Archives: September 2013

Ninth Circuit Rules on Constitutionality of California’s Pioneering Regulatory Approach to Reducing Carbon in Fuels

In a significant victory for the California Air Resources Board, a Ninth Circuit Court of Appeals panel concluded that California’s Low Carbon Fuel Standard does not facially discriminate against out-of-state fuel producers. At issue in the case, Rocky Mountain Farmers Union v. Corey (Sept. 18, 2013, Case Nos. 12-15131, 12-15135), were regulations imposed as part of the California Global Solutions Act of 2006 (Assembly Bill 32). The Act established the nation’s first greenhouse gas regulatory program.

The Low Carbon Fuel Standard requires producers of ethanol, crude oil and other fuels to reduce the carbon intensity of transportation fuels sold or supplied to California. The regulations are based on “lifecycle” analyses that take into account not only emissions that result from combustion at the end of a fuel’s “life,” but also emissions generated during the production and transportation of such a fuel.

In 2009, Rocky Mountain Farmers Union challenged the ethanol provisions of the fuel standard. Rocky Mountain claimed the standard’s reach, which extends beyond California, exceeded the state’s authority under the dormant Commerce Clause, and that it was preempted by federal law. The American Fuel & Petrochemical Manufacturers Association challenged both the ethanol and crude oil provisions. A federal trial court held in late 2011 that the fuel standard was unconstitutional because it discriminated against out-of-state fuel producers, in violation of the dormant Commerce Clause.

In its opinion, the Ninth Circuit panel dissolved the lower court’s preliminary injunction that at one point prevented the California Air Resources Board from implementing the fuel regulations. The court held that the ethanol provisions do not “facially” discriminate against out-of-state commerce, and that the initial crude oil provisions did not discriminate against out-of-state crude oil “in purpose or practical effect.” The court also held that the regulations did not violate the dormant Commerce Clause’s prohibition on extraterritorial regulation. The Ninth Circuit did not completely dispense with the controversy, however. The court remanded the case to the lower court to determine whether the ethanol provisions discriminate in purpose or practical effect, and if not, to apply the less restrictive Pike balancing test to determine the standard’s validity under the Commerce Clause. The court also remanded on the crude oil issue, ordering a similar balancing determination.

The opinion contains an in-depth and favorable discussion of the fuel standard’s “lifecycle analysis” approach. It also approvingly describes California’s “tradition of leadership” among states in protecting the environment, particularly with regard to the regulation of greenhouse gas emissions to reduce the risk of global warming. In explaining its rationale, the court stated: “California should be encouraged to continue and to expand its efforts to find a workable solution to lower carbon emissions, or to slow their rise. If no such solution is found, California residents and people worldwide will suffer great harm. We will not at the outset block . . . this innovative, nondiscriminatory regulation to impede global warming.”  

What follows is a deeper discussion of this case. It includes a summary of the genesis and technical aspects of the Low Carbon Fuel Standard for both ethanol and crude oil, the procedural background and challenges involved in the case, and the Ninth Circuit decision, which has generated significant media attention and speculation about whether the case will go to the U.S. Supreme Court.  

 Factual Background

The Ninth Circuit began its discussion of the facts by pointing to California’s long history of efforts to protect the environment, with a particular concern for vehicle emissions. The court noted that section 209(a) of the federal Clean Air Act allows California to adopt its own standards regulating vehicle emissions if they are at least as protective as federal standards. Other states may then either follow the federal or the California standards. But no other states may adopt vehicle emission standards of their own.

Following this tradition of environmental protection, California passed Assembly Bill 32, the Global Warming Solutions Act of 2006. Through AB 32, the state resolved to reduce greenhouse gas (GHG) emissions to 1990 levels by 2020. The bill directed the California Air Resources Board (CARB) to develop various regulations to achieve this goal. Through a scoping plan process required by AB 32, CARB determined that vehicle emissions constitute 40% of the state’s total GHG emissions. CARB responded to this finding by adopting a three-part approach to lowering GHG emissions in the transportation sector. The approach involved reducing emissions “at the tailpipe” by establishing progressively stricter emission limits for new vehicles and integrating regional land use and transportation planning to reduce vehicle miles traveled annually. Last, CARB aimed to lower the GHG intensity of transportation fuel by adopting the Low Carbon Fuel Standard. This would reduce the quantity of GHGs emitted in both the production and transportation of fuels.

The fuel standard applies to most transportation fuels currently used in California and any fuels developed in the future.  The fuel standard was intended to establish a declining annual cap on the average carbon intensity of fuels in California beginning in 2011. To comply with the fuel standard, producers must keep the average carbon intensity of their total volume of fuel below the annual limit. Producers selling fuel with lower intensity than the annual cap receive credits. These credits may be sold to other fuel producers or banked for later years. Under this credit-trading scheme, a fuel producer may still sell fuel with higher carbon intensities than the annual limit by purchasing credits to offset the overage.

