First District “Doubts” CEQA Operates In Reverse, Upholds Mitigated Negative Declaration For Urban Infill Project Despite Soil and Groundwater Contamination In Parker Shattuck Neighbors

In an opinion recently ordered published, the First District Court of Appeal extensively reviewed the relevant case law and expressed skepticism that CEQA would operate in reverse to require analysis of potential impacts on a mixed-use project’s construction workers and future residents from pre-existing soil contamination at the project site. Yet, while illuminating its tentative views on this important CEQA issue, the Court stopped short of expressly relying on them, and instead upheld the project’s challenged Mitigated Negative Declaration (MND) based on plaintiffs’ failure to identify substantial evidence in the administrative record supporting a fair argument that disturbance of the site’s contaminated soils may have a significant effect on the environment. Parker Shattuck Neighbors, et al, v. Berkeley City Council, et al (CityCentric Investments, LLC, et al, Real Parties in Interest), ____ Cal.App.4th ____, Case No. A13687 (1st Dist., Div. 4 2013), filed 11/7/13; pub. order 12/4/13 (rec’d from court 12/30/13).

The Parker Place Project proposes two five-story mixed use buildings and a three-story residential building – for a total of 155 residential units and over 20,000 square feet of commercial space – on three separate Shattuck Avenue parcels that are currently occupied by the Berkeley Honda car dealership. In addition to its ongoing uses as a car dealership and service garage, the project site for many decades was occupied by a service station and has a history of containing underground storage tanks (USTs) used to store hazardous substances, such as gasoline. Phase I, Phase II and Supplemental Phase II reports were commissioned by the site’s current owner prior to purchase; these reports ultimately revealed petroleum hydrocarbon, arsenic and cobalt contamination in amounts exceeding RWQCB environmental-screening levels (ESLs) for commercial/industrial land use, while noting the hydrocarbon contamination was “not likely” to “require cleanup,” that the arsenic and cobalt were probably “naturally occurring,” and that no contaminants were detected in amounts exceeding ESLs for non-potable groundwater. Following the 2006 removal of a UST and 75 tons of surrounding hydrocarbon-contaminated soils, the site was placed on the “Cortese list” of potentially contaminated sites due to the unauthorized release (see Gov. Code, §65962.5(c)(1)), but the RWQCB issued a closure letter finding no further corrective action was needed in January 2007, resulting in “case closed” status for the site.

Approximately two years later, CityCentric applied to the City for permission to construct the project; after initial litigation setting aside the project approvals on procedural grounds, the City approved the project based on an MND, which was also challenged, ultimately resulting in the Court of Appeal’s opinion affirming a judgment upholding the MND and approvals. Key points made in the Court of Appeal’s opinion include:

