Legal Alerts Aug 20, 2019

California Supreme Court Clarifies CEQA’s Most Fundamental Question: What is a “Project?”

Union of Medical Marijuana Patients, Inc. v. City of San Diego

California Supreme Court Clarifies CEQA’s Most Fundamental Question: What is a “Project?”

In a long-awaited decision, the California Supreme Court held yesterday that whether an activity is a “project” subject to environmental review under the California Environmental Quality Act must be based on whether the activity may result in environmental impacts – not merely the type of approval involved. Specifically, the Court held in Union of Medical Marijuana Patients, Inc. v. City of San Diego that zone changes were not per se CEQA “projects.” However, the Court went on to find that the City of San Diego’s zone change ordinance, allowing medical marijuana dispensaries within specific areas of the City, was a CEQA project in this instance due to its potential to cause reasonably foreseeable indirect environmental impacts.

This opinion provides important clarification for public agencies because it confirms that zone changes and, arguably, other activities described in Public Resources Code section 21080, are not automatically CEQA projects. However, the case also emphasizes the importance of carefully considering potential direct and indirect impacts when deciding whether an activity is a project under CEQA.

The case concerns an ordinance that the City adopted in 2014. The ordinance amended several zoning regulations to allow medical marijuana dispensary establishments and location and operation regulations. The City determined that the ordinance was not a “project” subject to CEQA because it did not have the potential to cause direct or reasonably foreseeable indirect physical changes in the environment. In adopting the ordinance, the City also stated, “[f]uture projects subject to the ordinance will require a discretionary permit and CEQA review, and will be analyzed at the appropriate time in accordance with CEQA.” The trial court and Court of Appeal both agreed with the City that the ordinance was not a project subject to CEQA, and that no environmental review was required.

In examining CEQA’s purpose and intent, the Supreme Court first summarized the “multistep decision tree” that a lead agency must engage in for its proposed activities:
1.) First, the lead agency must determine whether the proposed activity is a “project” subject to CEQA.
2.) If so, the lead agency must next decide whether the activity is exempt from CEQA.
3.) Finally, assuming the activity is not exempt, the lead agency must undergo environmental review.
Focusing on the first tier, the Court considered two questions: Whether a lead agency’s amendment of a zoning ordinance constitutes a per se CEQA project and whether the City’s ordinance, in this case, was a CEQA project.
To answer the first question, the Supreme Court closely examined Public Resources Code section 21080. The section says CEQA applies to “discretionary projects proposed to be carried out or approved by public agencies” and then offers a list of activities, including zoning ordinance amendments. The Union of Medical Marijuana Patients argued that, under section 21080, zone changes were per se CEQA projects, making the City’s zoning ordinance subject to CEQA review. The Court, however, found that section 21080 offered only examples of discretionary actions that may be CEQA projects — but only if those actions otherwise met the definition of a “project” under Public Resources Code section 21065. Specifically, the Court confirmed that section 21065 controls what activities are CEQA projects, and embraces only those activities that, among other requirements, “may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.” As such, the Court held that a zone change is not a “project” under CEQA, unless the zone change also met the environmental impact provisions of section 21065.

Next, the Court applied this rule to review the City’s zoning ordinance. The Court explained that the question was not whether the activity will have actual impacts, but “whether the activity’s potential for causing environmental change is sufficient to justify the further inquiry into its actual effects that will follow from the application of CEQA.” The Court concluded that, because no medical marijuana dispensaries were legally permitted to operate within the City prior to the ordinance’s adoption, that the establishment of new medical marijuana businesses may result in potential indirect physical changes in the environment. This includes new retail construction and changes in traffic patterns. As such, the Court found that the City’s zoning ordinance was, in this case, a CEQA “project” that must proceed forward to the next step of environmental review.

Editor’s Note: Best Best & Krieger LLP represented the League of California Cities and the California State Association of Counties as friends of the court in this case. The government associations urged the Court to reject the argument that every planning act, including zoning changes, automatically triggers CEQA review.

Should you have any questions regarding this opinion or its impact on your agency, please contact one of the attorney authors of this Legal Alert listed at the right in the Environmental Law & Natural Resources practice group, or your BB&K attorney.

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Disclaimer: BB&K legal alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.

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