In a 38-page opinion filed on May 16, and belatedly ordered published on June 14, 2019, the Third District Court of Appeal affirmed the trial court’s judgment rejecting all of plaintiff/appellant Center for Biological Diversity’s (“CBD”) CEQA and statutory challenges to the EIR that the California Department of Conservation, Division of Oil, Gas and Geothermal Resources (“DOGGR”) was required by S.B. 4 (Stats. 2013, ch. 13, § 2) to prepare “pursuant to [CEQA], to provide the public with detailed information regarding any potential environmental impacts of well stimulation in the state.”  (Pub. Resources Code, § 3161(b)(3)(A).)  The Court’s opinion addresses and disposes of CBD’s CEQA and other challenges in a highly unusual, and even unprecedented, context – that of a statutorily required program EIR addressing the statewide impacts of oil and gas well-stimulation treatments (including the controversial treatment known as hydraulic fracturing or “fracking”) prepared in the absence of any “project” being approved or undertaken by the ostensible “lead agency” (DOGGR).  Center for Biological Diversity v. California Department of Conservation, Division of Oil, Gas and Geothermal Resources, et al. (3d Dist. 2019) ___ Cal.App.5th ___.

Statutory And Regulatory Background

As background, S.B. 4 found that fracking and other well stimulation treatments “are spurring oil and gas extraction and exploration in California,” but that there is insufficient information available to assess the relevant science and address the environmental, occupational and public health hazards and risks of such treatments.  Hence, it added a number of statutory provisions (Pub. Resources Code, §§ 3150-3161) (1) defining the relevant industry terms, (2) requiring the California Natural Resources Agency to perform an independent scientific risk study, (3) directing DOGGR to adopt permanent regulations specific to well stimulation treatments, (4) establishing new permit and application requirements (separate from drilling permits) for well stimulation treatments, (5) enacting an interim statutory regime until DOGGR’s permanent regulations became effective, (6) directing DOGGR to prepare and certify not later than July 1, 2015 an EIR “pursuant to [CEQA] to provide the public with detailed information regarding any potential environmental impacts of well stimulation in the state” (§ 3161(b)(3)(A)), and (7) providing that it did not relieve DOGGR or any other agency from complying with other existing laws and legal obligations (presumably including CEQA compliance where applicable).

DOGGR’s Programmatic EIR

DOGGR completed and certified a 3-volume, 5500-plus page “first-tier” or “programmatic” EIR addressing dozens of environmental impact areas, based on a 116,000-plus page administrative record, and did so by the July 1, 2015 deadline imposed by S.B. 4.  The EIR described the “project” for CEQA purposes as “all activities associated with a stimulation treatment that could occur either at an existing oil and gas well, or at an oil and gas well that is drilled in the future expressly for the purposes of stimulation treatment.”  While the draft EIR contained mitigation measures addressing direct and indirect impacts of well stimulation treatments, upon the objections of commenters (including the Western States Petroleum Association (“WSPA”)) that they constituted impermissible “underground regulations” many of these were eliminated from the Final EIR and either converted to formal regulations or placed into a “Mitigation Policy Manual” intended to assist DOGGR’s later evaluations of project-specific permit applications.

The EIR’s certification statement explained:  “The EIR mandated by [S.B.] 4 is not an ordinary EIR, but rather is a rare, and possibly unique, CEQA document in that it was mandated by statute without any accompanying ‘proposed project’ requiring action by [DOGGR] or any other public agency.  The subject of the EIR, ‘well stimulation in the state,’ is not a pending ‘project’ in any ordinary sense.  Rather, the subject of the EIR is a set of ongoing activities likely to continue to be carried out throughout some parts of a huge and very diverse [s]tate.  Such activities were legally occurring at the time [S.B.] 4 was passed, and in fact had been occurring for decades.”

CBD’s Litigation Challenging The EIR And The Court Of Appeal’s Decision

CBD filed a writ petition challenging the EIR, asserting five causes of action and seeking declaratory and injunctive relief, based on alleged violations of CEQA and S.B. 4.  After sustaining DOGGR’s demurrer to the CEQA claim without leave, the trial court denied the petition’s other causes of action after a merits hearing, and the Court of Appeal affirmed.