The total carbon intensity of any given fuel is determined by a “lifecycle analysis.” This analysis drove much of the controversy in the litigation. Before addressing this controversy, the court dedicated a sizable portion of its background discussion to CARB’s policy choices regarding the adoption of the fuel standard and the lifecycle analysis. The court noted that because GHG emissions mix in the atmosphere to create global impacts, emissions from the production of fuels used in California impact the state even if the fuels are produced out-of-state. The lifecycle analysis captures these emissions by including GHGs from fuel production in the fuel’s final carbon intensity score. If CARB did not adopt this inclusive lifecycle approach, GHGs emitted before fuels are imported into the state would escape California’s regulation. Additionally, climate-change benefits of biofuels, such as ethanol, would be ignored if CARB’s focus were simply on tailpipe emissions, as the benefits of these alternative fuels largely come before combustion of the fuel itself.

To measure the lifecycle emission of various fuels, CARB relied on Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation Model (“GREET”) produced by the Argonne National Laboratory. This model has been used by the federal Environmental Protection Agency for its own lifecycle analysis under the federal Clean Air Act and by agencies of other states. CARB set a baseline average carbon intensity in the 2010 gasoline market of 95.86 grams of carbon-dioxide equivalent per mega joule (gCO2e/MJ.) In 2011, this carbon intensity cap would drop .25% below the 2010 average. Each subsequent annual limit would be further reduced from the 2010 baseline. As a side note, the court pointed out that evidence demonstrates CARB’s program is starting to work as intended. After reviewing ethanol sales in different markets during 2011, the Oil Price Information Service reported that lower carbon intensity fuels received a price premium in California.

Regulated fuel producers comply with the fuel standard reporting requirements through one of two methods. Fuel producers may rely on “default pathways” established for a range of fuels CARB anticipates will be sold in California. Or fuel produces may register individualized pathways to be approved for use by CARB.

The ethanol issue:

Ethanol is a fuel-alcohol produced through the fermentation and distillation of various organic feedstocks. Most domestic ethanol comes from corn, while Brazilian sugarcane dominates the import market. The California GREET model for ethanol considers various factors in the production of the fuel to reach a carbon intensity value. These factors include: (1) growth and transportation of the feedstock, with a credit for GHGs absorbed during photosynthesis; (2) efficiency of production; (3) type of electricity used to power the plant; (4) fuel used for thermal energy; (5) milling process used; (6) offsetting value of an animal-feed co-product (distiller’s grains) that displace demand for feed that would generate its own emissions in production; (7) transportation of the fuel to the fuel blender in California; and (8) conversion of land to agricultural use.

By 2011, producers from California, the Midwest, and Brazil had all obtained approval from CARB to use individualized pathways to measure the carbon intensity of their fuels. The pathways ranged in carbon intensity from 56.56 gCO2e/MJ to 120.99 gCO2e/MJ. The lowest intensity was achieved by a Midwest producer. The default pathway for Brazilian sugarcane ethanol made with co-generated electricity had a slightly higher carbon intensity of 58.40 gCO2e/MJ. The highest intensity of 120.99 gCO2e/MJ was assigned to Midwestern wet-mill ethanol, using 100% coal for thermal energy. In comparison, the carbon intensity of gasoline in 2010 was 95.86 gCO2e/MJ.

The crude oil issue:

CARB’s fuel standard also regulates crude oil and derivatives sold in California. The court explained that regulation of crude oil is necessary for CARB to achieve its GHG emission reduction goals set for the state. As easily accessible sources of crude oil are exhausted, they will be replaced by newer sources that require more energy to extract and refine. This leads to a higher carbon intensity for the fuel. CARB predicted that fuels with carbon intensity values 50 to 80 percent lower than gasoline will be needed to reach AB 32’s emission reduction targets.

Provisions developed in 2011 for the CARB fuel standard distinguished between crude oil through two factors: first, whether the crude originated from an existing or emerging source, and second, whether the crude is high carbon intensity crude oil or not. Crude is classified as high intensity if more than 15.0 gCO2e/MJ of emissions in extraction, production, and transportation result.

 Procedural Background

This case involved a host of petitioners, intervenors, and amici curiae. Plaintiffs included Rocky Mountain Farmers Union et al. and American Fuel & Petrochemical Manufacturers Association et al. Numerous environmental organizations intervened on behalf of CARB. These groups included Environmental Defense Fund, Natural Resources Defense Council, and Sierra Club. A diverse group of amici curiae, including states, law professors, and other organizations also filed briefs.

