In an opinion filed September 28, and certified for publication on October 26, 2021, the Fourth District Court of Appeal (Div. 3) affirmed a judgment denying a writ petition challenging the City of Tustin’s finding that a Costco gas station/ancillary facilities project in an existing shopping center was categorically exempt from CEQA.  Protect Tustin Ranch v. City of Tustin (Costco Wholesale Corporation, Real Party in Interest) (2021) ___ Cal.App.5th ___.  As did the trial court, the Court of Appeal rejected Petitioner/Appellant’s arguments that the project exceeded the 5-acre size limit of the Class 32 infill exemption (CEQA Guidelines, § 15332) and that the “unusual circumstances” exception precluded the City’s use of the exemption.

The Project And Its Infill Location

Costco proposed the project – a 16-pump (32-fuel position) gas station with related facilities and an adjacent 56-space surface parking lot – next to an existing Costco warehouse within an already built 12-acre shopping center located along a major commercial thoroughfare and adjacent to an auto center and another large retail center.  The shopping center that encompassed the project site included a McDonald’s, a vacant major retail store, a Goodyear Tire Center, and two multi-tenant buildings, in addition to the Costco warehouse.  The project would demolish and replace the Goodyear building with the surface parking, as well as construct the gas station with canopy, related equipment and landscaping.

The City’s Administrative Proceedings And The Trial Court Litigation

Costco’s original CUP application listed the “lot size” and “site size” as 11.97 acres (the size of the entire shopping center).  The City’s Planning Commission approved the project pursuant to CEQA’s Class 32 categorical exemption for infill projects.  It found the project was consistent with the general and specific plans, and would occur within city limits on a project site of no more than five (5) acres substantially surrounded by urban uses.  It also found the project met the Class 32 exemption’s other requirements, i.e., that the site had no value as habitat for special status species, that the project could be adequately served by utilities and public services, and that the project would not result in any significant traffic, noise, air quality, or water quality effects.

The City Council, on a de novo administrative appeal, considered more detailed infill exemption information from City staff, including information clarifying the relevant issue of the size of the project site as follows:  “The project site (consisting of the area where the fueling station and landscape screening will be constructed and the area where the existing Goodyear Tire Center Building will be demolished and restriped with surface parking) has a total of approximately 2.38 acres.  No new development or construction activity related to the proposed project will occur in the other portions of the shopping center, . . . nor will the existing operations at these uses change as a result of the proposed project.”

The City staff reports also addressed potential exceptions to the exemption and concluded none applied.  The Council found the project exempt, with no applicable exceptions (including expressly finding the project did not present any unusual circumstances as compared to other exempt infill projects), and it granted the approvals.

Petitioner/Appellant filed a writ petition arguing the exemption could not apply because documents described the project site as nearly 12 acres in size, and because the project fell within CEQA Guidelines § 15300.2(c)’s “unusual circumstances” exception.  The trial court denied the petition, and upon Appellant’s timely appeal, the Court of Appeal affirmed.

The Court Of Appeal’s Opinion

The Court reviewed the City’s (not the trial court’s) decision de novo and found no error.  Substantial evidence supported the City’s factual determination that the project fell within the Class 32 exemption, and that finding therefore had to be upheld under the applicable substantial evidence standard of review.  Multiple documents – including a revised application, an environmental assessment form, a water quality management plan, and various maps – as well as City staff hearing comments, clarified that the total project site size, i.e., the area “which will be disturbed [by new development or construction] as part of the project[,]” was only 2.38 acres, whereas the larger 12-acre figure referred to the entire shopping center.  As the project site size was the only infill exemption criterion Appellant challenged, its attack on City’s finding that the project fit within the scope of the exemption under that two-prong test necessarily failed.

While the legal analysis differed, Appellant fared no better with its “unusual circumstances” exception argument.  CEQA Guidelines § 15300.2(c) provides that:  “A categorical exemption shall not be used for an activity where there is a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances.”  The party challenging a project that falls within an exemption has the burden of producing evidence demonstrating an exception to the exemption applies.  It can do so in either of two ways:  (1) identify evidence showing the project will have a significant environmental effect; or (2) show (a) evidence that the project is unusual in some respect (e.g., size or location) that distinguishes it from other projects in the exempt class, and (b) that there is a reasonable possibility of a significant effect due to that unusual circumstance.  Appellant chose to pursue the latter possible method of proof, but failed under that two-prong test to produce evidence sufficient to meet its burden.

Indeed, Appellant did not clear the test’s first-prong hurdle of establishing the project presented “unusual circumstances” compared to others in its exempt class.  That issue presents “an essentially factual inquiry” as to which the lead agency is the fact-finder whose determination a court reviews under the deferential substantial evidence standard.  (Citing Berkeley Hillside Preservation v. City of Berkeley (2015) 60 Cal.4th 1086, 1105, 1114; my March 3, 2015 post on that case can be found here.)  Appellant argued the gas station’s unusually large configuration (32 individual fueling pumps), use of retractable billboards and additional employees to reroute peak usage traffic, and demolition of the Goodyear building (where tire, oil and fluid changes occurred) were unusual circumstances, but failed to explain or cite record evidence why these aspects distinguished it from other exempt infill projects.  On the other hand, the City’s conclusion that the project is not unusual compared to other exempt infill projects was supported by substantial record evidence showing its “size is not remarkably different than other [California] Costco gas stations;” that it “was consistent with the City’s general plan, the applicable specific plan, the applicable zoning designation, and development and design standards”; and that based on its location “it is in line with the characteristics of the surrounding setting.”  The Court also astutely observed:  “Because the infill exemption is expressly limited to projects under a certain size, it’s questionable whether the size of a project can be a characteristic that makes an otherwise exempt project unusual.”

The Court quickly dismissed Appellant’s concerns and claims of a “fair argument” of “potential soil contamination” from the Goodyear site as unsupported and irrelevant conjecture; the Court observed these concerns found no support in the record and correctly held that “one does not reach the question of whether there is a fair argument of a reasonable possibility of a significant environmental effect unless there is an adequate showing of an unusual circumstance.”  Thus, Appellant’s failure to clear the first “unusual circumstances” hurdle of the two-prong test was fatal to its exception argument, obviating analysis under the second “fair argument” prong.

Conclusion And Implications

CEQA’s Class 32 infill exemption retains vitality and usefulness for projects falling within the scope of its plain language.  The Court of Appeal’s opinion represents a straightforward judicial application of the relative burdens of proof and applicable standards of review in the CEQA categorical exemptions/unusual circumstances exception context, as they were clarified six years ago by the Supreme Court’s Berkeley Hillside Preservation decision.  To the extent it breaks any new legal ground, the Court of Appeal’s opinion helpfully clarifies that the infill exemption’s 5-acre maximum project site size criterion refers to the area actually disturbed by project construction (rather than unaffected surrounding areas of a larger parcel), and pointedly questions whether a project’s size can ever be deemed an “unusual” circumstance disqualifying it from the exemption when it meets the not-more-than-5 acre criterion.

 

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.