First District Finds EIR Deficient for Failing to Consider the Use of Agricultural Conservation Easements and In-Lieu Fees as Mitigation for the Project’s Conversion of Farmland to Nonagricultural Use

In Masonite Corporation v. County of Mendocino (2013) __Cal.4th__ (Case No. A134896), a partially-published opinion filed July 25, 2013, the First District Court of Appeal held that an EIR must evaluate the economic feasibility of using an agricultural conservation easement (ACE) and in-lieu fees as mitigation for the Project’s conversion of farmland to nonagricultural use. This is required even when the Project will only result in the direct loss of farmland associated with the Project and will not put development pressure on surrounding farmland.

Background and Procedural History

In 2008, Granite Construction Company applied to the Mendocino County Planning Commission for a conditional use permit to develop a sand and gravel quarry on 65.3 acres approximately one mile north of Ukiah. The Department of Conservation classified 45 of the site’s 65 acres as “prime farmland.” Although most of the site was cultivated as a vineyard when the application was submitted, the site has been zoned for industrial use since 1982. Granite proposed reclaiming most of the area as open space after the mining operations had ceased, but reclaiming the land for agriculture was impossible.

The EIR identified this permanent loss of prime farmland as a significant and unavoidable project impact. The County Planning Commission certified the EIR and adopted a statement of overriding considerations. Masonite filed a petition for writ of mandate challenging the County’s compliance with CEQA. The Mendocino County Superior Court denied the petition for writ of mandate, and Masonite appealed.

Court of Appeal’s Decision

In the EIR, the County determined that no mitigation was possible to offset the loss of 45 acres of prime farmland. Masonite argued that the impact could have been mitigated by the acquisition of ACEs on offsite properties or by payment of “in-lieu” fees to fund such acquisitions.

The County believed that an ACE was not legally feasible in this case because a conservation easement only addresses the indirect and cumulative effects of farmland conversion and does not replace on-site resources. According to the County, indirect and cumulative impacts of farmland conversion occur when a Project affects neighboring agricultural uses by increasing the speculative land value and farming costs due to land use incompatibilities and nuisance issues. Through the so called “domino effect,” this would lead to development pressure on agricultural lands. The County felt that the domino effect was unlikely here because the nearest active agricultural operation was across the Russian River (a natural barrier); therefore, a conservation easement as mitigation was not appropriate in this case.

The state Department of Conservation (DOC) disagreed, submitting comments on the Draft EIR asserting that the loss of agricultural lands from this project (the 45 acres that would be mined) could have been minimized by the acquisition of ACEs on comparable land of at least equal size. According to the DOC, because the loss of farmland is felt beyond just the surrounding area, comparable replacement land could be found regionally or even statewide.

In developing the standard of review for the County’s finding of infeasibility, the court noted that this was an issue of law that the court should review de novo since the County had determined it would be legally infeasible to use ACEs as a mitigation measure. According to the court, an agency’s conclusion that mitigation was infeasible is only entitled to deference under the substantial evidence standard if infeasibility is based on economic, environmental, social, and technological factors. In this case, “[b]ecause the County decided that ACEs were not a legally feasible means to mitigate the loss of farmland at the Project site, it never investigated whether ACEs were economically feasible, and there is no evidence to review.”

The court looked to multiple sources to determine if ACEs were legally feasible for mitigating direct effects, as opposed to cumulative or indirect effects. It noted that if agricultural lands were preserved through conservation easements at a 1:1 ratio, then at least half the agricultural land in the region would be preserved. Furthermore, the court concluded that this preservation of substitute resources would comport with the CEQA Guidelines’ definition of “mitigation” in section 15370, subdivision (e), which specifically mentions substitute resources. Case law on the use of conservation easements as mitigation for biological resources, the common usage of ACEs as mitigation by local governments, and the Legislature’s policy to preserve agricultural land also influenced the court’s decision. Based on this analysis, the court held that ACEs are legally feasible mitigation measures, and the County must explore the economic feasibility of ACEs in a supplemental EIR.

Additionally, the court required the County to consider the economic feasibility of in-lieu fees as an alternative to a conservation easement. The County had rejected the idea in the EIR as legally infeasible because the County’s lack of a comprehensive farmland mitigation program legally precluded it from accepting in-lieu fees. The court found this fact immaterial because there were third parties that could accept the in-lieu fees for conservation programs.