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Outfitter Properties, LLC & Rocky Springs Ranch, LLC v. State Water Resources Control Board et al

March 15, 2012


(Super. Ct. Nos. 06CS01520 & 07CS00462)

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

Outfitter Properties v. State Water Res. Cont. Bd.



California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

Plaintiffs Outfitter Properties, LLC and Rocky Springs Ranch, LLC, the owners of Oasis Springs Lodge and Rocky Springs Ranch, appeal from the denial of their consolidated petition for writ of mandate, seeking to overturn a project subject to the California Environmental Quality Act.*fn1

Plaintiffs contend the trial court incorrectly concluded certain CEQA contentions were barred by plaintiffs' failure to exhaust administrative remedies with the State Water Resources Control Board (Board), and incorrectly rejected their CEQA contentions on the merits. Plaintiffs also contend a project funding approval by the Department of Fish and Game (DFG) improperly gives funds to Pacific Gas and Electric Company (PG&E) which could be used to condemn property, in violation of Proposition 50.*fn2 We disagree and shall affirm.


A number of parties worked for a long time to create the "Battle Creek Salmon and Steelhead Restoration Project" (project) to partially repair habitat for Chinook salmon and steelhead trout*fn3 that had been damaged by hydroelectric dams.

Battle Creek, a tributary to the Sacramento River, receives its water from the slopes of Mount Lassen. It is the site of hydroelectric facilities dating back over a century, now owned by PG&E and operated under a license issued by the Federal Energy Regulatory Commission (FERC). Battle Creek is located in a rugged area, and originates in part from water percolating through volcanic soils, rather than from snow melt, and therefore maintains a relatively consistent temperature and stable, drought-resistant, flow level. This is ideal for steelhead trout and both spring- and winter-run Chinook salmon, which are anadromous, meaning they return to their native stream reach to spawn.*fn4 PG&E's facilities reduce stream flows, change water temperature, mix waters from different streams--confounding the fish as to the correct stream to follow when returning to spawn--and block the fish from access to portions of their native stream habitats.

The United States Bureau of Reclamation (Reclamation) and United States Fish and Wildlife Service (FWS) entered into agreements with PG&E and DFG to try to restore the anadromous fish habitats. By 1997, the "Battle Creek Working Group" had been formed to develop a plan to restore the Battle Creek watershed.*fn5

In 1999, DFG, Reclamation, FWS, PG&E, plus the federal Marine Fisheries Service (MFS), signed an "Agreement in Principle" outlining a restoration project, known broadly as the "5 dam removal alternative," which included a "Water Acquisition Fund" and an "Adaptive Management Fund" to implement the project. They then signed a memorandum of understanding (MOU) outlining the project, and acknowledging that alternatives to the 5-dam proposal would be subjected to environmental review, at both the federal and state level, before any final commitment was made. The MOU places PG&E in charge of "the operation, maintenance, and replacement of all physical modifications to its facilities under this MOU on Battle Creek" and vests PG&E with "lead responsibility for real estate requirements and transactions[.]"

A joint state-federal environmental review was conducted, with the Board as the "lead" agency and DFG as a "responsible" agency under CEQA, and Reclamation and FERC as the corresponding federal agencies under the National Environmental Policy Act (NEPA). The project's modifications to PG&E's hydroelectric facilities require FERC approval in the form of a license amendment. The Board was designated the lead agency because FERC requires a water quality certification under federal law before it can grant PG&E's license amendment. DFG was designated as a responsible agency because of its funding authority.*fn6

Draft and supplemental EIRs were released for public comment, and the final EIR was released on July 29, 2005. The stated project goals are to restore about 42 miles of anadromous habitat on Battle Creek, and about 6 miles on its tributaries, while minimizing the loss of clean, renewable hydropower. Several alternatives were evaluated, including a "no action" alternative and alternatives that called for removing different combinations of dams, or no dams, but the original 5-dam alternative was ultimately deemed best suited to the goals of the restoration project. Further, selecting a different alternative would require a new MOU with PG&E, which raised the possibility PG&E would either refuse or be unable to complete the required work before a 2026 FERC relicensing process.