The litigation began in 2009, when Rocky Mountain Farmers Union challenged the ethanol provisions of the fuel standard for violating the dormant Commerce Clause and being preempted by federal law. In 2010, American Fuels challenged both the ethanol and crude oil provisions on similar grounds. Rocky Mountain requested a preliminary injunction on its Commerce Clause and preemption claims, while American Fuels moved for summary judgment on its Commerce Clause claims. CARB filed cross-motions for summary judgment on all grounds.

The district court granted Rocky Mountain’s preliminary injunction and American Fuel’s partial motion for summary judgment. The district court determined that CARB’s fuel standard violated the Commerce Clause by engaging in extraterritorial regulation, facially discriminating against out-of-state ethanol, and discriminating against out-of-state crude oil in purpose and effect. The district court concluded that CARB’s fuel standard could not survive the strict scrutiny review courts apply to facially discriminatory regulations.

CARB achieved one small victory at the district court. The court granted partial summary judgment in favor of CARB after finding the fuel standard is “a control or prohibition respecting a characteristic or component of a fuel under section 211(c)(4)(B) of the Clean Air Act.” CARB appealed the case to the Ninth Circuit.

The Ninth Circuit’s Decision

The Commerce Clause and the Fuel Standard Ethanol Provisions

The Ninth Circuit first addressed plaintiffs’ Commerce Clause arguments regarding CARB’s regulation of ethanol. Specifically, plaintiffs argued the fuel standard’s ethanol provisions improperly discriminate against out-of-state commerce and regulate extraterritorial activity.

The court explained that under the dormant Commerce Clause, economic protectionism by states is prohibited. In other words, a state may not engage in the differential treatment of in-state and out-of-state economic interests to the benefit of the former and detriment to the latter. State statutes or regulations that discriminate on their face, in purpose or in practical effect, are unconstitutional unless they serve a “legitimate local purpose” and no alternative non-discriminatory means are available.

To determine whether a statute or regulation is actually discriminatory, courts must determine which factors make entities suitable for comparison. Entitles are “similarly situated” for the purposes of the dormant Commerce Clause test if their products compete against each other in a single market.

 When analyzing the ethanol regulations to determine which fuel pathways were similarly situated, the district court excluded all factors based on origin of the fuel. The district court excluded sugar cane ethanol and all GHG emissions related to transportation, electricity used in production, and production plant efficiency when considering whether the regulations discriminated against out-of-state interests.

The Ninth Circuit rejected the district court’s approach. The Ninth Circuit pointed out that the factors the district court ignored “contribute to the actual GHG emissions from every ethanol pathway, even if the size of their contribution is correlated with their location.” In contrast, the district court’s analysis considered different fuel lifecycle pathways to be equivalent simply if they used the same feedstock and production process. But the Ninth Circuit determined that the factors the district court ignored were necessary in determining whether the fuel standard gives equal treatment to similarly situated fuels.

Under the dormant Commerce Clause, regulations are not necessarily facially discriminatory because they affect in-state and out-of-state interests unequally. Instead, the reason for different treatment must be based on something other than origin. Here, CARB did not base its different treatment of fuels on the fuel’s origin. Instead, the fuel regulations treated fuels differently based on their carbon intensity measured by a lifecycle analysis. As the court pointed out, under this analysis, Midwest ethanol attained both the highest and lowest carbon intensity values depending on various factors. Just because Brazilian ethanol earned the lowest default pathway for measuring carbon intensity did not mean the regulations were discriminatory. Instead, the various factors were necessary for realistically assessing and attempting to limit GHG emissions from ethanol production.

Further, CARB’s decision to establish default pathways based on regional categories was also not facially discriminatory. The fuel standard regulations established default pathways in each region based on the same factors. The regulations also allowed for individualized fuel intensity values in lieu of default pathway values. A fuel producer obtains an individualized value based on factual showings, regardless of region of origin. As a result, CARB’s decision to construct categories of default fuel pathways, with reference to California’s border, was not discriminatory. The default pathways provide symmetrical burdens and benefits to both in-state and out-of-state corn ethanol.

The Commerce Clause and the Fuel Standard Crude Oil Provisions

On appeal, CARB challenged the district court’s conclusion that the fuel standard’s crude oil provisions discriminated against out-of-state crude oil “in purpose and effect.” The Ninth Circuit found CARB’s arguments compelling.

Under the 2011 crude oil provisions, CARB assessed a crude oil pathway’s carbon intensity based on whether it was an emerging or existing source and whether it was a high carbon intensity source. If a crude oil was high carbon intensity and not an existing source (more than 2% of the state’s market share), it was assigned its individual carbon intensity value. All other crude oils were assigned a 2006 baseline average of 8.07 gCO2e/MJ. California crude oil recovered using thermal-enhanced oil-recovery techniques (California TEOR) was the only existing source that was also high carbon intensity to qualify for the 2006 baseline treatment of 8.07 gCO2e/MJ, even though the actual carbon intensity of California TEOR is approximately 18.89 gCO2e/MJ. CARB stated the purpose of distinguishing between existing and emerging sources and high carbon intensity versus non-high carbon intensity crudes was to prevent increases in carbon intensity and “fuel shuffling.” The district court concluded these stated purposes disguised a discriminatory purpose due to the fuel standard’s favorable treatment of California TEOR as compared to other crudes. The Ninth Circuit faulted the district court’s comparison for leaving out other sources of California crude oil.

