A governor’s executive order intended to speed development of power plants superceded the California Environmental Quality Act (CEQA) and local measures for implementing CEQA, the First District Court of Appeal has ruled.
The appellate court held that an executive order signed by then-Governor Gray Davis “effectively repealed” portions of CEQA and the CEQA Guidelines that were inconsistent with the order while the directive was in effect, from February 8 until December 31, 2001.
The ruling came in a lawsuit filed by opponents of the Metcalf Energy Center in San Jose. They argued that the Bay Area Air Quality Management District and the California Energy Commission violated CEQA, the guidelines and implementation procedures.
State law makes special provisions for the development of electricity-generating plants. Cities and counties have virtually no say in the siting process. Instead the Energy Commission makes siting decisions. Power plant siting is exempt from CEQA, but the Commission employs a CEQA-equivalent process. The state environmental law may come into play when the power plant developer seeks a federal Clean Air Act permit from the local air district.
In 1999, Calpine Corporation applied to the Energy Commission for a certificate to build and operate a 600-megawatt, natural gas-fired power plant in south San Jose’s Coyote Valley. In October 2000, the Commission issued its final staff assessment (FSA) of the project, known as the Metcalf Energy Center.
Faced with blackouts and an apparent lack of generating capacity, Davis signed a series of executive orders in February 2001 that streamlined the power plant development process (see CP&DR, July 2001, March 2001). One of those orders, Executive Order No. D-26-01 required local, regional and state agencies making CEQA decisions on power plants to treat a Commission FSA just like an environmental impact report. Based on that order, the Bay Area air district relied on the FSA and issued a permit in May 2001.
The City of Morgan Hill and three groups — Santa Teresa Citizens Action Group, Demand Clean Air and Californians for Renewable Energy — filed an appeal with the federal Environmental Appeals Board. The opponents contended the air district failed to comply with CEQA and its own regulations for implementing CEQA. The federal appeals board, however, concluded that it had no jurisdiction to rule on matters of state law and upheld the air district’s decision. At about the same time the federal appeals board issued its decision, the Energy Commission granted the certificate to construct and operate the Metcalf Energy Center.
In September 2002, the opponents sued the Air Quality Management District. Calpine was named the real party in interest, and the Energy Commission also intervened in the litigation. Part of the lawsuit centered on timing. The air district issued its permit, based on the FSA, in May 2001. But the Energy Commission, which was the lead agency for environmental review purposes, did not decide on the project until September 2001. Under both the CEQA Guidelines and the air district’s own regulations, when the air district is not the lead agency, it may issue its permit only after the lead agency has provided final approval.
San Francisco Superior Court Judge A. James Robertson II ruled that the Commission had conducted all of the CEQA review required during the time the executive order was in effect, and, besides, the air permit was a federal permit that did not require CEQA review. Project opponents appealed, and a unanimous three-judge panel of the First District, Division Four, upheld the lower court.
The appellate panel ruled that the CEQA Guidelines and air district regulations on which the opponents relied were not in effect because of the executive order.
On appeal, the opponents challenged the lower court’s interpretation of the executive order. They argued that even if the air district used the FSA as an EIR, the district was still obliged under the CEQA Guidelines to wait until the Energy Commission made a decision. What mattered was the Commission’s certificate, not the prior issuance of the FSA, opponents contended.
The appellate court rejected the argument.
“To adopt the [opponents’] interpretation of the executive order would be absurd, rendering the order a virtual nullity,” Justice Timothy Reardon wrote for the court. “The purpose of this order was to alleviate a growing electricity shortage that threatened California’s residents and commercial users of energy. The order was intended to expedite the processing of applications for power plants by ensuring that the necessary environmental review of such proposals would be implemented more quickly. It designated the FSA, not the later-issued Commission certificate, as the functional equivalent of an EIR for power plant proposal applications for all state and regional agencies.”
“In this matter,” Reardon continued, “the Commission’s October 2000 FSA conducted as part of its certification process constituted the environmental document needed before the district could issue its May 2001 PSD permit. The Commission’s September 2001 certificate — incorporating the earlier assessment of its staff — was the only CEQA approval that the project required.”
The court essentially declined to rule on allegations that the district had violated a delegation agreement with the federal Environmental Protection Agency that allowed the district to issue federal permits. The court noted that federal authorities had decided that CEQA compliance was a matter of state law.
The decision in this case was the latest in a string of losses for opponents of the project, which is under construction. The opponents challenged the Commission’s approval of the project in the state Supreme Court — the only venue for contesting Commission decisions — but the state high court summarily dismissed the claim. The opponents then claimed in a different lawsuit that the state Supreme Court’s summary dismissal was a violation of their constitutional rights. But the Third District Court of Appeal rejected that argument in Santa Teresa Citizen Action Group v. State Energy Resources Conservation & Development Com., (2003) 105 Cal.App.4th 1441(see CP&DR Legal Digest, March 2003).
City of Morgan Hill v. Bay Area Air Quality Management District, No. A102518, 04 C.D.O.S. 4258, 2004 DJDAR 5835. Filed May 14, 2004.
For Morgan Hill: Stephen Volker, (510) 496-0600.
For the air district: Brian Bunger, (415) 749-4797.
For the California Energy Commission: William Chamberlain, (415) 654-3951.
For Calpine: Jeffrey Harris, Ellison, Schneider & Harris, (916) 447-2166.