In Neighbors for Smart Rail v. Exposition Metro Line Construction Authority (filed August 5, 2013) (“Neighbors”), a majority of the California Supreme Court justices announced a new rule regarding the baseline agencies may use when conducting a CEQA analysis of a project’s environmental impacts. Specifically, the Court ruled that CEQA does not prohibit the exclusive use of projected future conditions provided that there is substantial evidence in the record that the use of an existing conditions baseline would “tend to be misleading or without informational value.” Although the Court majority held that the respondent agency in Neighbors used the wrong baseline under this standard, a plurality of the Court upheld the project approval on the ground that the agency’s error was not prejudicial.

Neighbors involved a CEQA challenge to the Exposition Metro Line Construction Authority’s (“Authority”) approval of a light-rail project running from Culver City to Santa Monica. In December 2009, the Authority published its final Environmental Impact Report (“EIR”) and, in February 2010, it certified the EIR’s compliance with CEQA. Subsequently, opponents of the project, Neighbors for Smart Rail (“Neighbors”), challenged the project’s compliance with CEQA. Both the superior court and appellate court upheld the project’s CEQA analysis. The Supreme Court accepted certioari on two questions: did the Authority’s EIR violate CEQA because (1) it exclusively analyzed future conditions as a baseline for assessing the project’s environmental impacts, and (2) it used an impermissible mitigation measure to offset the project’s environmental impacts?

Writing for the majority, Justice Werdegar resolved an appellate court split of authority concerning the exclusive use of future conditions as a baseline for assessing project impacts. On one side of the split were the appellate opinions in Sunnyvale West Neighborhood Assn. v. City of Sunnyvale City Council (2010) 190 Cal.App.4th 1351 and Madera Oversight Coaliation, Inc. v. County of Madera (2011) 199 Cal.App.4th 48, both of which held that the use of a single future condition baseline was a per se CEQA violation. The appellate court opinion in Neighbors, on the other hand, held that future conditions could properly be used as baselines so long as they were reliable, provided relevant information, and permitted informed decisionmaking.

The Neighbors majority resolved this split by rejecting the bright-line rule expressed in Sunnyvale and Madera, but requiring a more detailed showing than that described in the Neighbors’ appellate decision. The majority found that CEQA does not prohibit per se the use of projected future conditions as the baseline. But, the high court held, the exclusive use of future baseline conditions should only be used where the use of an existing conditions baseline would “tend to be misleading or without informational value.” The Court also decided that the substantial evidence test would be used to determine whether the respective agency had used the correct baseline.

Significantly, although the Supreme Court majority spent 27 pages of its opinion explaining that there was no substantial evidence to support the Authority’s use of the future conditions baseline, a plurality let the agency off the hook on the ground that the agency’s error was not prejudicial. Relying on Public Resources Code section 21005(b)’s admonition that “there is no presumption that [agency] error is prejudicial,” three members of the Court determined that there was no evidence in the record that the agency decisionmakers or the public were deprived of substantial information relevant to approving the project; hence, the agency error was “not a ground for setting that decision aside.”

Other Justices disagreed with the majority’s baseline holding and it’s finding of no prejudice. Writing for the dissenters, Justice Baxter accused the majority of “needlessly complicat[ing] and protract[ing] the CEQA review process.” He, along with Chief Justice Cantil-Sakauye and Justice Chin argued that the majority should not have authorized an exception for instances where baseline conditions might be misleading or without informational value. Instead, the dissenters argued that the majority should have issued a more definitive, bright-line rule that an agency’s discretion regarding what baseline to use should be given substantial deference “so long as the selected alternative of proposed future conditions baseline is supported by substantial evidence and results in a realistic impacts analysis that allows for informed decisionmaking and public participation.” The dissenting justices signed on to the result—to uphold the EIR—because they concluded that no CEQA baseline error had been committed in the first instance.

The lone member of the Court to vote to send the EIR back to the Authority was Justice Liu. Although Justice Liu agreed with the majority’s new rule regarding the use of a future baseline, he did not agree that the error should be excused on the ground that there was no harm to informed agency decisionmaking. The fact that both California Appellate Courts and the Supreme Court appear to be trending towards requiring project opponents to demonstrate not just error but prejudicial error should be encouraging to project applicants and a warning to project opponents that attempt to use CEQA as a tool to derail or delay certain projects.

Authored by Bryan Hawkins and Andrew Brimmer.