The Ninth Circuit noted that the district court’s comparison left out significant portions of California’s 2006 crude oil market. In context of the full market, the court did not find the regulations protectionist in favor of California interests. For example, California Primary had the lowest individual carbon intensity in the market of 4.31 gCO2e/MJ, but was assigned the 2006 baseline value of 8.07 gCO2e/MJ. American Fuels argued this unfavorable treatment of California Primary was irrelevant, arguing that a state law that discriminates against out-of-state commerce is no less discriminatory simply because it burdens some interstate commerce. But the Ninth Circuit pointed out the cases American Fuels cited to involved regulations adopted by local governments which favored local interests at the expense of both in-state (but out-of-town) and out-of-state commerce . In contrast, the 2011 crude oil provisions of the fuel standard burdened and benefited in-state interests at the state level. The court could find no compelling evidence that CARB preferred California TEOR to California Primary and ultimately could find no protectionist purpose to the regulations.

The Fuel Standard and Regulation of Extraterritorial Conduct

The Ninth Circuit explained that the Commerce Clause prohibits, in addition to discrimination based on origin, any statute or regulation directly controlling commerce occurring wholly outside of the state. The district court agreed with plaintiffs that the fuel standard improperly attempted to regulate extraterritorial conduct for numerous reasons. For example, the district court believed the lifecycle analysis, including measuring GHG emissions during the transportation of fuel, improperly extended California’s police power to other states. The Ninth Circuit disagreed with this analysis.

The Ninth Circuit considered prior cases where courts found states engaged in improper regulation of extraterritorial conduct. It did not find the fuel standard’s regulation of ethanol analogous to any of these cases. The regulations had no impact on ethanol produced, sold and used outside of California. Nor did the regulations require other states to adopt reciprocal standards before allowing import of that state’s ethanol. Finally, the regulations were not intended to ensure California ethanol would remain at lower prices than in other states. The Ninth Circuit did not agree that offering financial incentives to encourage the sale of lower carbon intensity fuel within the state is categorically the same as regulating production of fuel outside of the state.

The Ninth Circuit also rejected plaintiffs’ assertion that the fuel standard would “Balkanize” the fuels market or lead to inconsistent regulations among the states. The court reasoned that the fuel standard does not place a financial barrier around the state. Similar states could adopt similar standards without impermissibly interfering with interstate trade. Instead, the purpose of the regulations was to allow California to assume legal and political responsibility for GHG emissions from fuels used within the state. Plaintiffs argued this attempt to take responsibility was indistinguishable from taking control of fuel production. The Ninth Circuit firmly disagreed, concluding that the “Commerce Clause does not protect plaintiff’s ability to make others pay for the hidden harms of their products merely because those products are shipped across state lines. The Fuel Standard has incidental effects on interstate commerce, but it does not control conduct wholly outside the state.”

The Holding

The Ninth Circuit ultimately rejected CARB’s argument that the fuel standard was expressly allowed under the Commerce Clause due to California’s exemption from Clean Air Act section 211(c)(4). However, CARB did succeed in convincing the appellate panel that its crude oil provisions did not discriminate in purpose or effect and that its ethanol provisions were not facially discriminatory or an impermissible extraterritorial regulation. The panel remanded the case to the district court to determine whether the ethanol provisions discriminate in purpose or practical effect, and if not, to apply the Pike balancing test to the regulations to determine whether they are valid. Under this test, plaintiffs must show that CARB’s fuel standard imposes a burden on interstate commerce “‘clearly excessive’ in relation to its local benefits.” The court also directed the lower court to apply the Pike balancing test to the 2011 provisions for crude oil.

Does Federal Law Preempt Further CEQA Review of the High-Speed Rail Project?

The California Attorney General’s Office has filed a letter brief with the Third District Court of Appeal arguing that a federal interstate commerce law preempts CEQA review by the Third District in a pending challenge to the High-Speed Rail project. If the state’s arguments are successful, the High-Speed Rail project could face fewer environmental approval hurdles in the future. In particular, environmental review for the project could proceed solely under the National Environmental Policy Act (NEPA) and potentially occur more quickly than it would have under CEQA.

