells. In doing so, the Court found Sunflower Alliance’s assertion that the Project’s exemption was not based on substantial evidence was meritless as multiple regulatory agencies reviewed the Project’s potential impacts and concluded that it would not have significant environmental impacts. With regard to Sunflower Alliance’s contention that Project conditions of approval were actually disguised mitigation measures, the use of which should preclude the use of an exemption, the Court found that (1) there was no significant impact to mitigate, and (2) the conditions put in place were required by existing regulatory standards for these types of wells. Accordingly, the Court reversed the trial court’s ruling and determined that CalGEM did not abuse its discretion in finding the Project exempt from CEQA.

Key Takeaways

This opinion subtly reorients the Class 1 exemption analysis to focus on the degree of potential environmental harm associated with the expansion of use, rather than the significance of the expansion itself, and it is unclear whether this shift will significantly alter how courts consider this oft-used exemption. However, the Court’s analysis was robust, and the deference to agencies on issues involving technical expertise is heartening.