On Monday March 2, the California Supreme Court handed down a decision allowing a Berkeley home builder to use an exemption from detailed environmental assessment under the California Environmental Quality Act (“CEQA”) in its proposed construction of a nearly 10,000 square foot residence in the Berkeley hills.  While the limited holding of the case relates to residential development’s use of CEQA exemptions, the analysis in the case is likely to have an impact on commercial development and infrastructure projects.

In Berkeley Hillside Preservation v. City of Berkeley, the issue involved whether the City of Berkeley had to require an Environmental Impact Report (“EIR”) prior to construction of a 6,500 square foot residence and 3,400 square foot garage in the Berkeley hills.  the Court of Appeals accepted the argument of those opposing the project, that, due to its size which was out of proportion to other residences and the instability of the hill to support a home of this size, an exception to the exemption should apply.  Specifically, opponents argued that there is a “reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances.” CEQA Guidelines section 15300.2(c). The California Supreme Court reversed the Court of Appeal and determined that the residential exemption applies, and there were no applicable exceptions.

CEQA, the state analog to the National Environmental Policy Act or NEPA, requires certain projects to undergo an assessment of potential environmental impacts prior to approval.  The CEQA process can result in an exemption, a Negative Declaration, a Mitigated Negative Declaration (“MND”) or an EIR.  In this case, the City of Berkeley as the Lead Agency determined that this residential construction could commence without analyzing impacts under CEQA and no exceptions to that exemption were present.

The case and oral arguments focused on the term “unusual circumstances."  The Court of Appeal had found that the existence of significant impacts was itself an usual circumstance.  The Supreme Court disagreed, as this determination would exist in all contested matters.  The Supreme Court held that it cannot be simply that there are impacts, but that the impacts must be “due to” the “unusual circumstances.” As a matter of statutory construction, the phrase “due to unusual circumstances” must be given attention, and not disregarded.  “Unusual Circumstances” have always been difficult to identify, and the nexus of those circumstances to the impacts must be demonstrated.  In practice, this determination will be made by the lead agency and both developers and objectors will use the advice from this case.  Project opponents will attempt to show early on that there are unusual circumstances in a project and that those unusual circumstances create significant environmental impacts. Project developers may consider having the permitting agency explicitly state there are no unusual circumstances, a finding which is not required on the face of CEQA.  And, in the case where there is a possibility of unusual circumstances creating significant impacts, a project developer may wish to skip the exemption and proceed directly to the MND or EIR stage, and not risk a challenge about the applicability of an exemption.  Under the regulations, an MND should take 6 months and an EIR should take a year, though both those timeframes are rarely met.  Nonetheless a developer may consider whether the opposition’s fight about CEQA analysis may eat up valuable time which might be spent analyzing the impacts.