Second District Court of Appeal Upholds EIR for Refinery Project

The Second District Court of Appeal upheld an Environmental Impact Report (“EIR”) for a South Coast Air Quality Management District (“SCAQMD”) permit for operational changes to two existing refinery facilities. (Communities for a Better Environment v. South Coast Air Quality Management Dist. (2020) ___Cal.App.5th ___ (Case No. B294732).) Praising both the lead agency and the EIR, the Second District Court of Appeal considered and rejected four arguments made by petitioner. One justice dissented on the issue of baseline.

Tesoro Refining and Marketing Company proposed the Los Angeles Refinery Integration and Compliance Project (“project”), which would integrate two of Tesoro’s oil refining facilities so that Tesoro could more flexibly alter outputs of gasoline and jet fuel, and reduce emissions in order to reduce air pollution and increase compliance. The SCAQMD was required to issue a permit, which allowed the facility to generate more heat, for the project. The court described three key points about the permit: (i) it was a paper change only and did not allow for any physical changes to the heater or other hardware; (ii) it imposed new limitations on emissions; and (iii) it allowed the facility to either process a heavier blend of crude or increase throughput by 6,000 barrels per day, but not both. The project would also shut down a catalytic cracking unit, a major source of emissions.

The SCAQMD prepared and certified an EIR which determined that the project would reduce emissions by 36 percent. The court explained that the analysis of emissions was conservative, in part because the EIR assumed the heater had never operated above 252 million BTUs per hour, when in fact it had. The project also imposed limitations on emissions that did not exist before the project. Although, the project could increase throughput or weight of the crude blend, the facility could have no new emissions under the new permit.

The court cited the following facts as pertinent—the draft EIR included over 1,700 pages; the SCAQMD circulated the EIR for 49 days more than required, for a total of 94 days; the final EIR responded to 1,112 pages of comments with 5,700 pages of responses; the United States Environmental Protection Agency (“EPA”) reviewed the EIR and indicated it had no objection to issuing the permit; and the EIR was “many thousands of pages” with the index alone being 180 pages.

Communities for a Better Environment (“CBE”) challenged the project alleging the EIR was inadequate. The trial court rejected CBE’s arguments and upheld the EIR. On appeal, CBE made four arguments.

Baseline

The court rejected CBE’s argument that the baseline was insufficient under CEQA. The EIR relied on a near-peak 98% baseline, based on an average of the refinery’s worst air pollution emissions during the two years leading up to the project, excluding the top two percent of the data in order to leave out extreme outliers. The EIR compared this 98th percentile analysis with impacts from the project and determined the project would reduce air pollution. CBE argued that CEQA requires an average-value baseline, but the court disagreed. The court emphasized that both peak and average can measure actual situations that truly exist, and there is no one “normal” way to measure the baseline. The court concluded that it was rational, and not “sinister or wrong,” to care most about the worst effects of air pollution, which occur when emissions hit their highest levels. Because EPA relies on a similar approach to regulate air pollution at the federal level, the court concluded the use of the 98th percentile baseline was supported by substantial evidence. One justice, however, dissented because federal custom and practice, which “appear[] to be the only substantial evidence found by the majority,” are not enough to support use of the 98th percentile as the baseline.

Pre-Project Crude Oil Composition

The court also rejected CBE’s argument that the EIR was required to provide the information regarding the existing composition of crude oil at the facility. The EIR explained that in order for the refinery to process a different blend of crude oil, the entire system would need to be changed. The EIR clarified that the project would not make these changes, so the court agreed there was no need to include information regarding the composition of crude oil. The project included a fixed crude operating envelope that would be the same before and after the project, and therefore the court agreed that baseline crude oil data was not necessary.

Failure to Exhaust

CBE argued that the SCAQMD was required to explain how it calculated the amount of additional oil that could be processed with the project. But, the court concluded, neither CBE nor anyone else had raised that exact issue before the SCAQMD, and therefore the issue could not be raised on appeal. The court emphasized that “[m]aking ‘broad’ requests that ‘encompass’ an issue raised on appeal is not raising the ‘exact issue’ during the administrative process.”

Existing Volume of Crude and Refinery’s Unused Capacity

Finally, the court concluded the EIR was not required to disclose the existing volume of crude or the refinery’s unused capacity because this data was immaterial to evaluating the project’s air pollution impact. The EIR explained that in order to increase the crude oil processing rate, the facility would need bigger pipes and stronger pumps. Because the project would not make these changes, it would not increase the refinery’s overall throughput. Data about the existing volume of crude processed and the refinery’s unused capacity, therefore, was not necessary.