Continuing the theme of water-related issues in California, the Sacramento County Superior Court, Judge Timothy Frawley presiding, recently addressed litigation concerning the operation of the State Water Project. On March 5, 2014, the court released its rulings in the cases Central Delta Water Agency, et al. v. California Department of Water Resources, et al. (Case No. 34-2010-80000561) and Rosedale-Rio Bravo Water Storage District, et al. v. California Department of Water Resources. (Case No. 34-2010-80000703.) The litigation in these cases involved CEQA challenges brought against an EIR prepared by the Department of Water Resources (“DWR”) for the project known as the “Monterey Amendments to the State Water Project Contracts (Including Kern Water Bank Transfer) and Associated Actions as Part of a Settlement Agreement.”
Background and History
The history of the challenged EIR stretches back to the 1960’s and the inception of the State Water Project (“SWP”). The SWP was structured so that its costs for operation are borne primarily by various public water agencies (“SWP contractors”) that contract with the state to receive SWP water. The obligations for sale, delivery, and use of SWP water were set forth in long-term contracts with these SWP contractors. As many may know, the original long-term contracts were overly optimistic when estimating the water supply which would be available at full build-out of the SWP. The original contracts anticipated that 4.2 million acre-feet of water would be available per year, but actual, reliable water supply from the SWP is now in the vicinity of 2 to 2.5 million acre-feet annually. So by the early 1990’s, the SWP was increasingly unable to fulfill demand for water deliveries.
In response to shortages in the SWP supply exacerbated by drought, DWR and the SWP contractors engaged in extensive negotiations in the city of Monterey, California. The negotiations resulted in substantial revisions to the SWP long-term water supply contracts. These revisions became known as the “Monterey Amendment.”
The Monterey Amendments established six primary objectives: (1) resolve conflicts and disputes among SWP contractors regarding water allocations and financial responsibilities for SWP operations; (2) restructure and clarify SWP water allocation procedures and delivery during times of shortage and surplus; (3) reduce financial pressures on agricultural contractors in times of drought and supply reductions; (4) adjust the SWP’s financial rate structure to more closely match revenue needs; (5) facilitate water management practices and water transfers that improve reliability and flexibility of SWP water supplies in conjunction with local supplies; and (6) resolve legal and institutional issues related to storage of SWP water in Kern County groundwater basins, and in other areas.
The Monterey Amendments included numerous elements to achieve these objectives. For example, the so-called “urban preference” was eliminated in favor of reductions in water deliveries borne proportionately by urban and agricultural users, water rates were restructured, and various other changes were made to the way the SWP is administered. Relevant to the litigation here, the Monterey Amendment also required DWR to transfer the “Kern Water Bank” property to the Kern County Water Agency.
In 1995 the Central Coast Water Authority, as lead agency, completed and certified a final EIR (“Monterey Agreement EIR”) studying the environmental impacts of the extensive amendments to the SWP water supply contracts. Soon after, the Planning and Conservation League and others challenged the sufficiency of this EIR (the “PCL litigation”). Among other allegations the plaintiffs argued that DWR should have been the lead agency for the purposes of preparing the EIR, and that the EIR inadequately defined the “project”. The PCL litigation reached the appellate court, where the court determined that DWR should have functioned as lead agency, and that the EIR was defective in at least one respect. The court ordered that DWR prepare a new EIR.
Following remand, the parties to the PCL litigation entered into a settlement agreement (the “Settlement Agreement”) governing how the new EIR would be prepared. The parties agreed that the proposed project to be analyzed in the new EIR would be defined during the scoping process, but at a minimum, would analyze the Monterey Amendment and certain additional terms agreed to in the Settlement Agreement. With this agreed scope the project became known as the “Monterey Plus” project, and the new EIR for the project was referred to as the “Monterey Plus EIR.”
DWR issued a draft EIR in October 2007 and certified a final EIR for the Monterey Plus project on February 1, 2010. The project studied in the EIR included all of the objectives and elements of the Monterey Amendment, along with the objectives and elements of the Settlement Agreement. The baseline used in the EIR was the continued operation of the SWP in accordance with the pre-Monterey Amendment water supply contracts. This means the EIR used 1995 as the baseline year to measure existing conditions. The EIR also provided analyses using baselines adjusted for 2003 and 2020 to account for changes in water supply and transfers resulting from decisions unrelated to the project. Since the proposed project was continued operation of the SWP under the Monterey Agreement, the EIR identified the no project alternative as a return of operation to the pre-Monterey Amendment water supply contracts. To account for uncertainty in determining what, exactly, these pre-amendment conditions would look like, the EIR analyzed four different “no project” scenarios.
