In Berkeley Hillside Preservation v. City of Berkeley, No. S201116 (Cal. Mar. 2, 2015) (slip op), the California Supreme Court overturned an appeals court ruling that banned developers from using an exemption under the California Environmental Quality Act (“CEQA”) to avoid undertaking an environmental impact report (“EIR”) for the construction of a proposed two-story 10,000-square-foot home in Berkeley.

Background

Typically, CEQA petitions are not asserted to stop the construction of single-family residences because CEQA contains a single family residence exemption that would excuse it from environmental review. However, there are exceptions to CEQA exemptions, and here, the Petitioners argued that the project proponent’s proposed two-story, 6,500-square-foot home with a 3,400-square-foot garage presented an “unusual circumstance” that would create “a reasonable possibility that the activity [would] have a significant effect on the environment,” and thus an EIR would be required.

The First District Court of Appeal held that unusual circumstances precluded reliance on the CEQA exemptions and reversed an earlier decision that found the City had correctly decided that the project was exempt from CEQA. On appeal, the California Supreme Court found that the developers could use the single-family home, as well as the infill exemption, under CEQA and thus would not need to prepare an EIR.

Court’s Analysis

This case is significant because the California Supreme Court defined the standard of review to determine whether a “categorically exempt” project is otherwise “excepted” under CEQA. The Court established a two-part test to determine whether the exception applies. First, the court must decide whether there are “unusual circumstances.” In making this determination, the “substantial evidence” standard of review applies. Second, if there are unusual circumstances, the court must decide whether, due to those unusual circumstances, there is a “reasonable possibility that the activity will have a significant effect on the environment.” In making this second determination, the “fair argument” standard of review applies. The Court in this case found that this bifurcated approach comports with the “construction of the unusual circumstances exception to require findings of both unusual circumstances and a potentially significant effect.”

The significance of this case is also a practical one in that the decision curtails the broadening effect the appeals court decision may have had on future CEQA challenges. While environmental groups may argue that CEQA is necessary to minimize the environmental impact of large scale projects like this, the Court’s opinion limits CEQA’s reach.