After petitioners/appellants in Town of Atherton, et al. v. California High-Speed Rail Authority (Case No. C070877) appealed the trial court’s dismissal of their suit, the Third District ordered all parties to brief whether federal law preempts state environmental law with respect to the rail project. On August 9, 2013, the California Attorney General’s Office, representing the California High-Speed Rail Authority, argued in its brief to the court that the federal Interstate Commerce Commission Termination Act (ICCTA) preempts CEQA and thus, the Third Appellate District lacks jurisdiction to impose CEQA remedies in the action.

The federal preemption argument is based on a June 13, 2013, decision by the federal Surface Transportation Board (STB) that it “has jurisdiction” over California’s rail project. The STB explained that California’s High-Speed Rail falls within its congressionally granted jurisdiction because it is an intrastate (i.e., between two or more points within California) “transportation by rail carrier” that “is carried out ‘as part of the interstate rail network.’” (California High-Speed Rail Authority-Construction Exemption-in Merced, Madera and Fresno Counties, Cal., Docket No. FD 35724, available at$file/43070.pdf.) The STB found that High-Speed Rail connects to Amtrak’s interstate rail lines, and thus is itself part of the interstate rail network.

According to the California Attorney General, the ICCTA established the STB and vested it with “exclusive regulatory jurisdiction over railroads involved in interstate commerce.” While acknowledging that the ICCTA “retains for the states the police powers reserved by the [U.S.] Constitution,” the Attorney General argues that the ICCTA contains express preemption language that preempts “state environmental preclearance laws,” including CEQA and CEQA remedies. This argument is supported by cites to federal case law, STB’s own decisions, and two California appellate cases.

If the Attorney General’s preemption argument is successful, California courts would lack subject matter jurisdiction over CEQA challenges to the High-Speed Rail project. This would affect not only the petitioners/appellants in currently pending cases, but also parties that may wish to bring suits against the future approvals of additional segments of the project. In this scenario, the High-Speed Rail project’s environmental review would only be subject to NEPA requirements.

On June 13, 2013, the STB approved and adopted the Final Environmental Impact Report/ Environmental Impact Statement, finding it took “the requisite ‘hard look’ at the potential environmental impacts associated with the proposed Project as required by NEPA.” For High-Speed Rail opponents, the options for challenging this NEPA decision are somewhat less attractive (i.e., less likely to result in significant delay or additional mitigation) than bringing CEQA claims.

Wild Fish Conservancy’s Challenge to Federal Government’s Water Diversions in Columbia River Basin Dismissed by Ninth Circuit Court of Appeals Panel

The Ninth Circuit Court of Appeals dismissed an action by the Wild Fish Conservancy, which claimed the federal government was improperly diverting water needed by native fish populations to a Washington fish hatchery. In Wild Fish Conservancy v. Jewell, Case No. 10-35303 (Sept. 11, 2013), the three-judge panel ruled the Conservancy lacked prudential standing to bring one of its claims under the Administrative Procedure Act (APA). The court also ruled it lacked jurisdiction to consider the Conservancy’s two other related claims.

The Wild Fish Conservancy is a nonprofit based in Duvall, Washington. The dispute arose over waters being diverted from Icicle Creek, a tributary of the Wenatchee River, which is a tributary of the Columbia River. During certain times of year, federal officials divert water from Icicle Creek to serve the Leavenworth National Fish Hatchery. The diversions cause a segment of Icicle Creek to become significantly and sometimes entirely “dewatered.” This prevents fish from swimming up the channel to spawning grounds above the hatchery.

The Conservancy sued the U.S. Department of the Interior and other federal officials over the diversions. The United States District Court for the Eastern District of Washington granted summary judgment in favor of the hatchery officials. The Conservancy appealed.

The Conservancy’s first claim involved an APA challenge alleging the federal defendants are violating section 8 of the Reclamation Act of 1902 (43 U.S.C. § 383) by diverting water from Icicle Creek without a state permit under Washington’s water code. The APA requires a plaintiff to demonstrate not only constitutional standing, but also prudential standing, which the Ninth Circuit panel described as “an interest ‘arguably within the zone of interests to be protected or regulated by the statute . . . in question.’ [Citations.]” The Conservancy argued that an APA plaintiff generally need not show a property right in litigation to demonstrate prudential standing. The Court said this was correct. Section 8 of the Reclamation Act, however, ensures that federal reclamation projects within state borders do not interfere with a state’s sovereign authority to regulate the appropriation or use of state waters or the protected property interests of parties with vested water rights under state law. Because the Conservancy lacked enforcement rights under Washington law, the court held it lacked prudential standing to bring its claim.

The Conservancy also claimed the federal defendants violated Washington’s fishway law by failing to submit fishway plans to the state and failing to properly maintain fishways across hatchery structures. The court held that it lacked jurisdiction to hear this claim because the requirements were not incorporated into section 8 of the Reclamation Act. Finally the Conservancy claimed that federal officials failed to supply hatchery fishways with adequate water in violation of the Reclamation Act. Here too, the court ruled it lacked jurisdiction because the claim did not challenge a final agency action and thus was not reviewable under the APA.

