In an opinion filed August 27 and later ordered published on September 24, 2024, the Fifth District Court of Appeal affirmed a judgment denying a writ petition that challenged the State Air Resources Board’s (CARB) adoption of the Advanced Clean Trucks Regulation (Regulation) on CEQA and Administrative Procedures Act (APA; Gov. Code, § 11340 et seq) grounds.  California Natural Gas Vehicle Coalition v. State Air Resources Board (2024) 105 Cal.App.5th 304.  The Court held that CARB’s in-depth study of three alternatives (including the “no project” alternative) constituted a reasonable range for CEQA purposes; it further held that CARB’s alternative analysis wasn’t deficient for rejecting without in-depth study, as infeasible for policy reasons, an alternative proposed by opponents of the Regulation that would have applied a low-NOx vehicle credit to sales mandates applicable to zero-emission vehicles (ZEV).  Based on the same reasoning, the Court held CARB also need not have considered the now-NOx vehicle credit as a mitigation measure for the acknowledged significant near-term air quality impacts of the Regulation.  (The Court also rejected appellant Coalition’s APA arguments in a portion of its opinion that won’t be further discussed in this post.)  Finally, the Court held on CARB’s affirmative appeal that any error with respect to the admission of a specific “white paper” document into the administrative record was nonprejudicial, and therefore harmless, as it did not impact either the trial court’s or its own analysis.

The Project, Administrative Rulemaking Proceedings, and Coalition’s Lawsuit

The Regulation was the “project” for CEQA purposes and it proposed a regulatory strategy to transition specified medium and heavy duty (MD/HD) trucks to zero emissions technologies to meet air quality and climate goals; it was described in CARB’s 2018 draft substitute environmental document as one step in a broader strategy to transform all mobile source sectors to ZEV, and would require 2.5% of annual MD/HD vehicle sales in the state to be zero-emission capable beginning in 2023, growing to 15% by 2030.  Truck manufacturers would also receive bankable and tradeable credits for exceeding annual state sales requirements.

During the public comment period and stakeholder workshops, the Coalition and others suggested a low-NOx vehicle credit be granted, but CARB in its initial statement of reasons rejected that alternative because NOx was already the subject of regulations and allegedly would not achieve GHG or sufficient particulate matter (PM) reductions from exhaust and brake wear, and would not advance adoption of heavy-duty ZEV technologies.  CARB’s position remained the same throughout the regulatory and review processes, which led to a June 2020 final environmental analysis and subsequent public hearing at which CARB approved the regulation, allowing its executive officer to take the final APA steps for approval, followed by CARB’s final statement of reasons and responses to public comments, notice of decision, and formal March 2021 approval of the Regulation.  (While not mentioned in the opinion, CARB’s process for adopting air quality regulations is part of a certified regulatory program using substitute environmental documents in lieu of EIRs and negative declarations to comply with CEQA.)

The Coalition filed a writ of mandate action challenging the regulatory process, amended it twice to raise all of the CEQA and APA issues discussed in the appeal, and sought to augment the record with three documents.  The trial court added the May 2016 white paper to the record on the basis that it was cited and hyperlinked in a comment letter, but ultimately denied the petition, rejecting the Coalition’s claims of error under both CEQA and the APA and finding CARB’s failures to properly respond to certain public comments to be erroneous but harmless.  The Coalition’s and CARB’s cross-appeals followed, and the Court of Appeal affirmed.

The Court of Appeal’s Opinion

After reciting the factual and procedural background, including detailed summaries of the twelve (12) project objectives identified in CARB’s final environmental analysis, and of that analysis’s major relevant sections, the Court’s opinion addressed the Coalition’s CEQA arguments based on CARB’s rejection of the low-NOx vehicle credit. 

