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Communities for a Better Environment v. South Coast Air Quality Management District

March 15, 2010

COMMUNITIES FOR A BETTER ENVIRONMENT, PLAINTIFF AND APPELLANT,
v.
SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT ET AL., DEFENDANTS AND RESPONDENTS;
CONOCOPHILLIPS COMPANY, REAL PARTY IN INTEREST AND RESPONDENT.
CARLOS VALDEZ ET AL., PLAINTIFFS AND APPELLANTS,
v.
SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT ET AL., DEFENDANTS AND RESPONDENTS;
CONOCOPHILLIPS COMPANY, REAL PARTY IN INTEREST AND RESPONDENT.



Ct.App. 2/2 B193500 Los Angeles County Super. Ct. Nos. BS091275 & BS091276 Judge: Andria K. Richey.

The opinion of the court was delivered by: Werdegar, J.

The California Environmental Quality Act (CEQA) (Pub. Resources Code, § 21000 et seq.)*fn1 requires a public agency to prepare an environmental impact report (EIR) only on projects that may have significant environmental effects (§§ 21100, subd. (a), 21151, subd. (a)). To decide whether a given project's environmental effects are likely to be significant, the agency must use some measure of the environment's state absent the project, a measure sometimes referred to as the "baseline" for environmental analysis. According to an administrative guideline for CEQA's application, the baseline "normally" consists of "the physical environmental conditions in the vicinity of the project, as they exist at the time . . . environmental analysis is commenced . . . ." (Cal. Code Regs., tit. 14, § 15125, subd. (a).)

In the present case, ConocoPhillips Company (ConocoPhillips), the private proponent of a project to conduct a new industrial process at a petroleum refinery, and the South Coast Air Quality Management District (District), whose failure to prepare an EIR before approving the refinery project is at issue, contend that the existence of valid permits to operate industrial equipment used in the project at particular levels establishes an exception to the general rule that existing physical conditions serve as the baseline for measuring a project's environmental effects. Instead, they maintain, the analytical baseline for a project employing existing equipment should be the maximum permitted operating capacity of the equipment, even if the equipment is operating below those levels at the time the environmental analysis is begun. Failure to use the maximum permitted operations as a baseline, they argue, would contravene CEQA's statute of limitations and deprive the permit holder of its vested rights.

We conclude neither the statute of limitations, nor principles of vested rights, nor the CEQA case law on which ConocoPhillips and the District rely justifies employing as an analytical baseline for a new project the maximum capacity allowed under prior equipment permits, rather than the physical conditions actually existing at the time of analysis. The District therefore abused its discretion in determining the project at issue would have no significant environmental effects compared to a baseline of maximum permitted capacity. We leave for the District on remand, however, to resolve exactly how the existing physical conditions - assertedly subject to operational variation over time - should be measured.

Factual and Procedural Background

Real party in interest ConocoPhillips operates a petroleum refinery in Wilmington, an area of the City of Los Angeles. The refinery, occupying approximately 400 acres bordering commercial, recreational, and residential areas, produces gasoline, jet fuel, diesel fuel, and other chemical products. The present dispute arises from ConocoPhillips's project to produce ultra low sulfur diesel fuel.

Plaintiffs are Communities for a Better Environment (an environmental organization), Southern California Pipe Trades District Council 16 and Steamfitters & Pipefitters Local 250 (labor organizations), and Carlos Valdez and other individuals. The individual plaintiffs and members of the plaintiff organizations live and/or work near the ConocoPhillips refinery.

Defendant District is the agency responsible for regulating nonvehicular air pollution in the South Coast Air Basin, an area encompassing all of Orange County and portions of San Bernardino, Riverside, and Los Angeles Counties, including the Wilmington area. (Health & Saf. Code, §§ 40000, 40410; Cal. Code Regs., tit. 17, § 60104.)

In 2000 and 2001, the District, the federal Environmental Protection Agency, and the California Air Resources Board issued regulations requiring a reduction by mid-2006 in the sulfur content of motor vehicle diesel fuel to 15 parts per million by weight. These rules were designed to reduce the harmful environmental effects resulting from emissions of sulfur oxides and other toxins from diesel- fueled motor vehicles.

To comply with these regulations, ConocoPhillips developed plans for an Ultra Low Sulfur Diesel Fuel Project (the Diesel Project), which involved replacing or modifying hydrotreater reactors, a cooling tower, storage tank, and compressor; installing new pipelines and pumps; and substantially increasing operation of the existing cogeneration plant and four boilers, which provide steam for refinery operations. The cogeneration plant and boilers were subject to prior permits that state a maximum rate of heat production for each piece of equipment.

ConocoPhillips applied to the District for a permit to construct the above modifications. After completing an initial study to determine the environmental impacts of the proposed Diesel Project, the District presented the results of its investigation in a draft negative declaration, concluding the project did not have the potential to adversely affect the environment.

Plaintiffs submitted comments on the draft negative declaration, arguing the Diesel Project would have significant adverse impacts on the environment and thus an EIR should be prepared to identify mitigation measures. One of plaintiffs' experts estimated the project would increase nitrogen oxide (NOx) emissions by as much as 661 pounds per day, greatly exceeding the District's significance threshold of 55 pounds per day.*fn2 NOx is a major contributor to smog formation and can cause adverse health effects, especially aggravation of respiratory disease.

The District determined that increased steam generation from the cogeneration plant and boilers, along with other new activities, would create an additional 237 to 456 pounds per day of NOx emissions, of which between 201 and 420 pounds would be caused by increased operation of the steam generating equipment. The higher estimates represented "worst-case" conditions in which the refinery would have to use boiler 4, the oldest boiler at the plant. In its final negative declaration (the Negative Declaration), however, the District concluded the Diesel Project "could not have a significant effect on the environment." While it noted the increased operation of existing steam generation equipment would cause additional NOx emissions, the District did not consider these increases to be part of the Diesel Project because they did not exceed the maximum rate of heat production allowed under existing permits.

Crucially, the District treated any additional NOx emissions stemming from increased plant operations within previously permitted levels as part of the baseline measurement for environmental review, rather than as part of the proposed Diesel Project. The District reasoned that ConocoPhillips had permits to operate the equipment, the refinery was an established use with operations fluctuating over time, and the proposed Diesel Project did not call for any equipment to exceed its permitted capacity. Applying this baseline in the Negative Declaration, not even the "worst-case" scenario produced significant NOx emission increases under ...


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