Key “takeaways” from the Court of Appeal’s published opinion include:

  • CBD failed to demonstrate the trial court committed prejudicial error in sustaining the demurrer to the CEQA claim as unripe because there was no “project” proposed to be carried out or approved by DOGGR. While the EIR was required by S.B. 4 to analyze “well stimulation in the state,” that was not a “project” or program carried out or considered for approval by DOGGR, and DOGGR’s regulatory oversight was not the project it was charged with examining.
  • The trial court did not abuse its discretion in denying judicial notice of the second and third volumes of the Natural Resources Agency’s scientific risk study, which were not completed until after DOGGR certified its EIR, and were thus not part of the administrative record and not before DOGGR at the time of certification. Rejecting CBD’s new theory on appeal that the two volumes were relevant to whether DOGGR should have supplemented the EIR or issued a subsequent EIR, the Court of Appeal cited authority that such a new theory regarding admissibility was barred (Lorenzana v. Superior Court (1973) 9 Cal.3d 626, 640), but held that even if it could be considered, the Court would still reject it:  “The trial court was not obliged to read between the lines of [CBD]’s request for judicial notice to divine an unasserted theory of relevance, and we cannot say the court abused its discretion for failing to do so.”
  • After reciting CEQA’s well established standards of review, the Court stated in part that: “[T]he present case requires us to apply these standards to an unusual EIR.  The parties have not directed our attention to any other case in which the Legislature directed an agency to prepare an EIR in the absence of a pending project or regulatory program requiring approval, and our own research has uncovered none.  In the absence of any authority directly on point, we look for guidance in the case law concerning analogous “program” EIR’s.”
  • After reciting relevant CEQA principles and standards concerning program EIRs and tiering, and noting the de novo standard of review applicable to its statutory interpretation of S.B. 4, the Court proceeded to systematically reject CBD’s arguments. First, it held that nothing in S.B. 4’s plain language required DOGGR to incorporate the Natural Resources Agency’s complete scientific study into the EIR.  The Legislature did not link the preparation of the study to the preparation of the EIR, and “could have rationally concluded that the independent production of two separate reports, with differing purposes and areas of emphasis, would effectuate [S.B.] 4’s remedial purposes by increasing the overall quantum of information about well stimulation treatments.”  While the Legislature could have expressly required postponement of EIR certification if the study were not timely completed, it did not, and the Court refused to impose such a requirement.
  • Nor did the EIR improperly fail to consider the first volume of the study. Applying well-established principles that an EIR need only be adequate and not perfect, must make a good faith effort at full disclosure, and must “be reviewed in the light of what is reasonably feasible,” the Court noted that “[t]he EIR discloses the existence of the first volume, expresses a willingness to consider the as yet unreleased future volumes, and observes that ‘as of the time that the Final EIR was published, no substantive conflicts between its conclusions and [those] of Volume I of the Independent Study had been identified.’”  It held “these disclosures were adequate under the circumstances” and rejected CBD’s arguments based on the asserted conflicts between the conclusions of the EIR and the second and third study volumes, “which had not been released at the time [DOGGR] certified the EIR and are not properly before us now.”  It further rejected CBD’s assertions of inconsistencies between the EIR and the first volume of the study, upon examination, as not necessarily being inconsistent.
  • The Court further held that no subsequent or supplemental EIR was required following release of the second and third study volumes based on the limited record before it. After reciting CEQA’s potentially relevant standards based on previously unknown and unknowable “new information of substantial importance,” the Court held that it could not reach the issue on the record before it “since the second and third volumes have not been made part of the record, and are not the subject of any pending request for judicial notice[.]”
  • Rejecting CBD’s arguments that the EIR failed to adequately address indirect environmental impacts of well stimulation – i.e., “emissions caused by pumping and transporting oil and gas produced by stimulated wells, traffic, and wastewater produced from stimulated wells” – the Court held that DOGGR “was not required to analyze indirect impacts of well stimulation in the EIR, but nevertheless adequately analyzed them on a programmatic basis, properly deferring further analysis to later, project-level EIRs.” While an EIR prepared “pursuant to CEQA” would ordinarily include analysis of a project’s reasonably foreseeable indirect effects, S.B. 4 and “CEQA are inconsistent, so far as the scope of the EIR is concerned” as the relevant provisions of S.B. 4 “reflect[ed] a legislative intent to limit the scope of the EIR [required here] to well stimulation treatments only.”  Per the Court:  “Reading section 3161 as a whole, and harmonizing the statute with the rest of the statutory scheme, we are convinced that [S.B.] 4 required [DOGGR] to prepare an EIR analyzing the environmental effects of well stimulation treatments only, as narrowly defined by Section 3157.  Nothing in [S.B.] 4 required an analysis of indirect impacts caused by the additional oil and gas production made possible by well stimulation treatments, and we do not believe that such a sweeping mandate can be reasonably implied from the instruction to prepare an EIR ‘pursuant to CEQA.’”
