In a July 3, 2014 published decision more notable for the practical importance of the water rights involved than the CEQA law applied, the Fifth District Court of Appeal rejected the CEQA challenges of various environmental groups and a tribe.  North Coast Rivers Alliance, et al., v. Westlands Water District, et al., 227 Cal.App.4th 832 (5th Dist. 2014).  The lawsuit sought to overturn statutory and categorical exemptions claimed for six 2-year interim renewal contracts between the U.S. Bureau of Reclamation (USBR) and several water districts (i.e., Westlands Water District and its related distribution districts) for Central Valley Project (CVP) water to be delivered, received and distributed within the district’s 600,000+ -acre boundaries.

Since the 1960’s – well before prior to CEQA’s effective date of November 23, 1970 – Westlands has had water service contracts with USBR giving it the right to receive approximately 1 million acre-feet of CVP water annually.  A long-term, 40-year contract was entered into in 1963; in 1992, the Central Valley Project Improvement Act (CVPIA) authorized both long-term 25-year CVP contract renewals pending completion by USBR of a programmatic EIS and up to 3-year interim renewals to “bridge the gap.”  Since the expiration of the original long term CVP contract in 2007, USBR and the districts have operated under a series of short-term interim renewal contracts because USBR has not yet completed the programmatic EIS.  Plaintiffs challenged the districts’ entry into the recent 2012 renewals under CEQA, arguing the exemptions claimed for them were inapplicable and that a full EIR should be done addressing the contracts’ impacts on the environment, including impacts to Delta species and habitat and salinity problems in Central Valley soils and groundwater due to USBR’s failure to provide promised drainage facilities.

In a lengthy opinion, the Court of Appeal ultimately affirmed the trial court’s judgment denying a writ of mandate, and upheld CEQA exemptions for the interim CVP water contract renewals.  While it rejected the trial court’s endorsement of the statutory “rate-setting” exemption (Public Resources Code, § 21080) as applicable, holding the record did not support a finding that approval of the 2012 interim renewal contracts set or adjusted the rates the water districts charged to their own customers, it upheld the renewals as exempt from CEQA under both the statutory “ongoing projects” exemption (see 14 Cal. Code Regs., § 15261(a) [recognizing statutory exemption]), and the categorical exemption for continued use of existing facilities at the same level of use.  (14 Cal. Code Regs., § 15301.)  It found substantial evidence in the record supported the districts’ claim of statutory exemption under Guidelines § 15261(a) since the record showed “the matters presently challenged by petitioners are merely an incidental part of the original, ongoing pre-CEQA project – and therefore exempt.”  In other words, the amount of water (1.15 million acre-feet annually) and the construction of the necessary CVP facilities needed to deliver and distribute the water contemplated by the interim contracts were both “approved” prior to CEQA’s effective date, i.e., in 1963, when the initial 40-year contract was entered; moreover, only project approval (not complete construction) was required for the exemption to apply.

Alternatively, the Court held that even if the statutory ongoing project exemption did not apply, the approval of the interim contracts would still be exempt under the categorical exemption for “the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of use beyond that existing at the time of the lead agency’s determination.”  (14 Cal. Code Regs., § 15301.)

In essence, the interim CVP contract approvals simply allowed continued use for 2 years without any changes in the existing CVP facilities on their operation.  Finally, neither the unusual circumstances nor cumulative impacts exceptions to the categorical exemption were established by plaintiffs.  Regarding the first asserted exception, whatever standard of review was applied, plaintiffs had shown no substantial adverse change in existing baseline conditions and thus no significant impact.  Regarding the second asserted exception, the short-term contracts were not “successive projects of the same type” under Guidelines § 15300.2(b), since under these circumstances the “successive projects” contemplated by both the 1963 contract and the applicable CVPIA legal scheme were “renewable, long-term water service contracts.”

The Court concluded by noting its holdings were “also in accord with notions of basic fairness and reasonableness in how CEQA is applied.” It stated:  ‘[T]he CVPIA imposed interim renewal periods of artificially short durations to provide the Bureau with brief continuances, during which time the status quo would be maintained to bridge the gap [between long-term contracts].  Since the exceptional brevity of each interim renewal period was not project driven, but was merely an expedient mechanism imposed by the CVPIA to assist the [USBR], we believe it would be unreasonable to insist that water districts conduct a full-scale environmental review under CEQA on the occasion of each two-year interval.”

The Fifth District’s opinion, while a valuable contribution to the legal literature and important in practical impact, does not contain any particularly earth-shattering CEQA holdings.  CEQA and land use practitioners will find it of interest and a worthwhile read because it contains (1) an interesting, and informative contextual discussion of the history of the CVP, the CVPIA, and Westlands and the related districts’ relevant CVP contracts and water rights; (2) a thoughtful discussion of the distinctions between statutory and categorical exemptions under CEQA; (3) a detailed discussion of the current split in authority on the interpretation and standard of review applicable to assertions that an exception to a categorical exemption applies (with an observation that the split is expected to be resolved by the Supreme Court in the Berkeley Hillside Preservation case currently under review); and (4) an interesting discussion of the genesis and scope of the statutory exemption for ongoing pre-CEQA projects recognized in Guidelines § 15261(a).

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