The California Environmental Quality Act (CEQA) calls on state and local agencies to review the environmental effects of projects before approving them.  When an agency partners with a private entity to undertake a project for which other agencies must issue approvals, which agency should take the lead in conducting the environmental review?  Getting this right is important if for no other reason than that project opponents may seek to undo a project’s approval by challenging the choice of lead agency.  The Court of Appeal recently wrestled with just such a challenge in two cases about a water supply project and clarified how a public/private partnership should be analyzed under regulatory Guidelines governing selection of the correct lead agency, and when during the CEQA process agencies can delegate responsibilities for overseeing project operations.  Taken together, the cases provide important guidance for how agencies can structure their relationships to enhance the likelihood that their decisions on these issues will be upheld.  Lisabeth Rothman of Briscoe Ivester & Bazel was counsel of record in one of the cases and assisted with the briefing of the other.

In Center for Biological Diversity v. County of San Bernardino (2016) __ Cal.App.4th ___ (4th Appellate Dist. Div. 3 Case no. G051058) and the companion case Delaware Tetra Technologies, Inc. v. County of San Bernardino (2016) __ Cal.App.4th ___ (4th Appellate Dist. Div. 3 Case no. G050858), a private landowner, Cadiz, Inc., whose property in San Bernardino County overlies an underground aquifer estimated to hold between 17 and 34 million acre feet of fresh water, partnered with Santa Margarita Water District, an Orange County water agency, to conserve an average of 50,000 acre feet of fresh water per year by capturing the fresh water before it could flow underground to dry lakes and become highly salinated and evaporate. Santa Margarita served as lead agency for the project and prepared an Environmental Impact Report (EIR) that described the project as conserving the fresh water for beneficial use by Santa Margarita and other Southern California water agencies and companies which subscribed to the project to obtain a new water supply.

Public Resources Code section 21067 states that the lead agency is “the public agency which has the principal responsibility for carrying out or approving a project . . . .”  Guidelines section 15051 elucidates the criteria for determining when an agency is carrying out a project and when an agency that is approving the project ought to be the lead agency.  Lead agencies can decide such things as retaining environmental experts to assess the project’s environmental impacts, if any; whether the project must be treated as one, or as separate projects; and whether a negative declaration, a mitigated negative declaration (MND), or a full EIR must be prepared.

But where multiple agencies have responsibility for different project approvals, how is the lead agency determined?  Ordinarily, lead agencies carrying out their own projects fall under Guidelines section 15051(a), “even if the project would be located within the jurisdiction of another agency.” Subsection (b) applies to projects carried out by a private entity and requires that the agency with the greatest responsibility for supervising or approving the project as a whole should be the lead agency.  Subsection (b) states that this agency usually will be the agency with general governmental powers such as a city or county rather than a single purpose agency such as a water district.  Where two or more agencies have a substantial claim to be the lead, Guidelines section 15051(d) provides that the agencies may designate an agency as the lead agency by agreement.

As funding for local governments becomes increasingly limited, public agencies are partnering with private entities more frequently to construct needed infrastructure and public facilities.  So questions about the appropriate lead agency in these public/private partnerships naturally may arise more often.  Although private entities cannot generally influence the selection of the lead agency that conducts required environmental analysis of project impacts under CEQA, and the lead-agency question is left for the agencies themselves, the Court’s decision provides helpful guidance for structuring the partnership.

Here, Santa Margarita entered into agreements both with Cadiz and the County spelling out their respective roles, and specifying that Santa Margarita would be the lead agency.  But the Center for Biological Diversity sued, claiming that CEQA’s criteria for lead agency selection specified in CEQA Guidelines section 15051 required that the County of San Bernardino, where the land and groundwater was located, should have been the lead agency and that use of an improper lead agency required the entire CEQA process to be redone.

The Court looked at the criteria for designation of lead agency for both agency projects and private entity projects to decide that Santa Margarita met the criteria for each.  Because the duties for carrying out and supervising the public/private partnership project were divided between private partner Cadiz and public agency Santa Margarita, the Court examined the duties delegated to Santa Margarita in the various agreements governing its participation in the project and concluded that Santa Margarita was doing enough to be carrying out, supervising, and approving the project as a whole. Santa Margarita’s involvement included, among other things, managing and overseeing the project’s operation, approving the design and construction of pipelines, wells and conveyance facilities, and overseeing the transfer of water to project participants.  The Court found that the County’s limited role over groundwater extraction under its ordinance, in contrast to Santa Margarita’s broad role supervising the project as a whole, properly rendered the County a “responsible agency” for the project rather than the lead agency.  Hence, the Court articulated a new rule for public/ private partnerships that the lead agency for a project carried out as a public/private partnership may be the public agency that is part of the public/private partnership or the agency with the greatest responsibility for supervising or approving the project as a whole.

This case is important for two reasons.  It is the first case to directly decide the issue of what constitutes a substantial claim to be lead agency under Guidelines section 15051(d) and thus provides guidance for the future. And for future private/public partnerships, this case shows that careful consideration must be given to the roles of the public and private entity to avoid a legal challenge, especially where the partnering agency is a limited purpose agency such as a water district or transportation agency.

In Delaware Tetra Technologies, Inc. v. County of San Bernardino, the Court upheld a challenge to the memorandum of understanding between the County and Santa Margarita, which the County approved before the project EIR was certified.  The memorandum’s purpose included serving as the enforcement mechanism for a groundwater management plan prepared to obtain an exclusion from the County groundwater ordinance.  But the memorandum would serve this function if, and only if, the County later approved the management plan.  Delaware Tetra had argued that because this memorandum was one of the required approvals for the project, it could not be considered and approved until after the EIR was certified.  However, the memorandum (1) would not directly or indirectly impact the environment, and (2) the memorandum clearly reserved the County’s discretion to alter or disapprove the groundwater management plan when the County considered the plan with the Final EIR.  Accordingly, the Court found that the County’s approval of the memorandum did not amount to approval of a project that required prior CEQA compliance, could be considered before the Final EIR was certified, and upheld the approval.

Taken together, these cases support the prerogative of agencies to enter into properly structured agreements amongst themselves over their respective roles in the CEQA process.

 

Lisabeth D. Rothman
Briscoe Ivester & Bazel LLP
155 Sansome Street, 7th Floor
San Francisco, CA 94104
Telephone: (415) 402-2700
Fax: (415) 398-5630

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