This opinion contained an element not often found in judicial opinions: An illustration showing Icicle Creek, related channels and tributaries, and the diversion and intake structures serving the hatchery.

Although the court did not address the merits, the author, Circuit Judge Sidney R. Thomas, took note of the historic backdrop and conflicting issues represented by the case. He opened the opinion by briefly capturing the history of a river basin where modern engineering had transformed it into “the most hydroelectrically developed river system in the world” while also helping to reduce native salmon and steelhead populations “from levels of mythic abundance to the brink of extinction.”

Before concluding, he highlighted the “nuanced” nature of this particular dispute: “As we have often acknowledged, ‘[s]almon and hydropower are the two great natural resources of the Columbia River Basin,’ and ardent desires to promote one or the other have yielded a century of conflict. [Citation.] This iteration does not present the ‘classic struggle between environmental and energy interests,’ [citation], but instead a more nuanced conflict between two entities seeking to repair the damage that dams have done to the Basin’s fisheries. Unlike the many cases we have decided concerning the fate of fish in the Columbia River Basin, the claims before us are not susceptible to federal judicial review.”

(Written by Deb Kollars)

RMM Attorneys’ 2014 Teaching and Speaking Events

On June 13, 2014, in Kings Beach, Rob Sawyer will be on a “Water Rights Roundtable,” with Dave Eggerton, General Manager, El Dorado County Water Agency, and Ron Stork, Senior Policy Advocate, Friends of the River, Sierra Nevada Alliance, Sierra Water Workgroup Summit.  The roundtable will consist of a discussion of water rights theory, how water use is regulated, and emerging issues, focusing on drought response.  More information is available on the Sierra Nevada Alliance’s website.

Jim Moose will make a presentation on 2014 CEQA case law to the Superior California Chapter of the Association of Environmental Professionals (AEP) on the evening of Sept. 10, 2014, in Sacramento. AEP is a nonprofit organization of professionals working to improve their skills as environmental and resource managers.

Whit Manley will serve as faculty at an Oct. 9-10, 2014, “CEQA Overview” course offered by the Center for Judiciary Education and Research (CJER), which is a program of the Judicial Council of California’s Administrative Office of the Courts. CJER provides an extensive statewide educational program for judicial officers and court staff at both the trial and appellate levels.

Jim Moose and Whit Manley are slated to speak at the First Northern California Association of Environmental Professionals Conference Oct. 23-24, 2014, in Anderson, CA. Further details will be provided as they become available.

Legislature Overwhelmingly Approves New CEQA Legislation With Two Aims: Limited Streamlining of California’s Premier Environmental Law and Fast-Tracking a New Sacramento Arena

On the final night of this year’s legislative session, Senate President Pro Tem Darrell Steinberg won approval in both houses for Senate Bill 743. The bill contains limited reforms to the California Environmental Quality Act and would help expedite Sacramento’s new sports arena. Support for the bill, which now goes to the Governor, was overwhelming. The Assembly voted 55 to 6 in favor, the Senate 32 to 5.

The successful legislation marks the convergence of two Steinberg CEQA bills. SB 743 originally was designed to shorten the process for handling CEQA lawsuits expected to be brought against the new Sacramento Entertainment and Sports Complex, which the City of Sacramento and the Sacramento Kings are planning to build in downtown Sacramento. Steinberg’s other bill, SB 731, was originally conceived as a broad overhaul of CEQA. It faced a rocky path as the business sector, environmental community and labor unions fought over its contents. Near the very end of the legislative session, Steinberg moved several elements from SB 731 into SB 743, while converting SB 731 into a two-year bill. Passage of the merged bill came after a series of final negotiations the evening of September 12, 2013.

Fast-tracking the Arena

Under SB 743, injunctive relief to stop construction of the planned arena in downtown Sacramento could be granted only if a court found a danger to public health and safety, or an impact on Native American archaeological grounds.  The legislation also would allow any necessary eminent domain proceedings involving the specific arena site at 545 and 600 K Street (currently a Macy’s store) to proceed concurrently with the CEQA process.

New CEQA Provisions

In addition, the bill as amended adds a new chapter to the CEQA statute, commencing with new Section 21099.  It is titled “Modernization of Transportation Analysis for Transit-Oriented Infill Projects.”