The EIR determined that the project did not have any significant impacts from 1996 to 2003, but might cause some potentially significant impacts during the period from 2003 to 2020. These impacts could include impacts to biological, cultural, and paleontological resources resulting from groundwater recharge activities. The EIR also identified potentially significant growth-inducing impacts resulting from the delivery of additional SWP water to urban contractors. Even though DWR incorporated mitigation measures for these impacts, they could remain potentially significant. The EIR also determined that the project may result in potentially significant impacts due to additional pumping from the Delta and from the construction of additional ponds on the Kern Water Bank lands. But DWR incorporated mitigation measures which it determined would reduce these impacts to less-than-significant levels.
DWR recorded a notice of determination regarding its decision to adopt findings and determinations, a statement of overriding considerations, and a mitigation, monitoring, and reporting program for the project. On June 3, 2010, DWR then filed a return on peremptory writ of mandate, requesting that the trial court discharge the 2003 writ of mandate that had required the new EIR. The very same day, Petitioners Central Delta Water Agency, South Delta Water Agency, and various environmental organizations led by the Center for Biological Diversity, filed a petition for writ of mandate challenging the sufficiency of DWR’s new Monterey Plus EIR under CEQA. The Petitioners also challenged the validity of the agreement to transfer the Kern Water Bank property from DWR to the Kern County Water Agency. At the same time, the Rosedale-Rio Bravo Water Storage District and the Buena Vista Water Storage District, each of which operates a water bank system in the vicinity of the Kern Water Bank, filed a separate CEQA action, focusing narrowly on issues of operation of the Kern Water Bank.
The Central Delta Water Agency Litigation
For the most part, the trial court rejected the claims brought by the petitioners. Notable for CEQA practitioners, the trial court declined to consider two of Petitioner’s arguments at the outset for failure to adequately summarize the record. Specifically, Petitioners cited to only a single page of the Monterey Plus EIR’s lengthy discussion regarding the issue of “paper water” (a term used to describe contractual water that may not actually exist as “wet water,” e.g., contractual water that may be beyond the contracting supplier’s ability to actually supply it) and failed to adequately summarize the evidence in the record addressing the Project’s climate change impacts.
Petitioners’ first primary challenge involved the project description element of the Monterey Plus EIR. Petitioners alleged the project description did not comply with CEQA’s requirements that it be accurate and stable. As noted above, the EIR described the Project as continued operation of the SWP under the Monterey Amendment, for which no permits or approvals are required. Petitioners argued this description of the project was confusing because it was unclear whether operation under the Monterey Amendment was the proposed project, or actually, the status quo. Petitioners submitted that this description concealed the true scope of the project. The court rejected this argument, but not without noting the unique factual circumstances of the case, a recurring theme throughout the trial court’s opinion.
The trial court stated that the litigation presented an unusual circumstance for a CEQA case because the proposed project was actually a standardized contract amendment, previously approved and executed. The court pointed out that DWR was operating the SWP pursuant to the Monterey Amendment while the new EIR was being prepared. Therefore, the Monterey Plus EIR accurately described the result of carrying out the proposed project being studied: continued operation of the SWP pursuant to the Monterey Amendment. Petitioners pointed out that this approach essentially resulted in an EIR analyzing the impacts of a decision that had already been made.
The court agreed, generally, with the assertion made by Petitioners. Under CEQA, the approach taken by DWR to prepare the Monterey Plus EIR should usually not be allowed. But in this case, the parties to the Settlement Agreement, certified by the court, approved preparation of a remedial EIR to analyze the impacts of the Monterey Amendments. Any argument that the court should have invalidated the Monterey Amendment approvals, rather than allowing DWR to continue operating under them, was time-barred. The time for petitioners to make this objection was when the Settlement Agreement was approved and the writ issued. Considering these unique circumstances, the trial court could not find that DWR abused its discretion by describing the project as continued operation of the SWP under the Monterey Amendment and Settlement Agreement.
Petitioners next argued the baseline selected in the EIR was flawed because the baseline omitted provisions of water supply contracts eliminated by the Monterey Amendment. The trial court quickly dispensed with this and other arguments attacking the baseline in the EIR. The EIR studied both existing baselines for years 1995 and 2003, and a future baseline at year 2020 to provide a complete assessment of the Monterey Amendment’s impacts. This choice of baseline was therefore supported by substantial evidence and entirely reasonable under the circumstances. Additionally, DWR’s approach was consistent with the Court of Appeal’s opinion in the PCL litigation. So again, considering the unique circumstances, DWR did not abuse its discretion by preparing an EIR in accordance with the prior Settlement Agreement and court order.
