In a published decision filed August 17, 2021, the Fifth District Court of Appeal affirmed the trial court’s judgment directing issuance of a writ of mandate ordering Inyo County to vacate three resolutions of necessity that authorized its condemnation of three Owens Valley landfill properties, including appurtenant water rights, owned by the Los Angeles Department of Water and Power (LADWP).  City of Los Angeles etc. v. County of Inyo (2021) __ Cal.App.5th__. The County operates three landfills on the properties pursuant to leases from LADWP.  In the published part of the opinion, the Court of Appeal held that CEQA’s issue exhaustion requirement did not apply to LADWP’s challenge to the County’s exemption determinations because the County failed to provide adequate notice of them, thus depriving LADWP of an opportunity to be heard on the issue.  As a matter of law, the Court also held the County improperly relied on the existing facilities exemption for the project.

Factual/Procedural Background

LADWP owns a very significant amount of property in Inyo County, generally for the purpose of water supply for its customers.  Among LADWP’s landholdings are the three properties at issue, which LADWP has leased to the County since approximately the 1950s for the purpose of operating landfills.  The three landfills are known as the Bishop-Sunland Landfill, the Independence Landfill, and the Lone Pine Landfill.

The Three Landfills

The Bishop-Sunland Landfill, established in 1955, is located on a 120-acre site two miles southwest of Bishop, and has an unlined disposal footprint covering 78 acres; the site is located on a gently sloping alluvial fan elevated about 130 feet above the Owens Valley floor.  The Independence Landfill, established in 1965, is located on a 90-acre site south of Independence; it has an unlined disposal footprint of about 18 acres located on a gently sloping alluvial fan elevated about 160 feet above the Owens Valley floor.  The Lone Pine Landfill, established in 1965, is located on approximately 60 acres southeast of the unincorporated community of Lone Pine; it has an unlined disposal footprint of 26.6 acres and is located on a shallow alluvial fan at the western edge of the Owens River floodplain, approximately 65 feet above the river.

All three landfills are operated by the County subject to oversight and permits by the County Department of Environmental Health Services, the California Department of Resources Recycling and Recovery, the Regional Water Quality Control Board, and the Great Basin Unified Air Pollution Control District.

Prior CEQA review for the three landfills includes mitigated negative declarations (MNDs) adopted in 1999 for each landfill in connection with updated operating permits, and a 2012 four-page addendum to all three MNDs addressing amendments to the operating permits related to increases in maximum daily disposal tonnage and average daily tons, a correction of the disposal footprint, and changes to the estimated closure dates.  At the time of the County’s approval of the resolutions of necessity in August 2017, it had pending applications to amend its operating permits to substantially increase peak daily disposal tonnage and average daily tonnage, which would substantially decrease the useful operating lives of the landfills.  The proposed amendments relied on the 1999 MNDs and 2012 addendum, with no additional CEQA review or mitigation deemed necessary by the County.

The Lease Negotiations and Subsequent Condemnation Proceedings

During 2016 and 2017, LADWP and the County were negotiating the terms of a lease renewal for the Bishop-Sunland Landfill, which included requests by LADWP for rent increases and revisions concerning lease termination rights.  The County objected to these changes and also complained of LADWP’s interference with its interactions with regulatory agencies.  The negotiations were ultimately unsuccessful, and led the County to pursue fee simple acquisition by eminent domain of all three landfill sites, including all water rights.  The County’s initial offers of compensation were rejected by LADWP, resulting in the County’s initiation of formal condemnation proceedings.

The County Board of Supervisors (“Board”) held a public hearing on August 15, 2017 to consider approval of the required resolutions of necessity.  The staff report (called an agenda request form) did not mention the previous 1999 MNDs, the 2012 Addendum, or any other CEQA analysis.  Prior to the Board meeting, LADWP submitted a letter objecting to the proposed resolutions.  Among many other objections, LADWP asserted that compliance with CEQA was mandatory before the County could condemn the properties, and that the whole project was not adequately described, resulting in an inadequate environmental analysis.  LADWP noted that the County already had plans to increase tonnage, expand uses, and correct violations at the Landfill Properties, that impacts of these changes must be analyzed before acquisition, and that the County cannot “piecemeal” such foreseeable projects and defer CEQA review.  Other issues at play were the County’s history of regulatory violations at the landfills, its potential plans to begin accepting out-of-County waste, and its unknown intentions regarding use of the water rights.  In addition to its comment letter, LADWP also objected verbally during the August 15 hearing on the resolutions of necessity.

Immediately prior to the close of the public comment portion of the Board hearing, in response to comments regarding CEQA, County Counsel stated the project was exempt from CEQA under the existing facilities and the common sense exemptions.  He described the project narrowly as the condemnation itself and not entailing any new land uses.  This was the first time ever that the County had disclosed to the public that it would rely on CEQA exemptions.

Notwithstanding its landlord’s objections, the Board unanimously adopted separate resolutions of necessity authorizing the condemnation of the fee interest (including appurtenant water rights) of the three landfill properties for continued landfill purposes and authorized County Counsel to prepare and prosecute the eminent domain proceedings necessary for the acquisition of the properties.  The resolutions failed to state the project definition or scope used for purposes of CEQA, set forth any findings relating to CEQA compliance, identify the CEQA exemptions relied on, or address the unusual circumstances exception to the exemptions.  The County did not file a notice of exemption.

In February 2018, LADWP filed a CEQA action challenging the County’s decision that was later transferred to Kern County Superior Court, which ultimately granted LADWP’s writ petition and entered a judgment directing the issuance of a peremptory writ of mandate vacating the County’s resolutions of necessity based on CEQA violations.  The County timely appealed.