One provision would remove parking and aesthetics standards as grounds for legal challenges against project developments in urban infill areas within transit priority areas for residential, mixed-use residential, or “employment center” projects. These standards often are used in litigation to slow or stop new development. An employment center project is defined as being located within a transit priority area on property zoned for commercial uses with a floor area ratio of no less than 0.75. In an interesting nuance, the legislation states that, for purposes of this section, “aesthetic impacts do not include impacts on historical or cultural resources.” Thus, the prohibition on concern under CEQA with aesthetic impacts under the bill must not translate into a disregard for adverse effects on historical or cultural resources.

This new section also seeks to modernize the statewide measurements against which traffic impacts are assessed and resolved within transit priority areas. It does so by authorizing the Governor’s Office of Planning and Research (OPR) to recommend CEQA Guidelines amendments that in transit priority areas would shift CEQA analysis away from traditional standards based on congestion levels at intersections and require it to rely instead on new measures to analyze an infill project’s actual reduction in car usage because of its proximity to jobs, retail, and mass transit options.

More specifically, the legislation directs OPR to prepare revisions to the CEQA Guidelines establishing criteria for determining the significance of transportation impacts of projects within such transit priority areas. These new guidelines would include recommendations for metrics to measure transportation impacts that may include vehicle miles traveled, vehicle miles traveled per capita, automobile trip generation rates, or automobile trips generated. Once the revised guidelines are adopted, automobile delay – as described by “Levels of Service” or similar measures of congestion – would not be considered a significant impact on the environment within transit priority areas. Receiving OPR’s guidance for alternative measures of traffic impacts may help preclude the argument that any small increment of new traffic being added to already severely congested intersections is a significant impact. For infill projects with nearby transit options, these measures may enable traffic consultants to show that locating residential or mixed-use projects in such areas actually reduces vehicle miles traveled or new trip generation.

Not included in SB 743 were many provisions that the development community sought to streamline CEQA processes and to reduce the existing potential for significant delays in litigation.

(Written by Deb Kollars)

Third District Court of Appeal Explains Why State Water Resources Control Board Has Authority to Determine Whether or Not It Has Authority Over Water Diversions

Finding the issue to be of “continuing public interest and importance,” the Third District Court of Appeal ruled in Young et al. v. State Water Resources Control Board, ___Cal.App.4th ___ (Sep. 4, 2013, Case No. C068559), that the State Water Resources Control Board (the “Board”) has jurisdiction under the Water Code to determine whether or not a diverter’s use of water is – or is not – exempt from the Board’s regulatory authority.  Such a determination by the Board (as opposed to by a court in a lawsuit) is an integral part of the state’s legislatively created water rights permitting system, and the court found that plaintiffs’ claim that the Board lacked authority to adjudicate the underlying jurisdictional issue because they were exempt from regulation was “flawed” because it “. . . beg[ged] the question central to the appeal . . . .”   The court was clear that where a water user claims to be exempt from Board regulation, the Board gets first crack at the question.  If the water user disagrees with the Board’s determination, the water user must seek subsequent judicial review.

The underlying dispute arose in 2009, when a group of South-of-Delta (i.e., upstream on the San Joaquin River and its tributaries) irrigation districts, conscious of their own flow obligations under the Board’s orders for maintaining fresh water in the Delta, questioned whether or not private in-Delta irrigation companies were illegally diverting water from Delta channels.  The Board responded with a number of draft cease and desist orders and hearing schedules, including one directed to the irrigation company from which plaintiffs receive their water.  Plaintiffs responded with claims of riparian or pre-1914 rights.

A “riparian” water right is the right of a user to take water out of a stream and apply it to the user’s land that abuts the stream.  An “appropriative” water right involves the diversion of water from a stream for use on land that doesn’t abut the stream itself.  When the Legislature enacted the Water Commission Act of 1913 to begin regulating water use in California, riparian use and already-established appropriations (“pre-1914 rights”) were excluded from the new permitting process.   When as part of the cease and desist order process the Board asked plaintiffs’ irrigation company to prove the nature of its rights, plaintiffs and the company argued that their rights were riparian or pre-1914, and that, therefore, the Board lacked jurisdiction to ask for evidence concerning even this threshold question.  Plaintiffs argued that the Board was required to first file a lawsuit against their company and them, and to convince a court that their rights were other than riparian or pre-1914.

The Board relied upon its cease and desist order powers under Water Code section 1831.  Plaintiffs argued that a provision in that section that specified that the Board no authority to regulate diversions “not otherwise subject to . . . regulation” meant that the Board lacked authority to determine even the threshold question of whether or not their use was subject to Board regulation.  Citing two California Supreme Court decisions that predated section 1831 but dealt with the Board’s investigative and permitting powers (Meridian, Ltd. v. San Francisco [1939] 13 Cal.2d 424, and Temescal Water Co. v. Dept. of Public Works [1955] 44 Cal.2d 90), the court found that the Legislature had expressly vested in the Board the authority “to determine if any person is unlawfully diverting water . . .,” and that it was a necessary part of that authority that the Board determine whether or not the use in question was riparian or pre-1914.

