In North Coast Rivers Alliance v. Westlands Water District, No. FO67383 (Cal. Ct. App. 5th Dist. July 3, 2014), the Fifth Appellate District upheld the Westland Water District and its related distribution districts’ (Water Districts) conclusion that their approval of the 2012 interim renewal contracts with the U.S. Bureau of Reclamation (Bureau) for Central Valley Project (CVP) water was statutorily and categorically exempt from CEQA. We consider the historical context of the Water Districts’ contracts along with the significance of the Court’s ruling below.
In the 1960s, Water Districts entered into various contracts under which the Bureau provided CVP water to Water Districts. (Slip Op. at p. 2-3.) The CVP is a major source of irrigation water for farming interests on the western side of the San Joaquin Valley. Under these contracts, Water Districts would then distribute the CVP water to end users for land use within Water Districts’ boundaries. (Ibid. at p. 3.)
In the early 2000s, the various contracts between Water Districts and the Bureau expired. (Slip Op. at p. 11-13.) However, before the expiration of the contracts, the Central Valley Project Improvement Act (CVPIA) was enacted into law. (Ibid. at p. 11.) The CVPIA provided that the Bureau shall, upon request, renew existing long-term water service contracts for a period of up to 25 years, but only after the Bureau first completed an environmental impact statement (EIS) that examined the environmental effects of renewing the existing long-term water service contract. (Ibid.) Until the EIS was complete, the Bureau was authorized by the CVPIA to enter into very short-term interim renewal contracts (up to three years in length). (Ibid.)
In December 2011, Water Districts approved the two-year interim renewal contracts at issue (2012 IRCs) and found that such renewals were exempt from CEQA, based on both statutory and categorical exemptions. (Slip Op. at p. 13-14.) The trial court upheld the Water Districts decision. (Ibid. at p. 16.)
The appellate court analyzed each statutory and categorical exemption to determine whether the 2012 IRCs were exempt from CEQA requirements.
First, the court found that the 2012 IRCs did not fall within the statutory rate-setting exemption, which exempts an agency’s rate settings to maintain existing services or meet operating expenses. (Pub. Res. Code § 21080(b)(8); Slip Op. at p. 25.) Although statutory exemptions are upheld if substantial evidence supports the agency’s finding of exemption, the appellate court reasoned that because the 2012 IRCs did not expressly mention rates, the record did not show by substantial evidence that the exemption was established. (Slip Op. at pp. 19, 25.)
Second, the court found that the statutory exemption for pre-CEQA ongoing projects was met, which exempts projects approved prior to the date CEQA took effect on November 23, 1970. (CEQA Guidelines § 15261(a); Slip Op. at p. 25.) Substantial evidence confirmed that, pursuant to the 2012 IRCs, CVP water would continue to be delivered within the parameters of the original pre-CEQA project under the same terms using the same facilities. (Slip Op. at p. 41.) Therefore, Water Districts correctly found the approvals to be exempt from CEQA compliance. (Ibid.)
Third, the court found that the categorical exemption for existing facilities was met, which provides that the repair, operation, maintenance, or minor alteration of an existing facility is exempt from CEQA compliance. (CEQA Guidelines § 15301, Slip Op. at p. 41.) Specifically, there was substantial evidence in the record that the project authorized by the 2012 IRCs was merely an unchanged, two-year continuation of previous contractual terms. (Slip Op. at p. 42.)
Although there is a split of authority concerning the standard of review as to whether a project falls within an exception to a categorical exemption, the court found it unnecessary to decide whether to apply the fair argument standard or the substantial evidence standard because the result would be the same—no exceptions applied. (Slip Op. at p. 43, 56.)
Petitioners argued that two exceptions applied to the categorical exemption for existing facilities made CEQA review necessary. First, they stated that there was a reasonable possibility that the activity would have a significant effect on the environment due to the unusual circumstances. (CEQA Guidelines § 15300.2(c), Slip Op. at p. 42.) The court held that even if an unusual circumstance existed, for the exception to apply, petitioners would also have to establish that there was a reasonable possibility of the activity to have a significant effect on the environment due to such circumstances. (Slip Op. at p. 46.) The court concluded that this exception was not met because the brief two-year period of the 2012 IRCs and the activity contemplated therein did not show the potential to cause a substantial adverse change to the environment. (Ibid. at p. 50.)
Second, petitioners argued that an exception existed due to the significant cumulative impact of successive projects. (CEQA Guidelines § 15300.2(b); Slip Op. at p. 50.) However, the court held that the short-term 2012 IRCs do not constitute “successive projects of the same type” because the “successive project” at issue was the long-term water contract, not the short-term 2012 IRCs. (Slip Op. at p. 54.) Therefore, the court held that no exceptions to the categorical exemption for existing facilities were met and the 2012 IRCs were exempt from CEQA review.
 The appellate court expressly noted the Supreme Court’s pending decision in Berkeley Hillside Preservation v. City of Berkeley, Case No. S201116 (review granted May 23, 2012), which is widely expected to resolve this appellate split. We also note that the Supreme Court recently granted review in Citizens for Environmental Responsibility v. State of California ex rel. 14th Dist. Agricultural Ass’n, Case No. S218240 (review granted July 9, 2014), which involves the application of the same “unusual circumstances” exception to a categorical exemption. Readers can reference our original blog post on the Citizens for Environmental Responsibility case here.