Introduction

In a recent decision with potentially broad implications for home builders and developers, the California Court of Appeal narrowed the ability of projects requiring discretionary approvals to obtain a categorical exemption from the California Environmental Quality Act (CEQA). Overturning the trial court, the Court of Appeal in Berkeley Hillside Preservation v. City of Berkeley, A131254 (First Appellate District, February 15, 2012) held that the construction of a relatively large single-family home (6,478 square feet) on a steeply sloped lot in the Berkeley hills presented a fair argument of a significant effect on the environment, and ordered the preparation of an environmental impact report (EIR) for the home.

Berkeley Hillside affects anyone attempting to use a categorical exemption from CEQA, not just residential builders, but its singlefamily home context makes the case especially noteworthy. Wading into the somewhat contradictory case law on the use of CEQA categorical exemptions, the Court of Appeal ruled that the "unusual circumstances" exception to using any categorical exemption is met simply by the existence of evidence that the project in question may have a significant environmental effect.

Background

CEQA generally requires a governmental agency to prepare an EIR for any project which may have a significant effect on the environment.1 There are several types of projects which the state has determined do not typically have a significant environmental effect, and which are therefore exempt from CEQA under so-called "categorical exemptions."2 Such categorically exempt projects historically have included single-family homes and limited in-fill development projects meeting certain requirements, although the use of such exemptions was limited. A project cannot use a categorical exemption, however, when "there is a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances."3 This exception to the categorical exemptions was at issue in Berkeley Hillside.

Courts have interpreted the "significant effect" and "unusual circumstances" language in different ways. The Court of Appeal in Banker's Hill, Hillcrest, Park West Community Preservation Group v. City of San Diego stated that applying the exception involved two distinct inquiries: whether the project at issue involved unusual circumstances, and then whether it was reasonably possible that those unusual circumstances could cause a significant effect on the environment.4 In contrast, the California Supreme Court has called into question such a two-part inquiry when it held that "where there is any reasonable possibility that a project or activity may have a significant effect on the environment, an exemption would be improper."5

Courts have applied the standard of review in CEQA exemption cases in different ways. Many courts have concluded that in assessing whether there is a reasonable possibility of a significant effect on the environment, the agency is to determine whether there is substantial evidence supporting a "fair argument" that a potentially significant environmental effect will occur.6 Some of those courts have used the "substantial evidence" requirement to justify a hard look at the evidence proffered by the party seeking application of the exception.7 In contrast, other courts have rejected using any CEQA categorical exception when there is any "fair argument" of an impact with little effort to ensure that the evidence of the alleged impact is meaningful.8

Berkeley Hillside

In 2009, the property owners in Berkeley Hillside filed applications to construct a 6,478 square foot home with an attached 3,394 square foot, 10-car garage on their steeply sloped lot in the Berkeley hills. The owners requested discretionary approvals from the City of Berkeley, including a height increase and setback reduction, thus triggering review under CEQA. The Berkeley Zoning Adjustment Board and the Berkeley City Council approved the project and cited two categorical exemptions from CEQA, one for single-family homes and another for in-fill developments.

The trial court denied the project opponents' petition challenging use of the categorical exemptions, finding that while there was substantial evidence supporting a fair argument that the project would cause significant environmental impacts, the exception to the CEQA exemption did not apply because those impacts were not due to "unusual circumstances."

The Court of Appeal reversed the trial court, ordering the City to set aside the project's permits and not to approve the project without first preparing an EIR. The court effectively collapsed the "unusual circumstances" requirement into the "significant effect on the environment" requirement, stating that "the fact that proposed activity may have an effect on the environment is itself an unusual circumstance..." In doing so, the court adopted the reasoning of the California Supreme Court in Wildlife Alive that "[w]here there is substantial evidence that proposed activity may have an effect on the environment, an agency is precluded from applying a categorical exemption." In other words, a possible significant effect on the environment alone is sufficient to trigger an EIR. According to the court's reasoning, CEQA's categorical exemptions cover projects that normally do not have a significant effect on the environment, therefore a project for which there is substantial evidence that it could have such an effect is by definition "unusual."

The court also held, as a matter of law, that a 6,478 square foot house with ten car garage constitutes "unusual" circumstances within the meaning of the exception, differing from the general circumstances of projects covered by the single-family residence exemption. The court held that the relevant comparison is not to other typical homes in the project vicinity, as some courts have held, but rather that a project should be "judged relative to the typical circumstances related to an otherwise typically exempt project . . . "10

Finally, in determining whether the opponents' evidence presented "substantial evidence of a fair argument" of a significant environmental effect, the court applied the less stringent interpretation of this standard. The court found that the existence of differing expert opinions was alone sufficient to meet the fair argument exception and trigger an EIR. The court chose not to examine the quality of the evidence presented by the opposing expert, despite an assertion that the opponents' expert "misread the project plans."

Conclusion

Some project applicants have assumed that single family homes are categorically exempt from CEQA. That has never been the case. Categorical exemptions have always been limited so that they could not be used when "there is a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances."11 This decision further limits CEQA categorical exemptions for all projects, not just single family homes. Homeowners and developers with projects requiring discretionary approvals should be aware that this opinion may make it easier for project opponents to challenge a categorical exemption, thereby increasing the likelihood that even small projects may need EIRs.

Footnotes

1 Cal.Pub.Res.Code § 21100

2 Cal.Pub.Res.Code § 21084(a); Cal. Code Regs., tit. 14, § 15300 et seq.

3 Cal. Code Regs., tit. 14, § 15300.2(c).

4 Banker's Hill, Hillcrest, Park West Community Preservation Group v. City of San Diego (2006) 139 Cal.App.4th 249, 278.

5 Wildlife Alive v. Chickering, 18 Cal. 3d 190, 205- 06 (1976).

6 See, e.g., Banker's Hill at 264-267; Azusa Land Reclamation Co., Inc. v. Main San Gabriel Basin Watermaster (1997) 52 Cal.App.4th 1165, 1202- 04.

7 See, e.g., Banker's Hill at 277-81; Bowman v. City of Berkeley (2004) 122 Cal.App.4th 572.

8 See, e.g., Quail Botanical Gardens Foundation, Inc. v. City of Encinitas (1994) 29 Cal.App.4th 1597, 1603-07; Sierra Club v. County of Sonoma (1992) 6 Cal.App.4th 1307, 1321-22 (stating that a facial disagreement among experts on the "significant effect" issue constitutes "substantial evidence").

9 See, e.g., Association for Protection of Environmental Values in Ukiah v. City of Ukiah (1991) 2 Cal.App.4th 720, 736.

10 Berkeley Hillside Preservation at 17, citing Santa Monica Chamber of Commerce v. City of Santa Monica (2002) 101 Cal.App.4th 786, 801.

11 Cal. Code Regs., tit. 14, § 15300.2(c).

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