In POET, LLC v. State Air Resources Board (2013) __Cal.App.4th__ (Case No. F064045) (POET), the Fifth District Court of Appeal held that the California Air Resources Board (CARB) committed procedural violations of the California Environmental Quality Act (CEQA) when it approved regulations for the nation’s first “Low Carbon Fuel Standard” program. The court ruled that CARB must set aside its approval of the regulations and take proper actions to comply with CEQA, but that the regulations should remain operative in the meantime in the interest of protecting the environment.
Facts and Procedural Background
The Low Carbon Fuel Standard regulations took effect in 2011 as part of the California Global Solutions Act of 2006 (Assembly Bill 32). The Act established the first comprehensive greenhouse gas regulatory program in the United States. The regulations at issue in POET were designed to reduce the carbon content of transportation fuels used in California.
On April 23, 2009, at the close of the public comment period, CARB passed a resolution that approved the proposed regulations for adoption. The resolution designated the board’s executive officer as the “decision maker” assigned to respond to certain remaining environmental issues. The board gave the executive officer authority to modify and adopt the regulations, but he did not have the option of declining to implement them.
The plaintiffs in the case included POET, LLC, which produces corn ethanol in the Midwest. POET challenged the regulations, claiming CARB violated CEQA during the adoption process. The Fresno County Superior Court denied the plaintiffs’ petition for a writ of mandate and entered judgment in favor of CARB. The Fifth District Court of Appeal reversed the judgment and remanded the matter for further proceedings.
The Court of Appeal’s Analysis
As a threshold matter in its 95-page opinion, the Court of Appeal concluded CARB’s actions were subject to CEQA. CARB contended that because it operated a certified regulatory program, it was required to follow only the procedures set out in its specific regulatory program. The court disagreed. Certified regulatory programs are exempt from CEQA’s procedural requirements regarding preparation of negative declarations and EIRs under Public Resources Code section 21080.5, which provides that a state agency’s preparation of environmental documents under its own regulatory program may serve as the functional equivalent of an EIR. The court noted, however, that this exemption is narrow and such regulatory programs remain subject to “CEQA’s broad policy goals and substantive standards,” including the timing of environmental review and approval of projects.
In its analysis of the CEQA claims, the court first determined that approval of the project under CEQA occurred when the CARB’s decision-making board (Board) approved the regulations for adoption in April 2009. CARB argued approval did not occur until the executive officer took final action on the regulations the following year. The court applied Save Tara v. City of West Hollywood (2008) 45 Cal.4th 116 (Save Tara), calling it “the leading case regarding the application of the definition of ‘approval’ under CEQA Guidelines section 15352.” The Supreme Court in Save Tara articulated a general test for determining the point at which agency action on a proposed project necessitates CEQA review. The Fifth District quoted Save Tara in noting the determination must take into account the terms of the resolution as well as “the surrounding circumstances to determine whether, as a practical matter, the agency has committed itself to the project . . . so as to effectively preclude any alternatives or mitigation measures that CEQA would otherwise require . . . .”
Save Tara involved a private project and a post-approval CEQA EIR compliance condition in an agreement to convey property. The Fifth District extended the Save Tara principles regarding project approval to “projects undertaken by public agencies under certified regulatory programs.” The court held that the Board’s 2009 approval of the Low Carbon Fuel Standard regulations constituted “approval,” based on the clear language in numerous Board documents, as well as the practical effects of the action.
From there, the court concluded CARB violated CEQA because its environmental review under its certified regulatory program was not completed before the regulations were approved. The court noted that this “premature approval” decided a controversial issue involving carbon intensity values related to land use changes for ethanol produced from corn. This was because CARB, in delegating subsequent environmental review authority to the executive director, expressly denied the executive director the authority to modify this aspect of the regulations.
The court also held the CARB “violated a fundamental policy of CEQA” by improperly delegating responsibility for completing the environmental review process to its executive director. Under CEQA Guidelines section 15025, subdivision (b) and case law, a public agency’s decisionmaking body may not delegate the review and consideration of a final EIR or approval of a negative declaration prior to approval of a project. “For an environmental review document to serve CEQA’s basic purpose of informing governmental decision makers about environmental issues, that document must be reviewed and considered by the same person or group of persons who make the decision to approve or disapprove the project at issue.” The court stated that this purpose “applies with equal force whether the environmental review document is an EIR or documentation is prepared under a certified regulatory program.”
The Court of Appeal further held that the CARB violated CEQA when it deferred formulating mitigation measures for NOx emissions from biodiesel fuel. Courts have recognized an exception to the general rule prohibiting the deferral of the formulation of mitigation measures under CEQA Guidelines section 15126.4, subdivision (a)(1)(B). The court stated that under this exception, an agency must commit to “specific performance criteria for evaluating the efficacy of the measures implemented.” In this case, the court held that CARB’s statement that future rules would “establish specifications to ensure there is no increase in NOx” failed to constitute the objective performance criteria required for the exception.
The court remanded the case, directing the trial court to issue a writ of mandate compelling CARB to set aside its approval of the Low Carbon Fuel Standard regulations while allowing the Low Carbon Fuel Standard program to remain in place “as long as [the Air Resources Board] is diligent in taking the action necessary” to comply with CEQA. The court concluded that “the environment will be given greater protection” if the status quo is preserved. The court noted this was a rare outcome. More commonly, the courts have set aside rules, ordinances or other types of written requirements governing third party action when CEQA has been violated. But the court determined that such a remedy was appropriate under power authorized it by Public Resources Code, section 21168.9.