Alternatives Analysis: CARB Studied Reasonable Range and Properly Rejected Proposed Low-NOx Vehicle Credit Alternative As Contrary to Project’s Fundamental Purpose

The Court’s alternatives analysis was guided by familiar principles, including CEQA’s requirement that the lead agency consider a range of reasonable alternatives to the project that would avoid or substantially lessen its significant environmental impacts, accomplish most of its basic objectives, and be at least potentially feasible.  (Citing Citizens of Goleta Valley v. Board of Supervisors (1990) 52 Cal.3d 553, 565; CEQA Guidelines, § 15126.6(a)-(c), (f).)  An EIR need only identify those alternatives necessary to permit a reasoned choice and examine in detail only those the lead agency determines could feasibly attain most of the project’s basic objectives; “no ironclad rule” governs the nature or scope of the alternatives discussed “other than the rule of reason.”  (Citing In re Bay-Delta, etc. (2008) 43 Cal.4th 1143, 1163.)  The project objectives established by the lead agency drive the alternatives analysis, such that the EIR need not study an infeasible alternative or one the “agency has reasonably determined cannot achieve the project’s underlying fundamental purpose.”  (Quoting id. at 1165.)  “Although a lead agency may not give a project’s purpose an artificially narrow definition, a lead agency may structure its EIR alternative analysis around a reasonable definition of underlying purpose and need not study alternatives that cannot achieve that basic goal.”  (Quoting id. at 1166.)

An EIR is presumed to comply with the rule of reason, and it is an appellant’s burden to (1) show the selected alternatives are “manifestly unreasonable and… do not contribute to a reasonable range” and (2) identify an alternative that was “feasible” and “adequate” because it could attain most of the project’s basic objectives; based on the foregoing principles, the Court framed the issue before it as follows:  “The question before us at the stage where the lead agency chooses which alternatives to consider and which to reject is whether the decision is supported by substantial evidence and comports with the rule of reason.”  (Citing In re Bay-Delta, at 1167.)  The Court went on to hold CARB’s decision met both criteria.

CARB’s 12 identified project objectives included accelerating deployment of vehicles achieving maximum possible emissions reduction; developing regulations consistent with the State Implementation Plan; leading the transition to all-electric powertrains; incentivizing, supporting, and spurring economic activity of zero-emission technologies; complementing existing regulatory programs; and providing market certainty for ZEV, inter alia.  These objectives led to the project’s “two primary elements”: (1) requiring “manufacturers to make a percentage of [California] truck and bus sales… to be zero-emission”; and (2) requiring certain large organizations (i.e., retailers, manufacturers, government agencies) to make a one-time reporting of information about contracted services requiring truck and shuttle use.  Per the Court, “the project objectives contain multiple points which clearly indicate or strongly suggest the project… was designed to support a transition to ZEV in the relevant transport sectors.  In contrast, the proposed [low-NOx vehicle credit] alternative sought to permit the use of low-emission vehicles in place of some of the desired ZEV in order to smooth the transition to zero-emission technology.”  The Court noted that while it could “readily see how such a transitional change could decrease, rather than increase, overall pollution,” it could not set aside CARB’s EIR approval “on the ground that an opposite conclusion would have been equally or more reasonable.”  (Quoting In re Bay-Delta, 43 Cal.4th at 1161-1162.)

Per the Court:

Given the overall scope of the project objectives, this court does not see defining the project as a move to ZEV to be unduly narrow or lacking substantial evidence.  We therefore conclude it was reasonable for [CARB] to reject the low-NOx alternative in the same way an agency could reject inland building sites as an alternative option for a planned oceanfront development.  [citation]  The identified objectives of the Regulation provide substantial evidence supporting the conclusion that an alternative reaching similar goals but, in a manner, contradicting those objectives fails to achieve the project’s fundamental purpose.”

The Court’s conclusion that CARB reasonably rejected a low-NOx alternative effectively doomed the Coalition’s argument that CARB’s failure to consider that alternative demonstrated that the three it did consider – no-project, less-stringent ZEV sales requirement, and more-stringent ZEV sales requirement – were “manifestly insufficient” because (unlike the low-NOx alternative) they would not substantially lessen the project’s short-term air quality effects.  Per the Court:  “That some aspect of the known environmental impact could be reduced by the low-NOx alternative) is irrelevant if that alternative is fundamentally opposed to the acceptable definition of the project at issue.”

