California's New Draft CEQA Guidelines for Greenhouse Gas Emissions

California's New Draft CEQA Guidelines for Greenhouse Gas Emissions

The California Governor's Office of Planning and Research (OPR) issued draft guidance in early January on the analysis and mitigation of the potential effects of greenhouse gas (GHG) emissions from development projects subject to review under the California Environmental Quality Act (CEQA).

The draft guidelines put to rest any lingering questions about whether lead agencies must determine under CEQA if a project's GHG emissions will have a "significant impact" on the environment and whether project developers must reduce any such impacts.

The issue stems from the California Global Warming Solution Act of 2006, also known as AB 32, which requires the state to reduce its GHG emissions to 1990 levels by 2020 -- a 30 percent decrease from projected "business as usual" emissions.  
Zachary Walton All images courtesy of Paul Hastings law firm
A year after the landmark legislation was passed, the legislature enacted another law, SB 97, which established for the first time that climate change is a proper subject for CEQA analysis. Under the law, OPR must present CEQA guidelines for mitigating emissions by July 1, 2009. The California Air Resources Board must adopt the guidelines by January 1, 2010.

One of the most important and difficult steps in the CEQA process is the lead agency's determination of whether a project will have a "significant" impact on the environment. This can be crucial for the project's ability to proceed in a timely and cost efficient manner.

Under CEQA, a significance determination requires mitigation to reduce emissions to a less than "significant level," or at least to the maximum extent possible. It typically also requires preparation of an Environmental Impact Report (EIR).
Sanjay Ranchod All images courtesy of Environmental Defense Fund
In June 2008, OPR released a technical advisory providing preliminary guidance to local agencies about how to evaluate and, if necessary, mitigate the effects of GHG emissions of projects subject to review under CEQA. It recommended local agencies establish their own significance criteria, but didn't provide any threshold or standard for doing so. Instead, OPR requested that the California Air Resources Board ("ARB") recommend a methodology.

ARB has issued a preliminary draft proposal for establishing these significance thresholds. It adopts a form of the "non-zero threshold approach" for GHG emissions and suggests sector-specific significance standards for residential/commercial projects and industrial projects.  It is most notable for indicating that significance thresholds for GHG emissions could be performance-based.

Residential and commercial projects can be presumed not significant under CEQA if they satisfy ARB "minimum performance standards" for construction-related emissions and meet an as-yet unspecified threshold of metric tons per year of CO2 equivalents. Standards could include green building, recycling, water conservation or energy.

The ARB proposes that industrial projects utilize some of the performance standards listed above plus a significance threshold of 7,000 metric tons per year of CO2 equivalents for operating emissions (excluding transportation). This threshold is estimated to cover approximately 90 percent of GHG emissions from new industrial projects statewide.

The ARB proposal indicates that a project proponent might be entitled to a presumption of non-significance under CEQA by designing the project to meet applicable performance standards that reduce GHG emissions.

While the ARB proposal is subject to change -- a revised final version is expected this month -- some have suggested that OPR's final CEQA guidelines for GHG emissions could require "stealth mitigation" for many new large-scale residential and commercial projects in California to the extent the performance standards have the same effect as mitigation measures.

Draft Significance Guidelines

OPR's Draft Guidelines do not include detailed significance thresholds for GHG emissions. Instead, OPR proposes that lead agencies make a good-faith effort to calculate or estimate the GHG emissions associated with a project, and consider four qualitative standards to determine the significance of impacts from those emissions:

(1) the extent to which the project could help or hinder attainment of the statewide 2020 emission reduction goal outlined in AB 32.

(2) the extent to which the project may increase the consumption of fossil fuels or other energy resources that contribute to GHG emissions.

(3) the extent to which the project may result in a reduction in overall GHG emissions from an existing facility; and (4) the extent to which emissions associated with the project exceed any threshold of significance that applies to the project.

The Draft Guidelines would allow agencies to retain their discretionary authority to establish their own significance thresholds for GHG emissions, potentially resulting in competing thresholds. However, it is widely expected that many lead agencies will rely on ARB's proposed significance thresholds because they lack the resources and expertise to develop their own standards.

Draft Mitigation Guidelines

The Draft Guidelines modify the existing CEQA mitigation guidelines by specifying that to minimize significant effects, "[l]ead agencies should consider all feasible means of mitigating greenhouse gas emissions." This is consistent with a basic CEQA principle that mitigation is required only where effects are significant.  In order to avoid a significance determination for GHG emissions that would trigger evaluation of mitigation measures, project applicants may design their projects to meet strict performance standards that reduce GHG emissions.

Key Implications

These developments indicate that California regulators are moving toward a methodology for controlling GHG emissions that will motivate project proponents to utilize project design features to the greatest extent possible to avoid and minimize environmental impacts.

With the caveat that they are subject to change, OPR's Draft Guidelines and the ARB's draft proposal for establishing significance thresholds have the following key implications:
--    Under CEQA, proponents of new development in California will need to identify, quantify, assess the significance of, and, if deemed significant, mitigate to the extent feasible the impact of the estimated GHG emissions associated with their projects.
--    Agencies are likely to retain their discretionary authority to establish CEQA significance thresholds for GHG emissions, but those thresholds will be linked to the ambitious GHG emission reduction goals set forth in AB 32.
--    Agencies may adopt the ARB's proposed significance thresholds. If those thresholds are performance-based, they will incentivize project proponents to reduce GHG emissions through incorporation of performance standards into project design.
--   In the event that further GHG emission mitigation measures are needed, it is likely that many projects will need to provide alternative transportation for residents/workers, and potentially to purchase expensive GHG emission offsets (if available).
Within the next month, the ARB is expected to hold a public workshop and issue its final proposal for establishing significance thresholds for GHG emissions. Local agencies and project proponents should continue to monitor and participate in this and related regulatory processes during this critical time for developing CEQA climate change guidelines.

Zachary Walton is a partner and Sanjay Ranchod is an associate in the Environmental Practice Group and the Sustainability and Global Climate Change Group at international law firm Paul Hastings. Both are based in the firm's San Francisco office. To learn more about the Draft Guidelines, see this client alert.

"Construction" -- CC licensed by Flickr user Paul Keleher.