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Real Estate Legal Alert
September 23, 2016              

California Supreme Court Rejects "New Project" Test for Modifications to Previously Approved Projects

On September 19, 2016, the California Supreme Court issued its long awaited decision in Friends of the College of San Mateo Gardens v. San Mateo Community College District (Case No. S214061).

The Supreme Court held that when a governmental agency considers proposed changes to a previously approved project, the California Environmental Quality Act (CEQA) does not authorize courts to invalidate an agency's CEQA determination regarding the modified project based on a court's threshold evaluation of whether proposed changes to the project result in a "new project", rather than a modified version of the old project. Instead, CEQA requires deference be accorded to a lead agency's environmental determinations when it approves project modifications for a project that already underwent full and adequate CEQA review, whether that review resulted in preparation of an Environmental Impact Report or a Negative Declaration. Thus, once a project has been subject to environmental review and received approval, Public Resources Code Section 21166 and CEQA Guidelines Section 15162 ("CEQA's Subsequent Review Provisions") limit the circumstances under which subsequent or supplemental CEQA review is required. 

In reaching its holding, the Supreme Court provided a bit more certainty to lead agencies and project proponents who are considering and seeking modifications to already approved projects. Thus, the decision should help reduce CEQA litigation challenges to projects based solely on whether changes to a previously approved project require new CEQA review and will help facilitate the continued use of addendums to accompany subsequent discretionary approvals related to changes to previously approved projects. 

A change in project plans challenged

The San Mateo College District (SMCD) adopted a revised 2011 Addendum to a 2006 Mitigated Negative Declaration (MND) prepared for analyzing the campus-wide facility improvements at the SMCD's San Mateo College campus (College). The earlier MND was never challenged. The SMCD revised the facilities plan for the College, including demolition of a horticultural building complex (Building 20) along with removal of the associated landscaping and gardens, the San Mateo Gardens, to make way for additional campus parking. The Building 20 complex was slated for renovation in the earlier facilities plan. Additionally, in the revised facilities plan, two other buildings on the campus that were to be demolished under the previous facilities plan would instead be renovated. The revised 2011 Addendum concluded that the changes would not result in new or substantially more severe impacts than disclosed in 2006 and an addendum was the appropriate CEQA document. The SMCD approved the demolition of Building 20 Complex and other changes. The project opponents challenged the SMCD approval regarding Building 20 Complex demolition.

Trial court found the proposed changes constituted a new project

The trial court found that the revised 2011 Addendum was inadequate under CEQA as demolition of the Building 20 Complex was inconsistent with the previously approved Plans, and the demolition impacts for Building 20 Complex were not addressed in the 2006 MND. The Court of Appeal affirmed the trial court's judgment, primarily relying upon Save Our Neighborhood v. Lishman (2006) 140 Cal. App. 4th 1288 (Save Our Neighborhood), and concluded that the proposed building demolition was an entirely new project, as a matter of law, rather than a project modification. In Save Our Neighborhood, it was held that whether the project modification proposal constituted a "new project" or a project modification was a "threshold question" of law. Thus, if the court determined the modification constituted a "new project" a new CEQA process would need to be initiated and the Subsequent Review Provisions of CEQA would not apply.

Supreme Court concludes that courts must defer to agency determination regarding scope of CEQA review for project modifications

The Court addressed the question of "[w]hen a lead agency performs a subsequent environmental review and prepares a subsequent environmental impact report ["EIR"], a subsequent negative declaration ["ND"], or an addendum, is the agency's decision reviewed under a substantial evidence standard of review (Mani Brothers Real Estate Group v. City of Los Angeles (2007) 153 Cal.App.4th 1385 [Mani Brothers]), or is the agency's decision subject to a threshold determination whether the modification of the project constitutes a "new project altogether," as a matter of law [(Save Our Neighborhood)]?"

Oral arguments were held on the case on May 4, 2016. But the Supreme Court decided to vacate the submission of the case and requested the California Natural Resources Agency ("Resources Agency") to file a supplemental briefing on two issues: (1) What standard of judicial review applies to an agency's determination that no EIR is required as a result of proposed modifications to a project that was initially approved by negative declaration or mitigated negative declaration under CEQA Guidelines Section 15162?; and (2) Does CEQA Guidelines Section 15162, as applied to projects initially approved by negative declaration or mitigated negative declaration rather than EIR, constitute a valid interpretation of the governing statute? 

On the first issue, the Supreme Court held that the lead agency should be provided deference for its decision regarding subsequent environmental review for project modifications under CEQA's Subsequent Review Provisions. The Supreme Court held that whether a previously certified environmental document remains relevant with regard to proposed changes to the previously approved project and whether such document requires major revisions due to proposed changes are predominantly factual questions. As such, a court must limit its review of an agency's decisions on such matters to the substantial evidence standard rather than allowing the subjective and arbitrary determination of judges on such matters. The aim of subsequent provisions of CEQA is to promote finality of decisions and efficiency, and they do not allow an event of project change to revisit environmental concerns laid to rest in the original analysis. 

Thus, the agency must determine whether the previous environmental document retains any relevance in light of the proposed changes and, if so, whether major revisions to the previous environmental document are nevertheless required due to the involvement of new, previously unstudied significant environmental impacts. An agency's determination regarding these questions must be upheld by the reviewing court so long as the decision is supported by substantial evidence. In reaching this decision the Court necessarily rejected the "new project" test in Save Our Neighborhood v. Lishman (2006) 140 Cal. App. 4th 1288, and overturned the decisions of both the trial court and the Court of Appeals, which relied on Save Our Neighborhood.

On the second issue, the Court found that CEQA authorizes the Resources Agency to fill gaps in the statutory scheme in a manner consistent with the statute. The Resources Agency filled a valid statutory gap in CEQA by extending the subsequent environmental review provisions under CEQA Guidelines Section 15162 to NDs as the legislature intended to provide the lead agency's decision to proceed by an ND the same degree of finality as is entitled to an EIR. As such, substantial evidence review is applicable to a lead agency's decision on subsequent environmental review in the case of project modifications, even when the initial environmental review document was an ND. 

Therefore, CEQA's Subsequent Review Provisions apply whether the initial project approval was with a Program EIR, a project specific EIR, a ND or a MND. The Court noted that when a project is initially approved with a ND, a "major revision" to the ND will be required if the proposed modification may produce a significant environmental impact that had not previously been studied as long as the potential new significant impact can be avoided or mitigated. If it cannot be avoided or mitigated then a subsequent EIR will be required. 

In summary, as long as an agency's decision with regard to any of the issues related to project modifications or potential new impacts associated with such modifications is supported by substantial evidence, courts must uphold those agency decisions. 

The Court remanded the matter back to the appellate court to reconsider the case in light of the Supreme Court's opinion

Devine William R William R. Devine
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