CEQA Does Not Work In Reverse To Require Environmental Impact Report Where The Environment Will Have An Effect On A Project

In South Orange County Wastewater Authority v. City of Dana Point, (— Cal.Rptr.3d —-, Cal.App. 4 Dist., June 30, 2011), a court of appeal considered whether the California Environmental Quality Act (“CEQA”) works in reverse to require an environmental impact report (“EIR”) where the environment would have an impact on a project instead of the other way around. In this case, the environment consisted of an existing sewage treatment plant that would impact an adjacent mixed use development project with its bad smells and noise. The court of appeal held CEQA does not require an EIR where it is proposed that the environment needs to be cleaned up for a project instead of vice versa.


Makar Properties, LLC (“Makar”), submitted an application to the City of Dana Point (“City”) to change City’s land use so that in the future Makar could develop a nine-acre site next to a sewage treatment plant operated by South Orange County Wastewater Authority (“SOCWA”). The sewage treatment plant is situated near the shoreline at Dana Point. Makar’s application sought (1) an amendment to “City’s general plan to create a new, mixed-use land-use designation;” (2) the addition of a new zone to City’s zoning code, R/C-22, which would allow mixed residential and commercial development; and (3) the rezoning of Makar’s site under the new zone. In addition to City’s approval of these three requests, Makar was required to get approval from the California Coastal Commission because of the site’s proximity to the shore.

City’s planning commission (“Commission”) began the environmental review process required by CEQA. The Commission observed all necessary formalities in regard to notices, reviews, and public meetings. In February 2008, the Commission issued a mitigated negative declaration (“MND”) after it determined “that any environmental effects caused by the project could be mitigated so as to render them insignificant.” The Commission revised and reissued the MND in October 2008 after it analyzed the effects of Makar’s proposed project more thoroughly. After four public hearings were held, City amended its “general plan, approved zoning changes, . . . adopted the MND, and passed a resolution requesting Coastal Commission certification.” City’s amendment to the general plan created a new mixed-use designation, Residential/Commercial -18.

The SOCWA lodged objections throughout the process and claimed that there would be noise and bad smells from plant operations that would affect Makar’s project. SOCWA “professed to worry that prospective residents of the Makar site would be subjected to [the bad smells].” SOCWA recommended dealing with the “intermittent” and “fleeting” bad smells by making Makar pay to cover the aeration tanks at the plant at a cost of $4.6 million.

SOCWA filed a petition for writ of mandate in a superior court in which it asserted that, in order to address the odor issue, City was required to prepare a full-scale EIR rather than just a negative declaration. The superior court denied SOCWA’s petition.


SOCWA asked the court “to order an [EIR], not to assess the impact of a proposed project on the present environment, but to assess the impact of the present environment upon a proposed project.” SOWCA argued “that the environment needs to be cleaned up to make it suitable for the project, rather than vice versa.” The court of appeal affirmed the judgment of the trial court. The appellate court found Makar’s “project would not have the environmental impact necessary to require an EIR.”

“Environment” is defined by CEQA as “‘the physical conditions which exist within the area which will be affected by a proposed project, including land, air, water, minerals, flora, fauna, noise, objects of historical or aesthetic significance.’” CEQA requires an EIR for “any project that ‘may have a significant effect on the environment.’” The phrase “significant effect on the environment” is defined as “a substantial, or potentially substantial, adverse change in any of the physical conditions within the area affected by the project.”

By objecting to the adoption of the MND for rezoning, SOCWA “essentially turns CEQA upside down.” The court stated, “Instead of using the Act to defend the existing environment from adverse changes caused by a proposed project, SOCWA wants to use the Act to defend the proposed project (the future residences) from a purportedly adverse existing environment (smells from the sewage treatment plant).” The court opined that what SOCWA really seeks is protection “from nuisance complaints by potential neighbors based on bad smells from the plant, while sticking Makar with the bill.”

The court concluded that the statutory definition of the environment as the physical condition that will be affected by a project precludes the application of CEQA in the way urged by SOCWA. The rezoning at issue here did not contemplate any changes to SOCWA’s plant or its production of odor. The court concluded no EIR was required for the rezoning “because the initial study turned up no significant and irreversible adverse environmental effects; the environmental effects the study did identify could be mitigated.”

The court also rejected SOWCA’s argument that City’s decision to amend its general plan to include the new land use designation of “Residential/Commercial” made the general plan internally inconsistent. The “Residential/Commercial” designation that City added allows a higher residential density but more limited commercial space. The court noted City already has two mixed-use designations—“Professional/Residential” and “Commercial/Residential.” The court also rejected SOWCA’s argument that City’s zoning decisions made the general plan internally inconsistent.


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