The 5-dam removal alternative is complex, and some details are deemed by FERC to be "Critical Energy Infrastructure Information" or "CEII" and are restricted due to antiterrorism concerns. For purposes of this appeal it is not necessary to describe the alternative in exhaustive detail. It is enough to know that the existing facilities move water via canals to and from various powerhouses. One problem is that water from North Battle Creek is diverted and then discharged into South Battle Creek. This mixing of water can create olfactory confusion for the fish, causing them to take the wrong fork and miss their natal spawning reach. A second problem is that the dams create physical barriers that block fish from natural spawning reaches.

The plan calls for removing five dams and adding new fish ladders to allow the fish to access more habitats, and for building new "tailrace connectors" to keep the discharge water from mixing between the forks. However, the plan reduces the water usable for the powerhouses, triggering the need for an FERC license amendment.

On September 19, 2006, the Board's Executive Director certified the final EIR. The resolution finds some project impacts cannot be mitigated to a less-than-significant level; however, the resolution did not adopt a statement of overriding considerations.

No Board review of the Executive Director's decision was sought. On October 18, 2006, plaintiffs filed their first writ petition, challenging the EIR certification on the ground it was made by the Executive Director, not the Board itself, and also challenging the merits of the certification.*fn7

On March 14, 2007, DFG approved conditional Proposition 50 funding. DFG's findings divided project implementation into two phases. Phase 1 comprised work on the North Fork of Battle Creek, and Phase 2 comprised work on the South Fork of Battle Creek. DFG found Phase 1 could be completed independently of Phase 2 and still provide significant environmental benefits. DFG adopted a statement of overriding considerations, finding project impacts were significant but unavoidable. Such impacts included "reducing the scenic quality at the Oasis Springs Lodge" and "impacts to recreational opportunities at Oasis Springs Lodge from construction activities at Inskip Diversion Dam." Contrary to plaintiffs' current trout stocking practices, when "the South Fork of Battle Creek is considered 'anadromous waters' non-resident trout can no longer be stocked." However, DFG found that over time "increased fish population could benefit recreational industries by providing more abundant and larger trout, which would result in higher catch rates."

Project phasing was needed due to the separation of the proposed worksites "along the North and South Forks of Battle Creek and the potential for delays pending PG&E's resolution of access issues at its Inskip Diversion Dam facility." DFG found plaintiffs refused to allow access to facilitate planning, making any additional mitigation measures infeasible. DFG also found the Board was required to approve a water quality certification, and noted that PG&E needed to secure "all necessary access rights from the appropriate landowner(s)" as to each phase.*fn8

DFG issued a Notice of Determination (NOD) regarding the conditional funding approval, statement of overriding considerations, and phasing of the project.

On April 12, 2007, plaintiffs filed their second writ petition, and on September 26, 2008, the trial court consolidated their two petitions.

The trial court implicitly granted requests by the parties for judicial notice of documents evidencing two significant later events, as follows:

(1) On December 12, 2008, the Board issued a water quality certification, as required by the Federal Clean Water Act (33 U.S.C. § 1341(a)(1)) and adopted CEQA findings and a statement of overriding considerations. There were three "unavoidable significant adverse impacts" to plaintiffs based on construction activities, namely, visual impacts, noise impacts, and "short-term significant adverse recreational impacts (1-6 years)."*fn9

(2) On August 25, 2009, FERC issued an order amending the license for PG&E's hydroelectric facilities.

The trial court denied the consolidated writ petition, and plaintiffs timely filed this appeal.



CEQA Claims

A. Exhaustion of Remedies

The trial court first found CEQA claims against the Board were barred by plaintiff's failure to exhaust administrative remedies, specifically, that plaintiffs could have but did not seek Board review of the decision of the Executive Director to certify the EIR. The trial court also addressed all CEQA claims on the merits.

The parties initially buried their discussion of exhaustion deep within their voluminous briefs. We requested supplemental briefing on exhaustion, directing the parties to specific items of legislative history. However, we now find it more efficient to address all CEQA claims on the merits.*fn10

B. Designation of Lead Agency

Plaintiffs contend that DFG, not the Board, should have been designated as the lead agency. The trial court rejected this contention, finding the Board "is the State agency with the broadest jurisdiction over the Project" and also finding any error "did not preclude informed decision-making or informed public participation."*fn11

Plaintiffs concede the following: Because the project alters PG&E's hydropower facilities, a FERC license amendment is required. A FERC license amendment cannot be granted absent a water quality certification. The Board, not DFG, had the authority to issue the certification FERC required.

