In County of Mono v. City of Los Angeles (2022) 81 Cal.App.5th 657, the First District Court of Appeal held that the city’s 2018 water allocation to lessees was not a change in water use policy, but merely an exercise of the city’s discretion to curtail water deliveries for the purposes of increasing water deliveries to city residents, which was allowed subject to the terms of a lease agreement approved in 2010.
In 2010, the city approved leases (2010 Leases) governing approximately 6,100 acres of city-owned land to petitioner and others. Relevant here, the 2010 Leases provide for the delivery of no more than 5 acre-feet of water per acre (AF/acre) per irrigation season subject to certain conditions. These conditions made clear that the city’s water use was paramount to rights under the 2010 Leases and that the actual amount of water delivered in any given year is to be determined solely by the city and may be reduced in dry years based on water availability. The 2010 Leases further provided that the supply of water could be discontinued at any time and that lessee has no claim against the city should the city exercise its right to withhold water for its own residents. The initial lease term ran from January 2009 to the end of 2013 after which the leases allow the lessees to holdover as tenant at will. Accordingly, the city and the lessees have proceeded under the 2010 Leases in holdover status since 2013.
In March 2018, the city sent copies of a new form of leases (Proposed Dry Leases), which provided that the city would no longer provide irrigation water to the lessee, but rather from time to time the city may spread water on the leased properties. The Proposed Dry Leases included similar provisions reserving the city’s rights to discontinue water delivery. The city issued a Notice of Preparation (NOP) that it would prepare an environmental impact report for the Proposed Dry Leases in August 2018.
In May 2018 correspondence between the city and petitioner, the city indicated that it was evaluating the impacts of reducing water on the leased ranch land, but that based on the snowpack and anticipated runoff it determined that the city could provide lessees 0.71 AF/acre of water, which was consistent with what it had provided two years earlier when the runoff was 82 percent of normal.
Petitioner challenged the city’s decision to curtail water deliveries in 2018 alleging it violated CEQA in that it committed to the Proposed Dry Leases without environmental review.
Court of Appeal’s Decision
The appellate court initially discussed the propriety of considering a declaration filed by the city which asserted that in 2019 and 2020 the city had delivered 6.6 AF/acre and 3 AF/acre of water, respectively. The trial court denied the city’s request to augment the record with the declaration because it was untimely (filed after the court had issued its tentative order granting the writ petition) yet the trial court relied on the 2019 and 2020 water allocations for purposes of setting the historical baseline and fashioning the remedy. The appellate court found that while the declaration was admissible extra-record evidence under Western States Petroleum Assn. v. Super. Ct. (29915) 9 Cal.4th 559, 576 because the 2018 water allocation is an informal or ministerial administrative action, it agreed with the trial court that the declaration was untimely. Nevertheless, the appellate court held that the trial court’s reliance on the contents of the declaration for purposes of the scope of the remedy was inappropriate given that the trial court had not considered the declaration for purposes of the merits. Accordingly, the appellate court held that it would consider the declaration.
Next the court considered whether the 2018 water allocation was a new reduced water project or part of either the 2010 leases or the Proposed Dry Leases. In doing so, the court noted that the definition of a CEQA “project” involves three distinct components: “agency involvement, physical change to the environment, and whole of an action including multiple discretionary approvals.” Based on the terms of the 2010 Leases, the history of water allocations under them, and the city’s post-2018 water allocations set forth in the declaration, the court found that the 2018 water allocation was merely a “string of water allocations that the 2010 Leases” allowed the city to make. It was therefore not a new project subject to CEQA.
The court rejected petitioner’s contention that the terms of the 2010 Leases did not allow it to curtail water deliveries. Rather, based on the discussion of water supplies in the 2010 Leases, which expressly provided that lessee understood and acknowledged that any water supplied to leased land was “subject to the paramount rights” of the city and that the city could discontinue water deliveries in whole or in part at any time, the court held that the 2010 Leases reserve the city’s right to curtail water deliveries.
Petitioner argued that the court’s interpretation would allow the city to end all water deliveries under the 2010 Leases. However, the city agreed that eliminating water deliveries would require environmental review. Based on this concession, the court of appeal concluded that the 2010 Leases reserved the city’s rights to reduce water allocations subject to changing water availability so long as such reductions did not convert the 2010 Leases into dry leases.
The court further rejected petitioner’s reliance on Communities for a Better Environment v. South Coast Air Quality Management Dist. (2010) 48 Cal.4th 310. While that case establishes that the city would need to consider the actual amounts of irrigation water provided in the past, rather than a hypothetical right to eliminate water deliveries, it further establishes that doing so does not prevent the city from exercising its right under the 2010 Leases to curtail or reduce water deliveries.
The court also found that the city’s past practices did not support petitioner’s claim that the 2018 allocation was an implementation of a new low- or zero-water delivery policy. While petitioner claimed that the city historically provided up to 5 AF/acre of water reduced proportionally based on deviations in snowpack and anticipated runoff, the court found that the actual water deliveries under the 2010 Leases did not have a linear relationship with runoff. In considering the declaration previously excluded by the trial court as evidence, the court also found that the higher allocations in 2019 and 2020 demonstrate that the 2018 water allocation was an implementation of the 2010 Leases, not a new project.
Finally, the court held that without some evidence beyond the simply the timing of correspondence between the city and petitioner and the city’s issuance of an NOP for the Proposed Dry Leases, it could not find that the NOP meant that the city’s reliance on the 2010 Leases for the 2018 allocation was a pretext for implementing that project.
Because the court found that the 2018 water allocation was within the scope of the 2010 Leases, it held that petitioner’s lawsuit effectively challenged the 2018 implementation of a project approved in 2010 and was therefore barred by CEQA’s statute of limitations.
By Christina L. Berglund