• A CEQA petitioner must “demonstrate by citation to the record the existence of substantial evidence supporting a fair argument of significant environmental impact.” “Unless the administrative record contains this evidence, and [plaintiffs] cite[ ] to it, no ‘fair argument’ that an EIR is necessary can be made.” (Quoting South Orange County Wastewater Authority v. City of Dana Point (2011) 196 Cal.App.4th 1604, 1612-1613 (“SOCWA”).)
• A “significant effect on the environment” under CEQA requires a physicalchange in the environment caused by a project, and such a change may be deemed significant based solely on its impact on people. (Citing Pub. Resources Code, §§21068, 21083; 14 Cal. Code Regs. §§15382, 15065(a)(4), 15358(b).)
• Disturbing contaminated soil can be a “physical change” in the environment; by contrast, the mereexistence of toxic soil contamination at a site – without any accompanying disturbance or other physical change – is not, in itself, a significant impact requiring CEQA review and mitigation. (Citing Baird v. County of Contra Costa (1995) 32 Cal.App.4th 1464, 1466, 1468; SOCWA, supra, 196 Cal.App.4th at 1608, 1613, 1614, 1616; Ballona Wetlands Land Trust v. City of Los Angeles (2011) 201 Cal.App.4th 455, 462-464, 475.) According to the Court, none of the above-cited cases in the “CEQA-in-reverse” line of authorities “involved a project that would itself physically change the environment” – i.e., so as to cause the relevant environmental effect or condition, as opposed to bringing human receptors into the proximity of the environmental effect or condition.
• An EIR is not required for every project proposed on a Cortese-listed site; while such projects are not categorically exempt from CEQA because they may be more likely to involve significant environmental effects (see Pub. Resources Code, § 21084(d) [legislative exception to categorical exemption for such projects]), the exception to exemption merely “ensures an initial study to investigate whether there is a potential significant effect on the environment but does not establish that such an effect exists.” (Citing Davidon Homes v. City of San Jose (1997) 54 Cal.App.4th 106, 113.)
• In concluding “that the health risks to workers and residents identified by petitioners do not constitute ‘substantial adverse effects on human beings’ or otherwise create a fair argument that the disturbance of contaminated soil may have a significant effect on the environment[,]” the Court stated as a prefatory matter: “To begin with, and while we need not and do not decide the issue here, we note that it is far from clear that adverse effects confined only to the people who build or reside in a project can ever suffice to render significant the effects of a physical change. In general, CEQA does not regulate environmental changes that do not affect the public at large: ‘the question is whether a project [would] affect the environment of persons in general, not whether a project [would] affect particular persons.’” (Citations omitted.)
• In a footnote, the Court further elaborated and cast doubt on petitioners’ argument that CEQA covers impacts “on a project’s workers and future residents because these groups are made up of people who are part of the public.” It stated: “Although we doubt that CEQA regulates environmental effects confined to such relatively small groups, we note that these groups are not unprotected from risks when a project is built on a potentially contaminated site.” (Citing, e.g., Health & Saf. Code, § 25220 et seq. [regulating building on hazardous-waste sites]; Lab. Code, § 6300 et seq. [regulating workplace safety].)
• The Court stated: “We recognize that when a project may cause a physical change to the environment, CEQA requires a consideration whether the change will have a potential impact on people…. None of the authorities cited by [petitioner], however, holds that a significant effect on the environment must be found when potential health risks are confined to people associated with a project.” It further recognized “the weight of authority indicating that an EIR is not required for environmental effects that impact only a limited group of people.” (Citing SOCWA, supra, 196 Cal.App.4th at 1616 ["A few questions on a suggested checklist in an appendix to the [G]uidelines do not seem to us to provide a strong enough foundation on which to base a reversal of the entire purpose of CEQA”].)

The bulk of the First District’s opinion, and its most interesting pronouncements, pertained to the CEQA-in-reverse issue and were, of course, merely dicta – since, as it noted, it “need not decide whether the potential effects of a physical change that poses risk only to the people who will construct and reside in a project may ever be deemed significant.” (Citing to its recent decision in California Building Industry Assn. v. Bay Area Air Quality Management Dist. (2013) 218 Cal.App.4th 1171, 1195, a case in which it similarly declined to decide the issue, and in which the Supreme Court has now granted review on the “CEQA-in-reverse” issue.)

The opinion contained some other interesting conclusions in support of its actual holding in rejecting petitioner’s proffered expert evidence – from a hydrogeology/air quality expert – as not constituting the requisite “substantial evidence” supporting a “fair argument.” For example, the Court dismissed the expert’s opinion that potential vapor intrusion placed future residents’ health at risk and required a vapor-intrusion study, stating: “The opinion is insufficient to create a fair argument of a significant effect on the environment because a suggestion to investigate further is not evidence, much less substantial evidence, of an adverse impact.” The Court found this conclusion was “bolstered by the uncontroverted evidence that 26,000 cubic yards of soil will be excavated from [one of the project site parcels] before construction and that underground parking and the ground floor will separate residential units from any vapor-intrusion pathway.” In sum, short shrift was given to plaintiff’s evidence in disposing of it under the low threshold “fair argument” standard, leaving the definite impression that the primary factor actually driving the case’s outcome was, indeed, its extensive “dicta” that CEQA does not operate in reverse.