The Court was not persuaded by the Coalition’s citation to cases such as Watsonville Pilots Assn. v. City of Watsonville (2010) 183 Cal.App.4th 1059, 1087 and California Native Plant Society v. City of Santa Cruz (2009) 177 Cal.App.4th 957, 981, 999-1000, which held that actual infeasibility – which can be found when an alternative “merely …[does] not meet one or more project goals” – did not preclude potentially feasible alternatives from inclusion in an EIR’s reasonable range.  The Court acknowledged Watsonville’s holding “that such a narrow ground for rejecting an alternative was improper” and “that the question whether to reject a potentially feasible alternative [for in-depth study] turns on whether” it “would have been capable of avoiding or substantially lessening any significant effects of the project, even if it would impede to some degree the attainment of project objectives.”  (Citing and quoting in part from Watsonville, at 1087 (cleaned up).)  Nonetheless, it distinguished Watsonville as follows:

In this case, the low-NOx vehicle credit alternative was identified as a potential alternative and dismissed as infeasible because it did not meet the project’s underlying fundamental purpose.  As a logical matter, an alternative that does not meet the fundamental purpose of the proposed project cannot attain most of that project’s basic objectives and therefore provides no relative indication that the actual alternatives considered were insufficient.  The low-NOx vehicle credit is thus not like the potentially feasible alternatives rejected in Watsonville because the proposal in this case does more than impede to some degree the attainment of project objectives.  The proposal here sought to undermine the fundamental purpose of the project.”

Accordingly, the Court held that the three alternatives considered by CARB were “[i]n keeping with the underlying purpose of the Regulation [to] adopt[] zero-emission sales requirements to encourage development of zero-emission technologies” and satisfied the rule of reason because they “created a reasonable range of alternatives within the scope of the project from which a reasoned choice could be made.”

Coalition Adequately Exhausted Issue, But CARB’s Rejection of Low-NOx Vehicle Credit Option As Mitigation Measure Was Proper

The Coalition raised the related, but separate, argument that CARB “improperly rejected the low-NOx vehicle credit as a mitigation measure to the recognized short term-air quality impacts expected from the project.”  CARB argued the Coalition failed to properly exhaust this mitigation measure argument, and further that the measure was infeasible for the same substantive reasons set forth in the alternatives analysis.  The Court rejected CARB’s first argument but agreed with the second.

Exhaustion of administrative remedies is a jurisdictional prerequisite to maintaining a CEQA action, the requirements of which are set forth in Public Resources Code § 21177.  The exhaustion doctrine allows administrative agencies the opportunity to learn and act on the contentions of interested parties prior to the institution of litigation challenging their decisions, and requires more than “generalized environmental comments” to preserve an issue.  Here, the Court of Appeal agreed with the trial court that the large number of comments in the record proposing the use of the low-NOx vehicle credit as a solution to various problems, including (in some cases) short-term air quality impacts, sufficiently apprised CARB of the mitigation measures issue so as to satisfy exhaustion requirements.  Per the Court:

Although not a perfect call out of the issue raised on appeal, we conclude… that such comments are sufficient to allow [CARB] to decide the matter at issue and to learn the contentions of interested parties surrounding the low-NOx vehicle credit option and its applicability to air pollution concerns.  Given the specific facts of this case, we conclude that level of specificity is sufficient to exhaust the Coalition’s administrative remedies with respect to claims the low-NOx vehicle credit should be considered as a mitigation measure to known air pollution impacts.”

