The Third District Court of Appeal recently applied a standard of review that gives more certainty to project proponents relying on a California Environmental Quality Act categorical exemption. The decision in Citizens for Environmental Responsibility v. State of California ex rel. 14th District Agricultural Association[1] validated an agency’s reliance on a categorical exemption for a rodeo as a normal operation of an existing facility for a public gathering. The court denied claims that the “unusual circumstances exception” disqualified the project from the exemption.

Categorical Exemptions under CEQA

The California Environmental Quality Act (CEQA) instructs the Secretary of the Natural Resources Agency to approve “classes” of projects determined not to result in a significant environmental impact.[2] Such projects are exempt from what can be a costly and time consuming environmental review process.

Categorical exemptions benefit an array of public and private projects, such as operation, maintenance and minor alteration of existing facilities, replacement and reconstruction of existing facilities, construction of new small structures, minor alterations to land, and in-fill development projects. Such exemptions may also apply to renewable energy projects, like small solar and hydroelectric projects. As California continues to struggle with economic recovery, facilitating reliable water supplies in the midst of a water shortage crisis, and efforts to reduce climate change impacts, the ability to rely on CEQA exemptions to bypass or streamline environmental review for activities can be crucial.

Substantial Evidence that Rodeo Satisfied Exemption Criteria

In Citizens for Environmental Responsibility, the district agricultural association found exempt from environmental review a rodeo at the Santa Cruz County Fairground in Watsonville under Class 23. That exemption applies to “the normal operations of existing facilities for public gatherings for which the facilities were designed, where there is a past history of the facility being used for the same or similar kind of purpose.”[3] “Past history” means “that the same or similar kind of activity has been occurring for at least three years and that there is a reasonable expectation that the future occurrence of the activity would not represent a change in the operation of the facility.”[4]

The court determined the agency satisfied its burden to show that substantial evidence supported its factual finding that the rodeo met the criteria for a Class 23 exemption. The rodeo was consistent with “normal operations” of the Fairground (other livestock and equestrian events held for many years) and no changes to the facility or operations were necessary for the rodeo.

Unusual Circumstances Exception to Categorical Exemption Did Not Apply

Unlike statutory exemptions, which are adopted by the Legislature and considered absolute (the exemption applies if the project fits within its terms), projects that satisfy a categorical exemption’s criteria nonetheless can be disqualified under certain “exceptions” to the exemption. Notably, the “unusual circumstances exception” provides that “[a] categorical exemption shall not be used for an activity where there is a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances.”[5]

The petitioners in Citizens for Environmental Responsibility argued the rodeo did not qualify for a Class 23 exemption due to “unusual circumstances” related to stormwater runoff over the Fairground where manure contributes to a polluted creek. The court then considered whether the unusual circumstances exception disqualified the rodeo from the exemption based on two questions established in the Fourth District Court of Appeal decision Banker’s Hill, Hillcrest, Park West Community Preservation Group v. City of San Diego: whether the project presents unusual circumstances and, if so, whether there is a reasonable possibility of a significant effect on the environment due to the unusual circumstances.[6] The exception does not apply if either of these questions is answered in the negative, and the burden is on the project challenger.

Circumstances of a project are considered “unusual” when they differ from the general circumstances of the projects covered by the categorical exemption in question. Courts also look to whether the project would result in additional environmental risks, whether the project is consistent with the surrounding zoning and land uses, and the scope and size of the project.

To determine the “normal operations” of the facility by which to compare the rodeo, the court considered the circumstances of other events and operations at the Fairground rather than other alleged “normal” fairgrounds or public gathering facilities, such as a stadium or convention center.  The rodeo did not result in a change in the operation of the Fairground such as more horses or livestock and was similar in nature and scope. The rodeo also posed a similar risk to the environment as other Fairground activities and was consistent with surrounding zoning for agricultural uses.

The petitioner failed to offer any evidence in support of its claim that the impaired status of a creek flowing through a portion of the Fairground was an unusual circumstance because it differed from “normal fairgrounds” contemplated under Class 23. Because the court found no unusual circumstances, it did not need to consider whether such circumstances would have a significant effect.

Significance of Decision

Citizens for Environmental Responsibility was silent as to whether the Banker’s Hill two-question test conflicts with the standard of review applied by the First Circuit Court of Appeal in Berkeley Hillside Preservation et al. v. City of Berkeley et al.[7] There, the court barred reliance on categorical exemptions covering infill development[8] and new construction of small structures[9] for a single family residence. The court concluded “the fact that proposed activity may have an effect on the environment is itself an unusual circumstance, because such action would not fall ‘within a class of activities that does not normally threaten the environment,’ and thus should be subject to further environmental review.”[10] Despite Berkeley Hillside’s proclamation that its holding was consistent with Banker’s Hill,[11] the Berkeley Hillside ruling threatens to severely weaken the availability of categorical exemptions by allowing an activity to be disqualified if it could have any “effect on the environment” regardless of whether that effect is “significant” or “due” to unusual circumstances as required in the State CEQA Guidelines.

Unsurprisingly, the Supreme Court granted a petition for review of Berkeley Hillside. The matter has been fully briefed and is awaiting oral argument. The Third District’s exercise of discretion to hear Citizens for Environmental Responsibility, though the appeal had been rendered moot by completion of the rodeo, to address “an issue of broad public interest that is likely to recur and capable of evading review”[12] is a strong indicator of the importance of establishing more certainty for categorical exemptions.

How important are categorical exemptions to your agency’s activities? Have you struggled to determine whether the unusual circumstances exception applies to an exemption? Please share your responses.

[1] (2014) 224 Cal.App.4th 1542.

[2] Public Resources Code, § 21084, subd. (a); California Code of Regulations, Title 14, Chapter 3, § 15300.

[3] California Code of Regulations, Title 14, Chapter 3, § 15323.

[4] Ibid.

[5] California Code of Regulations, Title 14, Chapter 3, §15300.2, subd. (c).

[6] (2006) 139 Cal.App.4th 249, 278.

[7] (2012) 203 Cal.App.4th 656.

[8] California Code of Regulations, Title 14, Chapter 3, §15332.

[9] California Code of Regulations, Title 14, Chapter 3, §15303, subd. (a).

[10] (2012) 203 Cal.App.4th 656, 670.

[11] “Our conclusion that the unusual circumstances exception applies whenever there is substantial evidence of a fair argument of a significant environmental impact is thus not inconsistent with Banker’s Hill.”  (Id at p. 671.)

[12] (2014) 224 Cal.App.4th 1542, 1548 [citation omitted].