Issue Exhaustion Not Required Due to Inadequate Notice

On appeal, County argued that LADWP failed to properly exhaust administrative remedies because it did not specifically raise some of individual CEQA violations identified in the trial court proceedings.  Under Public Resources Code § 21177(a), the alleged grounds for noncompliance with CEQA must be presented to the public agency orally or in writing during the public comment period or prior to the close of the public hearing on the project.  However, subdivision (e) of Section 21177 provides that this exhaustion requirement “does not apply” where “”there was no public hearing or other opportunity for members of the public to raise those objections . . . or if the public agency failed to give the notice required by law.”  Applying the holding of Tomlinson v. County of Alameda (2012) 54 Cal.4th 281, 289 (“Tomlinson”), the Court held that because exemption determinations do not provide a “public comment period,” that prong of Section 21177 does not apply here.  Thus, per Tomlinson, the issue exhaustion requirement would apply to LADWP only if there was an opportunity for public comment at the public hearing.

The Court held the County did not provide adequate notice that CEQA exemptions would be considered at the public hearing before the Board.  Such notice was not contained in the staff report or any other public notices, and exemptions were first mentioned only near the end of the public hearing.  The County, therefore, did not provide an “opportunity for members of the public to raise … objections” to its reliance on those exemptions; thus Section 21177’s issue exhaustion requirement did not apply.  The Court held, as a matter of law, that disclosure of an exemption determination for the first time “near the end of the hearing does not constitute [the legally required] adequate notice to the public that the CEQA exemption will be considered.”  The issue exhaustion requirement thus did not apply to bar LADWP’s exemption challenges.

Existing Facilities Exemption Did Not Apply As A Matter of Law

The County relied on the Class 1 categorical exemption for existing facilities, which covers “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 existing or former use.”  (CEQA Guidelines, § 15301.)  LADWP argued the existing facilities exception does not apply, as a matter of law, to unlined landfills, based on Azusa Land Reclamation Co. v. Main San Gabriel Basin Watermaster (1997) 52 Cal.App.4th 1165, 1192 (“Azusa), which held that “[t]he categorical exemption for an existing facility should not be construed to include a large, municipal waste landfill.”  The County argued Azusa was distinguishable, but the Court of Appeal disagreed.

Applying the rules of statutory interpretation, which are equally applicable to administrative regulations, the Court independently reviewed the scope of Section 15301 and determined as a matter of law the term “facilities” is “ambiguous.”  Azusa had determined the term “facilities” was ambiguous with respect to its application to a solid waste landfill.  Here, the Fifth District evaluated the issue anew, looking to the context of CEQA’s statutory and regulatory scheme as a whole and agreed the term “facilities” is ambiguous because it could be reasonably interpreted to include or to exclude unlined landfills.  (The Court’s legal analysis in this regard, based on the premise that categorical exemptions classes tend to be mutually exclusive, is quite interesting and worth a read.)  To resolve the ambiguity, the Court sought the interpretation that would best effectuate the legislative and regulatory intent of CEQA—protection of the environment—and held that the term “facilities” should not be broadly construed to include classes of business that would not normally satisfy the statutory requirements for a categorical exemption.  Legislative history from the 1998 amendments to the CEQA Guidelines included a reference to Azusa, which the Court noted indicated that the then-acting Secretary of Natural Resources was aware of the decision and yet did not revise Section 15301 to include landfills.  Finally, the Court held that the legislative finding found in Public Resources Code § 40000(b) that “[o]ver 90 percent of California’s solid waste currently is disposed of in landfills, some of which pose a threat to groundwater, air quality and public health,” was a separate basis to find that landfills do not constitute a suitable class of properties for categorical exemption.  Thus, the Court held that the Class 1 exemption does not apply to unlined landfills as a matter of law, and that the County therefore violated CEQA when it relied on the existing facilities exemption to approve the project.

Unpublished Portions of Decision

In the unpublished portions of its opinion, the Court also concluded that the County committed two other CEQA violations: (1) it improperly described the project as constituting only the proposed condemnation proceedings and a mere change in ownership of the landfill sites, and (2) the County’s unduly narrow project description, i.e., piecemealing, caused it to fail to consider pertinent factual issues based on the whole of the project and thus to erroneously conclude on an undeveloped administrative record that the commonsense exemption provided in Guidelines section 15061 applied.

Conclusion and Implications

Exhaustion is a powerful defense to CEQA challenges when it applies, but as this decision makes clear, lead agencies must take care to preserve this potential defense.  This decision builds upon the Supreme Court’s Tomlinson decision by clarifying that where a public agency fails to adequately notify the public of its intended reliance on CEQA exemption(s), i.e. in a staff report or other written materials prepared prior to the public hearing approving the project, CEQA’s issue exhaustion requirement will not apply to bar an exemption challenge.  Lead agencies should accordingly ensure that applicable CEQA exemptions are identified in the meeting agenda or at least the staff report materials made available to the public prior to the hearing to avoid this problem.  In other words, exemption determinations should not be treated as an “afterthought” raised only at the “last minute.”  Here, since LADWP did participate in the administrative proceedings, the Court did not address whether the same rule would have applied to relieve it of the CEQA requirement of party exhaustion.

With respect to the existing facilities exemption, the Court of Appeal’s opinion provides valuable guidance for litigants with regard to interpretation of categorical exemptions, where their application to an individual use may be ambiguous and where the underlying use is unique as to the types of environmental impacts it is known to have.

 

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 fifty 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.