But having concluded the Coalition sufficiently exhausted on the mitigation measure issue, the Court of Appeal went on to reject its argument on the merits.  Observing that “there is a strong relationship between alternatives and mitigation measures” – the “chief goal” of both being “mitigation or avoidance of environmental harm” (citing Laurel Heights Improvement Assn. v. Regents of University of California (1988) 47 Cal.3d 376, 403) – the Court noted that, under the similar but distinct CEQA process for considering mitigation measures, “feasible mitigation measures, known to the agency must be adopted, and therefore considered” but not every measure rejected as infeasible need be discussed.  (Citing King & Gardiner Farms, LLC v. County of Kern (2020) 45 Cal.App.5th 814, 865-866 and San Diego Citizenry Group v. County of San Diego (2013) 219 Cal.App.4th 1, 15.)  After reviewing CEQA’s definition of “feasible” contained in Guidelines § 15364 – i.e., “capable of being accomplished in a successful manner within a reasonable period of time, taking into account economic, environmental, legal, social, and technological factors” – the Court agreed with San Diego Citizenry Group, at 17, that the concept “encompasses ‘desirability’ to the extent that desirability is based on a reasonable balancing of the relevant economic, environmental, social, and technological factors” and therefore reasoned that a mitigation measure’s failure to meet project objectives can be a form of infeasibility.  Accordingly, it held that “CEQA [does not] require[] the discussion and incorporation of mitigation measures that would defeat the policy objectives defined by [CARB’s] scoping process, as set forth in the EIR [sic], and as relied upon to reject the same proposed measure as an alternative to the project.”  Per the Court:

We… consider whether substantial evidence in the record as a whole supports [CARB’s] decision not to discuss the low-NOx vehicle credit option as a mitigation measure because it had rejected it as infeasible under the alternatives analysis.  We conclude the evidence supports this conclusion.  As discussed above, [CARB] properly scoped its project as an attempt to solve air quality issues by encouraging a full move to ZEV.  It then publicly identified sufficient reasons in the alternatives discussion as to why the low-NOx vehicle credit option failed to meet those goals, rendering it infeasible.  Upon concluding the low-NOx vehicle credit was infeasible from a policy perspective, [CARB] was not obligated to further consider the option in the context of mitigation measures, even if alerted to the potential use of the low-NOx vehicle credit in that space by commenters.  Disagreement with that policy-driven decision ‘is not a basis for setting aside’ the EIR [citing San Diego Citizenry Group, at 18].”

CARB’s Failure to Respond to Comments Was Harmless Error

The Court held that CARB violated both CEQA and its own regulations by not responding to “comments submitted during the EIR process that suggested the low-NOx vehicle credit be implemented in one form or anther” until doing so in its final statemen of reasons.  Those comments timely raised significant environmental issues, and CEQA requires responses to such comments, including good faith, reasoned analysis, at least 10 days prior to EIR certification.  (CEQA Guidelines, § 15088 (b)-(c).)  CARB should thus have responded and considered the responses to comments at the very least as part of its final environmental analysis prior to approving the project, which was approved when CARB voted to send the regulatory package to its executive officer on June 25, 2020, prior to its final statement of reasons. 

But no matter, per the trial court and Court of Appeal, because the error was harmless under the “first” and “guiding principle” in the context of an omission of relevant information:  “a failure to follow the law that frustrates the purpose of CEQA is, in fact, prejudicial, and the failure to follow mandatory procedures is presumptively so.”  (Citing Environmental Protection Information Center v. California Dept. of Forestry & Fire Protection (2008) 44 Cal.4th 459, 485.)  Here, despite the acknowledged integral role of public comment and review under CEQA, the Court found CARB met its burden to show its error in not properly responding to comments on the low-NOx vehicle credit option was immaterial; rather, it was “patently irrelevant” in light of CARB’s publicly-considered and announced conclusion that such a credit “contradict[ed] the nature of the project.”

Per the Court:

A failure to respond to comments that support a proposal that was considered and rejected as unreasonable is the type that can be shown to be harmless.  In this case, the Board satisfies this showing because it had already expressly informed the public of its view that the proposal was contrary to the nature of the project and the comments did not raise anything more than generalized requests to include the proposal in light of various economic and environmental factors.  Its failure to provide more detailed or specific [or timely] responses thus did not hinder the ability to conduct public decision making or the ability to have informed public participation, both because the general proposal was demonstrably considered in another context and because the omitted material was generally irrelevant in light of the proper determination the proposal ran contrary to the scope of the regulatory project.”

