CEQA at 40 – CEQA’s Major Milestones – No Oil, Inc. Decision

This blog is the second in our series on CEQA’s major milestones. No Oil, Inc. v. City of Los Angeles (1974) 13 Cal.3d 68, was the California Supreme Court’s second look at CEQA, and in that case the Court “inquire[d] into how an agency should decide whether a pending project requires an EIR.” In other words, how does an agency decide whether an EIR is required or a negative declaration and initial study are sufficient?

This case involved the approval of a project just three short weeks after the Court issued its opinion in Friends of Mammoth, which held that CEQA applies not only to purely governmental actions but also to private actions requiring a government permit or permission. The project was the approval of several test oil wells along the coast of Los Angeles. Dueling experts testified about the potential impacts of such wells: experts for the opposition testified about the geologic instability of the project site and the potential impacts of a well blowout adjacent to the ocean and a state beach; experts for the project proponent testified about how impacts would be minimized through appropriate technology and procedures. The City approved the project without making specific CEQA findings. After suit, the trial court remanded for clarification on this issue, asking whether there was any “reasonable possibility that the project will have a momentous or important effect of a permanent or long enduring nature.” On remand, the City Council concluded that there was no “reasonable possibility that the project will have a momentous or important effect of a permanent or long enduring nature.”

The Supreme Court took issue with the City’s actions. First, it noted that the verbal findings of the City, on remand, were not sufficient. The Court held that the City was required to make a written Negative Declaration when it approved the project. The Court concluded that the City’s findings were nothing more than a post hoc rationalization to support its prior actions.

Second, and more to the point for those scrambling to enforce CEQA in the wake of Friends of Mammoth, the Court found that the City had employed the wrong standard altogether. The Court looked to Public Resources Code section 21151, which then read in relevant part that an agency “shall make an environmental impact report on any project they intend to carry out which may have a significant effect on the environment.” The Court held that the standard, applied by the City and the trial court—“reasonable possibility that the project will have a momentous or important effect of a permanent or long enduring nature”—imposed “far too high a barrier to the preparation of an EIR” and was not consistent with 21151.

The Court expressly stated that it would not craft the proper test: “We do not think this court at this time should draft a substitute test [to the one formulated by the trial court]. The responsibility for formulation of such a test is expressly delegated by CEQA to the State Resources Agency.” (No Oil, supra, at p. 82, fn. 15.) Nevertheless, the Court stated that “the preparation of an EIR is key to the environmental protection under CEQA, accomplishment of the high objectives of that act requires the preparation of an EIR whenever it can be fairly argued on the basis of substantial evidence that the project may have significant environmental impact.” (Id. at p. 75.) Subsequently, the Resources Agency embraced that dicta as its test in the CEQA Guidelines, section 15084 (now 15064), and subsequent courts, most notably First Appellate District in Friends of “B” Street v. City of Hayward (1980) 106 Cal.App.3d 988, 1001, read the No Oil dicta as a binding test.

The No Oil Court made several other statements that guided the development of the case law interpreting CEQA and are often quoted, including: “One major purpose of an EIR is to inform other government agencies, and the public generally, of the environmental impact of a proposed project [citations], and to demonstrate to an apprehensive citizenry that the agency has in fact analyzed and considered the ecological implications of its action.” (No Oil, supra, at p. 86.)