California Court Provides Practical Guidance On Affixing The "Baseline" In A CEQA Case – And Weighs In On A Thorny Federal/California Air Quality Issue

In a case that may be remembered more for its dicta than its holding, Communities for a Better Environment v. South Coast Air Quality Management District, ____ Cal. App. 5th ___ (April 7, 2020) (Second District), provides a helpful and practical guide on how lead agencies should affix the “baseline” in California Environmental Quality Act (CEQA) cases. 

As a general matter, the “baseline” adopted in a CEQA case sets the stage for the subsequent analysis of the proposed project’s impact on the environment. In a case such as this one involving the emission of air pollutants from a refinery, because the future projected emissions (the environmental impact) are compared to the existing emissions (the baseline) to determine whether the project may have a significant impact on the environment (and, if so, what additional environmental review and mitigation may be required, as well as what alternatives must be considered), the baseline that is selected is a central component of the proposed project’s review and approval under CEQA.  

Here, the proposed project involved the issuance of an air permit by the South Coast Air Quality Management District (SCAQMD) to two oil refineries owned by Tesoro Refining and Marketing. The permit was issued pursuant to a federal program which the SCAQMD has the authority to administer, subject, however, to U.S. EPA’s review. The refineries are adjacent to each other and Tesoro sought to enhance its operational flexibility to respond to supply and demand by, for example, altering the ratio of outputs of end products such as gasoline and jet fuel. At the same time, the project would result in an overall reduction of air pollutants (refinery-wide) by, among other things, shuttering a fluid catalytic cracking unit that was a significant source of emissions.

Although Communities for a Better Environment (CBE) favored the emissions reduction, it challenged the methodology employed by the SCAQMD in calculating the refineries’ emissions used to calculate the baseline for CEQA review. In particular, CBE contended that the SCAQMD should have averaged the prior two years’ emissions from a particular piece of equipment. Instead, the SCAQMD used a “peak” (or maximum) emission level for the CEQA baseline. It was acknowledged that peak conditions prevailed only on 15 of the prior 760 days. 

The Court of Appeal acknowledged that either an average or a peak value could be a suitable measure of the baseline in a CEQA case, as a general matter, but which one was correct depended on the particular circumstances. Indeed, the Court elaborated that “[t]here is no ‘true,’ ‘natural,’ or ‘normal’ way to measure baselines,” which is one reason a CEQA lead agency is afforded discretion in selecting the measure it considers most suitable. 

Here, the SCAQMD adopted a “98th percentile” peak (or near-peak) baseline that relied on the refinery’s highest per-day air pollution emissions (excluding the top two percent to avoid including extreme or unrepresentative outliers) over the prior two years. These emissions were compared with the projected future worst-case emissions for purposes of conducting the CEQA analysis. 

The SCAQMD stated that the worst emission days reflected the greatest public health risk, and thus supported using these examples to affix the baseline. The Court agreed. 

In particular, the Court noted that smog peak days create the most danger to the most vulnerable populations, such as those with respiratory illnesses like asthma. The Court firmly reiterated that a baseline must reflect actual, not hypothetical, conditions. But insofar as this case was concerned, it emphasized that “[r]educing peak pollution means less human suffering: fewer airway constrictions, less gasping for air, fewer hospital trips …. [t]here is nothing hypothetical or illusory about that.”

The SCAQMD also selected the 98th percentile in conformance with U.S. EPA’s similar approach to regulating federal National Ambient Air Quality Standards. The Court stated that U.S. EPA’s practice in this regard was “tremendously material” in setting the CEQA baseline in this case.

In that regard, the Court tiptoed, however delicately, into the fray between U.S. EPA and California law and policy -- an issue that is currently playing out on a larger stage in the context of the litigation recently filed by California against U.S. EPA respecting the federal government’s revocation of a federal Clean Air Act waiver previously routinely granted to California to establish state vehicle emission standards, notwithstanding the federal Clean Air Act’s general prohibition against states establishing their own motor vehicle emission standards.

While the vehicle waiver involves a different area of the Clean Air Act than that at issue in this case, the Court here nonetheless broadly noted:

“It [makes] good sense for California regulators to piggyback on a federal effort with similar goals, a bigger budget, a cadre of scientists, and nationwide experience…. California remains at liberty, of course, to go its own way on air pollution control. California often does, and does so proudly and with a sense of leadership. But that is different than saying California regulators, as a mandatory matter, must ignore everything the federal agency has ever done. That position would be illogical.”

This saga may not be over. In a dissent, one of the Justices agreed with CBE that a baseline using average emissions over the prior two years (including, but not limited to, peak days), was most reflective of actual conditions, unless such an approach would misinform the public and the relevant decision makers. Here, the majority did not suggest that this was the case.

More fundamentally, the dissent noted that use of a peak baseline overstated existing emissions and for that reason reduced and diluted the impact of future air emissions projected by the project, published to the public, and used as the basis for granting the permit.

This is not an insignificant issue and, if a petition for review is filed with the California Supreme Court by CBE, the Supreme Court, at the very least, will recognize the significance of this question, even should it ultimately decline to grant review.