Any Error By The Trial Court in Augmenting the Record Was Harmless

Finally, the Court rejected CARB’s argument, made in its affirmative appeal, that the trial court erred in augmenting the record on the Coalition’s motion with a 2016 white paper titled the “Game Changer Report.”  Even assuming the trial court erred, as CARB argued, because it mistakenly believed the document was cited and hyperlinked in a comment letter, any error was harmless due to CARB’s failure to demonstrate prejudice.  “There is no presumption that errors in CEQA cases are prejudicial” and errors from overinclusion of materials into the administrative record are generally considered beneficial to the project proponents; project opponents, who have the most to gain from underinclusion, bear the burden of showing prejudice.  (Citing San Francisco Tomorrow v. City and County of San Francisco (2014) 229 Cal.App.4th 498, 534-535.)  While citing these general principles obviously provided no applicable guidance on the specific facts and positions of the parties before it – where the project proponent was seeking to exclude a document the opponent wanted included – the Court nonetheless cited them and went on to summarily dismiss CARB’s argument on the common-sense ground that the disputed document did not affect either its or the trial court’s analysis and its inclusion was thus not prejudicial.

Conclusion and Implications

While a lead agency may not reject from in-depth consideration in an EIR, as infeasible, a proposed alternative that would substantially lessen any of a project’s significant environmental impacts merely because it would not meet or would impede to some degree some project objectives, the agency may do so if the proposed alternative is contrary to the project’s fundamental purpose or scope as reasonably defined by the agency based on policy considerations.  As applied here, this principle led the Court of Appeal to uphold CARB’s rejection of a low-NOx vehicle credit for in-depth “EIR” analysis as either an alternative or mitigation measure based on what it viewed as CARB’s reasonable definition of the Regulation’s “underlying fundamental purpose” being essentially a “shift to ZEV.”  Based on this rationale, and employing the “rule of reason” and deferential substantial evidence review, the Court of Appeal did not need to analyze which of CARB’s 12 stated project objectives were “basic” and whether the proposed alternative would meet “most” of those; rather, it shortcut that analytical route by “logically” reasoning that an alternative contrary to the project’s fundamental nature and purpose could not possibly meet most of its basic objectives.  While appellant Coalition ostensibly disagreed with this “logic” and believed that it allowed CARB to utilize an artificially narrow project definition and objectives, the Court of Appeal was not persuaded that was the case.  Once the Court concluded that the low-NOx vehicle credit option was properly deemed infeasible by CARB as a matter of policy, all of the Coalition’s alternatives and mitigation measure arguments based on it were obviously doomed to fail as well.

Given its apparent ability to substantially lessen significant short term air pollution impacts, and arguable ability to meet a number of the 12 stated project objectives, CARB’s EIR-equivalent environmental analysis may have been more informative – and drawn less legal opposition – had it included discussion of the low-NOx vehicle credit option as a “potentially feasible” alternative.  But EIRs aren’t required to be perfect or exhaustive in nature, and per the Court, CARB’s CEQA analysis here passed legal muster under the rule of reason and substantial evidence test.  The biggest CEQA takeaway from this case seems to be that it highlights an agency’s ability to reject for policy reasons – as not even potentially feasible for EIR discussion purposes and prior to determining actual infeasibility at the project approval stage – an alternative or mitigation measure that could substantially reduce significant impacts.  There is obviously some tension in this space between CEQA’s mandate to adopt feasible mitigation and an agency’s discretion to reasonably define its own project and project objectives based on policy goals and preferences, and it seems likely that the boundaries of these competing CEQA principles will be the subject of future litigation.

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 more than fifty years. For nearly all that time, the firm also has written Miller & Starr, California Real Estate 4th, 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, financing, common interest development, construction, management, eminent domain and inverse condemnation, title insurance, environmental law and land use. For more information, visit www.msrlegal.com.