It is a fundamental precept of CEQA that it applies only to the discretionary approval of a project.  If an agency has no discretion to deny or shape the project to address environmental concerns, CEQA review would be a pointless and futile exercise, no matter what adverse environmental impacts of the project it might reveal.  Recent decisions continue to illustrate how an agency’s discretion under substantive law constrains CEQA’s applicability as a threshold matter, and how it can also affect the scope of required environmental review when CEQA does apply.

In Central Basin Municipal Water District v. Water Replenishment District of Southern California (2d Dist. 12/10/12) 211 Cal.App.4th 943, the relevant substantive law governing agency discretion was a court judgment imposing a “physical solution” (pursuant to the California Constitution’s “beneficial use” mandate) comprehensively governing water use in the Central Basin, a groundwater basin.  The judgment authorized the defendant and respondent agency, the Water Replenishment District of Southern California (WRD) to declare a water emergency when “without implementation of the water emergency provisions of this  Judgment, the water resources of the Central Basin risk degradation.”  Declaration of  a water emergency had certain automatic consequences under the terms of the judgment – e.g., alteration of basin pumpers’ “carryover” allocations to subsequent years and extension of their time to replenish overextractions – that the WRD had no ability to alter.

Plaintiff and Appellant Central Basin Municipal Water District (CBMWD) sued WRD under CEQA, claiming that WRD failed to analyze the significant environmental impacts of the increased carryover rights and replenishment periods triggered by its “water emergency” declaration before making that declaration. The trial court sustained WRD’s demurrer and the Court of Appeal affirmed on the grounds that CEQA did not apply as a matter of law, and even if it did it was “trumped by the physical solution.”

According to the Court, WRD’s declaration of a water emergency itself had no environmental impact and was not a project under CEQA.  More to the point, the Court held:  “WRD had no discretion to alter the terms of the Judgment even if it prepared an EIR and determined that the carryover and delayed replacement would have significant environmental effects.  Thus, even if the declaration of the water emergency should be reviewed together with its consequences, WRD’s decision was ministerial, WRD simply had no discretion to alter the carryover rights or delayed replenishment, and the preparation of an EIR would have been a futile act.”  (The remainder of the Court’s brief opinion cited authorities essentially holding that  CEQA may not be applied to “frustrate” or “in contravention of” a judgment establishing a physical solution, since the power to alter such a judgment rests with the court rather than the public agency.)

Agency discretion under the substantive law ultimately affected the adequacy of an EIR’s alternatives analysis in an unusual procedural context in Habitat and Watershed Caretakers v. City of Santa Cruz (6th Dist.11/27/12) 211 Cal.App.4th 429.  The issue addressed in this somewhat convoluted and at times difficult-to-read opinion was the adequacy of an EIR prepared by the City of Santa Cruz to analyze a proposed sphere of influence (SOI) amendment to include the undeveloped “North Campus” area of the U.C. Santa Cruz (UCSC) campus.  The SOI amendment was needed to allow the City to provide extraterritorial water and sewer services to facilitate contemplated new development in North Campus.  The impetus for the proposed SOI amendment was a 2008 Comprehensive Settlement Agreement (CSA) resolving litigation among the City, the Regents, and others concerning UCSC development.  The CSA provided in material part that: (1) the Regents would place specific restrictions on enrollment and would increase on-campus housing; (2) the City would seek LAFCO approval of an SOI amendment, and not oppose the Regents’ request for extraterritorial water and sewer services for North Campus; and (3) if LAFCO denied the SOI amendment, or its approval was overturned, the Regents’ housing commitment was excused.

Because substantive law vests LAFCO with the authority and discretion to approve, deny or conditionally approve SOI amendments and extraterritorial service agreements, the City could not lawfully agree in the CSA to change its SOI or provide such services, but only to request the necessary approvals from LAFCO and to provide the services if LAFCO approved.  Anomalously, in this unusual context, the City filed its applications with LAFCO without first preparing and certifying an EIR; LAFCO advised that it could not consider the applications without a certified EIR, so the City prepared one while the applications were pending.  While it is unclear what substantive approval was being challenged (presumably City’s decision to submit an application to LAFCO), plaintiff Habitat and Watershed Caretakers (Habitat) sued the City challenging the adequacy of the EIR it subsequently certified for the project.

The Court of Appeal reversed the trial court’s judgment upholding the City’s actions on the ground that the “EIR misdescribed the project’s objectives, that this misdescription skewed its consideration of alternatives, and that the EIR was inadequate because it failed to consider any feasible alternatives that would avoid or limit the significant environmental impact of the project on the City’s [already severely constrained and threatened] water supply.”  Ultimately, while it might have stated it more simply, it appears that the Court’s view is that the City’s EIR violated CEQA because its description of the project and its objective failed to accurately describe what action was actually required by the CSA and what discretion remained under the CSA – i.e., in LAFCO, albeit not the City – to act on the SOI amendment and extraterritorial service applications.

The Court observed the EIR described the project in conflicting language – as a “proposed request,” on the one hand, while on the other hand making clear that the City had already submitted its application to LAFCO and had “agreed to provide water and sewer services to the area….”  The Court clarified that the “project” for CEQA purposes was the SOI amendment and provision of extraterritorial water and sewer services, not the fulfillment of the CSA’s requirements.  The CSA was beyond CEQA challenge, and its requirements were fulfilled once the City filed its LAFCO applications, since that was all the CSA required and it “did not [(and could not)] obligate anyone to actually obtain LAFCO approval, as LAFCO was not a party to the CSA.”  Notwithstanding that the City may have had no remaining discretion with regard to the project under the CSA, the critical fact was that LAFCO did.

The Court held that the EIR’s faulty statement of project objectives failed to describe the project’s underlying purpose, and hence resulted in the EIR’s failure to analyze a reasonable range of alternatives within LAFCO’s discretion to consider in making its discretion.  For example, the draft EIR’s introductory discussion in its alternatives section misleadingly stated that the “primary objective of the proposed project is to implement City of Santa Cruz legal obligations to provide water and sewer services to the North Campus of UCSC set forth in the [CSA].  There are no known alternatives to the City provision of these services to the project area….  Any alternatives that alter the provisions of the [CSA] were not considered feasible as they would violate a legal judgment….”

Following this introduction, the Draft EIR analyzed only two alternatives, the mandatory “no project” alternative and a modified SOI alternative, and the Final EIR apparently effectively eliminated from consideration any alternative that would not both provide UCSC with the amount of water needed to fully develop North Campus and trigger UCSD’s housing commitment under the CSA.  Proceeding in this “all-or-nothing” fashion, with unclearly stated project objectives, precluded meaningful analysis of “reduced-development” or “limited-water” alternatives that would have allowed some development of North Campus while still triggering the Regents’ housing commitments if LAFCO selected such an alternative as a condition of project approval (rather than simply denying the applications).  The Court ruled that such potentially feasible alternatives should have been presented to LAFCO for consideration in the EIR, rather than rejected out of hand based on what it characterized as unsupported speculation that they would not yield environmentally superior results.

While the Central Basin and Habitat cases obviously arose in different contexts, they reaffirm that an agency’s meaningful discretion to shape the environmental consequences of its action under governing substantive law is a prerequisite to CEQA’s applicability in the first place, and may even affect the adequacy of an EIR’s analysis of project impacts and alternatives if it is not properly construed or described in the CEQA document.


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