The importance of this decision:  If it were necessary for the Board to first file a lawsuit for a court determination of a user’s rights, the Board would in all likelihood have the burden of proving by a preponderance of the evidence that the use was neither riparian nor pre-1914 (a potential “proving a negative” situation).  In contrast, an initial factual determination by the Board may be challenged only by an action for writ of mandate, in which the challenger would ordinarily bear the significantly higher burden of demonstrating that the Board’s decision had been made without substantial evidence, or had been an abuse of its discretion.

[Written by Rob Sawyer]

Mining Advocates Challenging Approval of State Suction Dredge Permit Program Argue that Federal Law Preempts State Laws and Regulations, Including CEQA

Several petitioners representing both mining and environmental interests have filed separate suits in state superior courts seeking to set aside the California Department of Fish and Wildlife’s approval of the Suction Dredge Permit Program and its certification of the Final Supplemental EIR for the program. On one hand, the Karuk Tribe, fisheries groups, and environmental groups have brought claims under CEQA and the Fish and Game Code, alleging that the suction dredge permit program would result in significant environmental impacts and unacceptable impacts to endangered fish. On the other hand, parties advocating mining rights argue that the suction dredge permit program is too restrictive because the corresponding EIR erroneously exaggerated environmental impacts from suction dredging.  These mining advocates are arguing that various federal mining laws preempt state law and regulations, including CEQA. If these preemption arguments are successful, the existing CEQA claims brought by the Karuk Tribe and environmental groups, as well as any future CEQA challenges to mining regulations, could be moot.

Suction dredging uses motorized pumps and sluice boxes to mine gold from the beds of streams, rivers and lakes. In 2005, the Karuk Tribe brought a CEQA suit challenging the Department of Fish and Game’s previous environmental review of a proposed suction dredge program. This action resulted in a December 2006 Order and Consent Judgment requiring the Department to complete an updated environmental review and rulemaking by June 20, 2008. When the Department failed to meet this deadline, the Karuk Tribe and a coalition of environmental and fisheries activists filed a new action in February 2009. The court in this second suit issued a preliminary injunction in July 2009 prohibiting the Department from spending any state funds for the issuance of suction dredge permits until after CEQA review was completed.

This judicial prohibition of suction dredging was mirrored in several legislative actions. On August 5, 2009, the Governor signed SB 670 into law establishing a temporary ban on suction mining until after the Department had completed its environmental review. After the Department issued a Draft Supplemental EIR and draft regulations for the suction dredge program in February 2011, AB 120 went into effect on July 26, 2011. The law imposed more limitations on suction dredge mining and extended the prohibition on motorized suction dredging until June 30, 2016 or until environmental review and other conditions have been met. This legislation prompted the First District Court of Appeal to lift the July 2009 preliminary injunction. Most recently on July 27, 2012, the legislature again prohibited suction dredge mining with SB 1018, which eliminated the June 30, 2016 sunset provision in AB 120.

The Department issued revised suction dredge mining regulations on February 17, 2012, and a Final Supplemental EIR for the Suction Dredge Permit Program on March 7, 2012.  The Department adopted updated suction dredge regulations on March 16, 2012. Finally, on March 20, 2012 the Department adopted its Final Statement of Reasons and CEQA Findings of Fact.

The six different cases that were subsequently filed in three different counties are now one coordinated proceeding before the San Bernardino Superior Court. (Suction Dredge Mining Cases, Case No. JCPDS4720.) The list of plaintiffs includes the Karuk Tribe, The New 49’ers, Public Lands for the People, Western Mining Alliance, the Center for Biological Diversity, and numerous other advocates of both environmental and mining interests.

The 49’ers, et al., and Public Lands for the People, et al., filed amended complaints and petitions for writ of mandate on March 14, 2013. Among other causes of action involving inverse condemnation, CEQA, the Administrative Procedure Act, and the Endangered Species Act, the plaintiff mining groups are alleging that federal law creating property rights in mining claims preempt any conflicting state laws or regulations. The pertinent federal laws they list include: The Mining Acts of 1866, the Federal Mining Law of 1872, the Mining and Minerals Policy Act of 1970, the Federal Land Policy and Management Act of 1976, and the Multiple Surface Use Act. These plaintiffs argue that the new state suction dredge regulations interfere with the operation of the scheme of federal mining laws because federal laws give miners an absolute right to enter and use federal public lands for the purpose of mining. As a derivative argument, they also assert that federal laws would preempt CEQA to the extent that CEQA stands as an obstacle to the plaintiffs securing suction dredge permits.

The Suction Dredge Mining Cases are currently pending before the Honorable Gilbert G. Ochoa of the San Bernardino Superior Court.

(Written by Elizabeth Sarine)