After years of study, Marin County adopted an Ordinance in 2011 banning single-use plastic bags and mandating a 5-cent fee on single-use paper bags; the ordinance applies to roughly 40 retailers in the unincorporated county.  The county found the ordinance categorically exempt from CEQA as “a regulatory action designed to assure the maintenance, restoration, enhancement, or protection of natural resources and the environment.”  (See 14 Cal. Code Regs., §§ 15307, 15308.)  Plaintiff Save the Plastic Bag Coalition (the “Coalition”) sued claiming CEQA required an EIR for such an ordinance, but the trial court denied its writ petition.  On July 25, 2013, the Court of Appeal for the First Appellate District ordered published portions of its June 25, 2013 decision affirming the trial court’s judgment.  (Save the Plastic Bag Coalition v. County of Marin, et al (1st Dist., Div. 3, 6/25/13, part. pub. order 7/25/13) 218 Cal.App.4th 209.)

As in the Coalition’s challenge to the City of Manhattan Beach’s plastic bag ban ordinance, which ordinance was upheld by the California Supreme Court in Save the Plastic Bag Coalition v. City of Manhattan Beach (2011) 52 Cal.4th 155, plaintiff’s CEQA objections to County’s environmental regulation focused on “life-cycle” assessments — i.e., evaluations of local and global environmental impacts of a product’s manufacture and use from “cradle to grave,” encompassing the process from extraction of the necessary materials to the finished product’s final disposal.  The gist of the Coalition’s arguments is that its evidence shows “paper bags are significantly more damaging to the environment than plastic bags” because among other things, “they use more energy and water, emit more greenhouse gases, produce more atmospheric acidification [causing] acid rain, cause [formation of] more ground level ozone…, and generate more solid waste.”  By contrast, the County’s analysis supporting its ordinance concluded that it would result in “a shift to reusable bags that would conserve resources, reduce the amount of greenhouse gas emissions associated with the production of single-use bags, reduce waste and marine pollution, protect water resources and water quality, and enhance the quality of life for county residents, visitors, and wildlife.”

In upholding MarinCounty’s adoption of the ordinance pursuant to categorical exemptions from CEQA review, the Court of Appeal made the following key holdings and observations:

• A categorical exemption from CEQA rests on a finding by the Resources Agency that a class or category of projects does not have a significant adverse environmental effect; a lead agency’s finding that a proposed project falls within one of the exempt classes thus includes an implied finding that the project has no significant environmental effect, and its “determination will be affirmed if supported by substantial evidence that the project fell within the exempt category of projects.”  (Citing Davidon Homes v. City of San Jose (1997) 54 Cal.App.4th 106, 115.)
• “‛[W]here the agency establishes that the project is within an exempt class, the burden shifts to the party challenging the exemption to show that the project is not exempt because it falls within one of the exceptions listed in Guidelines section 15300.2[,]”’ the most commonly raised of which is the section 15300.2(c) exception that applies where “‛unusual circumstances’… create a ‘reasonable possibility’ that the activity will have a significant effect on the environment.”  (Ibid.)  As relevant to the case before it, the Court of Appeal observed that Guidelines § 15300.2(b)’s “cumulative impact” exception provides that “a public agency may not rely on a categorical exemption ‘when the cumulative impact of successive projects of the same type in the same place, over time is significant.””
• Significantly in light of the California Supreme Court’s pending review of the First District’s own seemingly contrary decision in Berkeley Hillside Preservation, et al. v. City of Berkeley, et al. (No. S201116), concerning the standard of review for exceptions to exemptions, the Court stated:  “There is a split of authority on the appropriate standard of review to apply to a question of fact concerning whether an activity that would otherwise be categorically exempt is subject to one of the three main exceptions contained in … Guidelines section 15300.2[(a)-(c)].  [citation.]  “‘Some courts have relied on cases involving review of a negative declaration, holding that a finding of categorical exemption cannot be sustained if there is a “fair argument” based on substantial evidence that the project will have significant environmental impacts, even where the agency is presented with substantial evidence to the contrary …. Other courts apply an ordinary substantial evidence test …. deferring to the express or implied findings of the local agency that has found a categorical exemption applicable.”’  (Citing 1 Kostka & Zischke, Practice Under the Cal. Environmental Quality Act (CEB 2013), § 5.37, pp. 298-302, and Hines v. California Coastal Com. (2010) 186 Cal.App.4th 830, 856.)  The Court of Appeal ruled that “it is unnecessary for us to take a position on this split of authority because it would not alter the outcome of this appeal.”
• In gleaning relevant principles from the Supreme Court’s plastic bag ban decision in Manhattan Beach, the Court noted a distinction was made between local effects and those outside a jurisdiction’s geographical boundaries:  “Although the [Supreme] [C]ourt stated that public agencies must consider effects that a project will have beyond the boundaries of the project area, it clarified that CEQA does not require an exhaustive analysis ‘of all conceivable impacts a project may have in areas outside its geographical boundaries.’”  Rather, it “emphasized that broader environmental impacts without direct impact on the local agency’s geographical area may be evaluated at a higher level of generality.”
• Accordingly,  Manhattan Beach’s relevant focus was on the “actual scale of the environmental impacts that might follow from increased[local] paper bag use in Manhattan Beach, instead of comparing the global impacts of paper and plastic bags ….”  The Supreme Court there explained that while properly conducted “life cycle” studies may provide useful information to decision makers “when a project entails substantial production or consumption of the product[,]” “common sense” counsels they are not useful under different circumstances when “increased use of the product is an indirect and uncertain consequence, and especially when the scale of the project is such that the increase is plainly insignificant[.]”
• Following the Supreme Court’s teachings, the Court of Appeal noted that:  (1) Marin County’s plastic bag ban ordinance affected only 40 stores, as compared to over 200 stores in the Manhattan Beach case; and (2) any impacts from increased paper bag production were even more trivial for this reason, as well as the fact that, unlike the Manhattan Beach ordinance, Marin County’s ordinance required a retailer to charge for paper bags, thus increasing consumers’ incentive to bring reusable bags.  In sum:  “If anything, a comparative analysis involving stores and population figures in Manhattan Beach and the unincorporated parts of Marin County reinforces the conclusion that, just as in Manhattan Beach, the environmental impacts of the ordinance are insignificant.”
• The Court did “not suggest that there is a blanket exemption from CEQA for plastic bag bans[,]” but observed that “[a] categorical exemption may apply to plastic bag bans depending upon the unique facts and circumstances presented.”  It observed nothing in Manhattan Beach precluded such a result, since even through the Supreme Court there considered a negative declaration, it expressly recognized that a categorical exemption was a potential alternative.
• The Court rejected the Coalition’s legal argument that CEQA’s Class 7 and 8 exemptions were inapplicable because County was not a “regulatory agency” that was “implementing regulations authorized by a preexisting state law or ordinance.”  While the Coalition had adequately exhausted its administrative remedies on this argument – since the County did not give adequate notice in advance of the hearing on the project of the ground for its exemption determination (see Tomlinson v. County of Alameda (2012) 54 Cal.4th 281) – the argument failed on its merits.  The Court held that: (1) “ordinances” may constitute “regulations” “enacted for the purpose of protecting natural resources and the environment”; (2) such ordinances are authorized as within a county’s inherent police power (Cal. Const., art. 11, § 7); and (3) Marin County’s plastic bag ban ordinance here was just such an ordinance.
• The Court also rejected the Coalition’s argument that MarinCounty was attempting “to create an enormous loophole in CEQA by allowing cities and counties to adopt ordinances they deem to be ‘green’ or ‘environmentally protective’ without conducting any form of CEQA analysis.”  Public agencies must meet an “initial burden” of “marshal[ing] substantial evidence to support the conclusion that [a] project falls within the [claimed] exemption.”  Thereafter, “it still has to defend against claims that the exemption is subject to an exception.”  The Coalition never directly argued that substantial evidence did not support the Class 7 and 8 exemptions (before considering exceptions), and thus forfeited the argument.
• In the unpublished portion of its opinion, the Court again acknowledged the split of authority on the standard of review for exceptions, but observed that it made no difference since the Coalition still lost even under the more deferential “fair argument” test.  It concluded, in light of the analysis of Manhattan Beach and other case law, that the Coalition had failed to present substantial evidence supporting a fair argument that the ordinance may have significant adverse effects due to unusual circumstances or cumulative impacts.

The Court of Appeal’s decision provides useful guidance generally for local agencies seeking to adopt environmentally-protective regulations as exempt from CEQA review, and more specifically, it provides a clearer road map for local agencies seeking to enact plastic bag ban ordinances by explicating and applying the principles of Manhattan Beach.  It is also significant in that it recognizes, but does not resolve, the split in judicial authority on the critical issue of the standard of review applicable to claims of exceptions to categorical exemptions — an issue currently awaiting a much-anticipated decision from the California Supreme Court in Berkeley Hillside Preservation.

Questions?  Please contact Arthur F. Coon of Miller Starr Regalia.  Miller Starr Regalia has had a well-established reputation as a leading real estate law firm for over forty-five years.  For nearly all that time, the firm also has written Miller & Starr, California Real Estate 3d, a 12-volume treatise on California real estate law.  “The Book” is the most widely used and judicially recognized real estate treatise in California and is cited by practicing attorneys and courts throughout the state.  The firm has expertise in all real property matters, including full-service litigation and dispute resolution services, transactions, acquisitions, dispositions, leasing, construction, management, title insurance, environmental law, and redevelopment and land use.  For more information, visit www.msrlegal.com.