Similarly, the trial court found the range of alternatives analyzed in the EIR reasonable under the circumstances, despite Petitioners’ assertion that the EIR did not evaluate a true no-project alternative. As noted above, DWR analyzed four different no-project scenarios in the EIR. DWR adopted this approach because it identified a good faith disagreement as to what exactly conditions prior to the Monterey Amendments would look like. DWR had continued to operate the SWP with the Monterey Amendments in place even after litigation was initiated following approval of the amendments in 1995 (and it is 2014 at the time of this entry—not an insignificant passage of time). The trial court found this approach to analyzing a no-project alternative to be reasonable. The EIR provided sufficient information to the public and decision makers regarding the impacts of various potential scenarios under pre-Monterey Amendment conditions.
The trial court also rejected an argument CEQA practitioners frequently encounter: deferral of mitigation. The petitioners argued DWR improperly deferred mitigation by finding that impacts on Delta aquatic life would be reduced to a less-than-significant level after compliance with existing and future regulatory permits and processes. However, the court declared this was not a situation where an agency relied on references to compliance with existing laws to avoid compliance with CEQA. The Monterey Plus EIR conducted the appropriate impact analysis and determined that the project could have significant impacts on the delta. But DWR operations would be subordinate to existing laws and regulatory requirements including applicable SWRCB Orders, Army Corps of Engineers permits, Biological Opinions, endangered species take permits, habitat protection plants, etc. The court determined it was appropriate for DWR to rely on commitment to this existing regulatory scheme to mitigate the Project’s impacts. In fact, the court suggested it may not have even been feasible for DWR to propose additional mitigation measures separate from the existing regulatory scheme.
Finally, the court upheld the DWR’s analysis of the project’s growth-inducing impacts in the Monterey Plus EIR. The EIR concluded that the Project could potentially induce growth. DWR identified contractors that could receive additional water, calculated the amount of additional water that could be made available, and estimated the number of additional residents this new water could support. The EIR also discussed potential economic development resulting from this potential increase in population. Petitioners argued the EIR should have conducted additional, site-specific analyses of the Project’s potential growth inducing impacts, but the court found the generalized level of detail in DWR’s analysis sufficient under the circumstances and compliant with CEQA.
The Kern Water Bank Issue
The Central Delta Water Agency petitioners also challenged the portion of the Monterey Plus EIR dealing with the transfer of the Kern Water Bank property. As part of the Monterey Amendment, the Kern Water Bank property would be transferred from DWR to the Kern County Water Agency for the express purpose of developing and operating a groundwater bank.
The Central Delta Water Agency petitioners argued that the EIR failed to sufficiently describe or analyze the Water Bank’s future operations. Instead, the petitioners argued the analysis was limited to the historical operation of the water bank during the unusually wet period from 1995 to 2004. The trial court agreed the EIR insufficiently analyzed operation of the water bank, as the court explained in further detail in its Rosedale opinion.
The Rosedale-Rio Bravo Litigation
The Rosedale-Rio Bravo Water Storage District petitioners argued that the Monterey Plus EIR failed to analyze the use and operation (as opposed to merely the transfer) of the Kern Water Bank as a component of the project. Specifically, the Rosedale petitioners argued the EIR failed to adequately discuss, analyze, and mitigate potential hydrology and water quality impacts associated with the use and operation of the water bank. The trial court agreed, noting the defects in the EIR could be traced to its incomplete description of the project. The trial court pointed out that the EIR described this portion of the project as including only the transfer of the property. But the record unequivocally demonstrated that the project included not just the transfer, but also the “construction, operation and maintenance of the Kern Water Bank.”
The trial court concluded that the omission of relevant information regarding the use and operations of the Kern Water Bank was prejudicial. This omission precluded informed decision-making and informed public participation, as analysis of potential impacts associated with operation of the water bank was not included in the EIR. On this narrow ground, the Court granted the petitions in both the Rosedale and Central Delta Water Agency cases.
The court has ordered an additional hearing to be noticed by the parties, to discuss “an appropriate remedy for the CEQA violation,” presumably pursuant to Public Resources Code Section 21168.9(b). This CEQA statute encourages courts to fashion remedies no broader than necessary to cure violations, i.e., any remedy “shall include only those mandates which are necessary to achieve compliance with [CEQA] and only those specific project activities in noncompliance with [CEQA].”
Here, the court identified violations in only a narrow area of the Monterey Plus EIR dealing with the Kern Water Bank. It seems reasonable that DWR could argue for, and the court would accept, a narrow remedy upholding the majority of the Monterey Plus EIR while requiring additional, focused analysis on the operation of the Kern Water Bank.