  • Contrary to CBD’s arguments, the Court believed DOGGR was not obligated under CEQA to adopt formal mitigation measures since it was not actually approving or carrying out a project. Per the Court:  “Under the peculiar circumstances of this case, where [DOGGR] was directed by the Legislature to prepare an EIR for informational purposes only, in the absence of any particular project for approval, we do not believe that [DOGGR] had an obligation to adopt formal mitigation measures.  We need not decide this issue, however, as we conclude that:  (1) [DOGGR] committed to specific performance criteria to mitigate the direct effects of well stimulation treatments in the Mitigation Policy Manual; and (2) [DOGGR] reasonably concluded that potential mitigation measures for the indirect effects of well stimulation treatments were infeasible.”
  • The Court held DOGGR did not improperly defer formulating mitigation measures in any event, because it met both conditions of an exception to the general rule prohibiting deferral: (1) it “committed itself to specific performance criteria for evaluating the efficacy of the measures to be implemented in the future” and (2) “the future mitigation measures are formulated and operational before the project activity that they regulate begins.”  (Citing POET, LLC v. State Air Resources Bd. (2013) 218 Cal.App.4th 681, 735, 738.)  DOGGR “committed” to using the specific performance criteria in the Mitigation Policy Manual as a starting point to evaluate future well stimulation projects, and also committed to them in numerous other ways, including committing to revising the manual as it gains experience; to requiring full compliance from operators wishing to have their projects deemed “within the scope” of the EIR; to working with local agencies to ensure adequate site-specific mitigation; and to imposing additional mitigation on future projects through well stimulation permit conditions or under its general supervisory jurisdiction over oil and gas operations.  CBD failed to show either that the Mitigation Policy Manual’s performance criteria were not sufficiently specific, or that DOGGR’s commitment to those measures was illusory, and hence failed to show DOGGR improperly deferred mitigation of direct impacts of well stimulation treatments.
  • The Court further held: “Substantial evidence supports [DOGGR]’s determination that it was not feasible to mitigate the indirect effects of well stimulation treatments by imposing conditions on well stimulation permits.”  Per the Court:  “An EIR may properly decline to consider a proposed mitigation measure if substantial evidence supports the agency’s determination that the proposed mitigation measure would not reduce a significant impact, or that the proposed mitigation measure is infeasible.  (Guidelines, § 15126.4, subd. (a).)”  Because well stimulation permits can only be finalized in conjunction with drilling permits, which are themselves subject to conditions of approval addressing the direct effects of drilling new wells (such as the emissions, traffic, and disposal of wastewater impacts that CBD was concerned with), DOGGR could reasonably conclude that the potential indirect effects of well stimulation treatments causing the development of oil and gas operations in previously undeveloped areas could most effectively be mitigated directly, by imposing conditions of approval on the necessary well-drilling permits, rather than indirectly by imposing conditions on well stimulation permits.  (Citing California Native Plant Society v. City of Santa Cruz (2009) 177 Cal.App.4th 957, 998 [“ ‘ “ ‘feasibility’ under CEQA encompasses ‘desirability’ to the extent that desirability is based on a reasonable balancing of the relevant economic, environmental, social, and technological factors” ’”].)
  • Rejecting CBD’s arguments that the EIR violated CEQA because it lacked findings and a mitigation monitoring and reporting plan, the Court agreed with DOGGR that these were required only when an agency approves or carries out a project, and were thus not required under the circumstances here. (Citing Pub. Resources Code, §§ 21081, 21081.6(a).)
  • Finally, the Court held CBD failed to demonstrate claimed error in certain aspects of the EIR’s more detailed field-specific analyses and discussion regarding three particular existing oil well production fields (Wilmington, Inglewood and Sespe). While CBD argued these analyses were no more specific than the EIR’s statewide “programmatic” analyses, this failed to meet its burden of demonstrating inadequacy.  Per the Court:  “The Center has not identified any evidence in the record showing that the air quality impacts of well stimulation treatments at the Wilmington, Inglewood, and Sespe fields are different from the air quality impacts for the state as a whole, or that the proposed mitigation measures for those impacts are or should be different.  [CBD] invites us to assume that the sameness of the analysis establishes a failure of analysis, but we could just as easily assume that the well stimulation treatments at the [specific] fields are representative of well stimulation treatments statewide.  In the absence of an affirmative showing that the EIR’s field-specific analyses were inadequate, we must presume that [DOGGR]’s decision to certify the EIR was correct.”  Further, nothing in the EIR or record suggested the field-specific analyses were intended to displace or supplant future CEQA review of specific future projects in those areas, as CBD apparently feared.

Conclusion And Implications

While the opinion in this case certainly addresses important factual and legal subject matters (i.e., fracking regulation and statewide environmental impact review) and does so in a truly unique context – a statutorily mandated EIR without a corresponding project – it likely will not, for those very reasons, have widespread implications for CEQA practice generally.  After all, how often will a public agency be required to prepare an EIR addressing ongoing legal activities on a statewide basis when there is no project proposed for approval?  Perhaps the most important lesson to be taken away here is that clarity and precision in drafting legislation are important – if the Legislature had wanted all the ordinary components of an EIR (such as findings, mitigation, analysis of indirect impacts, a mitigation monitoring and reporting program) to be provided in the EIR it mandated DOGGR to prepare here, or had it wanted DOGGR to include Natural Resources Agency’s mandated scientific study in the EIR, it should have clearly said so.

 

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