Plaintiffs view the Board's authority as "limited" to the water quality certification, and note that the Board did not sign the MOU.*fn12 In contrast, plaintiffs contend DFG: 1) signed the MOU; 2) helped design the project; 3) will be responsible for carrying the project out; and 4) wields the power to authorize necessary funding.

Under CEQA, "'Lead agency' means the public agency which has the principal responsibility for carrying out or approving a project which may have a significant effect upon the environment." (Pub. Resources Code, § 21067.) "Usually, this is the agency with the broadest governmental powers." (City of Sacramento v. State Water Resources Control Bd. (1992) 2 Cal.App.4th 960, 971 (City of Sacramento).) A responsible agency is "a public agency, other than the lead agency, which has responsibility for carrying out or approving a project." (Pub. Resources Code, § 21069.)

We credit plaintiffs' point that DFG was responsible for "carrying out" the project. However, as a lead agency is the agency with the "principal responsibility for carrying out or approving" a project (Pub. Resources Code, § 21067, emphasis added), the plain language of the statute confers lead agency designation on an agency that bears potentially no responsibility "for carrying out" a project, as long as that agency has "principal responsibility" for "approving" the project--which the Board has.*fn13

The Board has the power to regulate beneficial uses of water, including "power generation" "and preservation and enhancement of fish, wildlife, and other aquatic resources or preserves." (Wat. Code, §§ 13000, 13001, 13050, subd. (f).) The DFG has authority over fish and wildlife resources and related funding. (See Fish & G. Code, §§ 700, 1501, 1600.) Although the project goal is to benefit fish, in the context of a project that alters hydropower generation, DFG carries the slimmer portfolio, because the Board has authority over fish and hydropower, and DFG has authority over fish, including funding authority, but lacks any authority over hydropower.

Accordingly, we agree with the trial court's conclusion that plaintiffs have not demonstrated that the decision to designate the Board as the "lead" CEQA agency was in error.

In the reply brief, plaintiffs refer to the FERC license amendment approval as a "small component . . . of an otherwise large project." Even if we were to view that component as "small," which we do not, it was essential to the project.*fn14

Plaintiffs cite two of our prior cases to support the contention the Board was wrongly designated as the lead agency here. Both of these cases are factually inapposite.

Planning & Conservation League v. Department of Water Resources (2000) 83 Cal.App.4th 892 (PCL), involved the "Monterey Agreement," which required amendments to State Water Project (SWP) water supply contracts between the Department of Water Resources (DWR) and 29 contracting agencies. The parties agreed that a local water contracting agency would be the lead agency. We held that because the project involved state water resources and SWP contracts administered by DWR, which had primary responsibility for negotiating the contract amendments, DWR should have been the lead agency. (PCL, supra, 83 Cal.App.4th at pp. 906-907.) We did not hold this necessarily tainted the CEQA process; we held the EIR prepared by the contracting agency was defective because it did not consider a "no project" alternative. (Id. at pp. 907, 910-920.) We did not hold that the agency which implements a project must be the lead agency.

Plaintiffs also contend "the appointment of the wrong lead agency required reversal" in City of Sacramento, supra, 2 Cal.App.4th at page 960. In that case, the trial court issued a writ of mandate, concluding a regional water board had a duty to comply with CEQA regarding pesticide discharges into water. (City of Sacramento, supra, at p. 968.) We held the Department of Food and Agriculture (DFA) had broader authority regarding pesticides, and the petitioners had not shown CEQA violations by the DFA, therefore the trial court erred by requiring CEQA review by a regional water board. (Id. at pp. 973, 978.) Thus, contrary to plaintiffs' argument, City of Sacramento was not a case where the "wrong" agency conducted CEQA review.

Thus, neither of the cases relied on by plaintiffs support their contention that the Board should not have been designated as the lead agency in this case for CEQA purposes.

As a separate reason for upholding the trial court's ruling, respondents contend the relevant public agencies agreed in the MOU that the Board should be the lead agency, and point to a regulation stating that where two or more agencies have

"a substantial claim to be the lead agency, the public agencies may by agreement designate an agency as the lead agency." (Cal. Code Regs., tit. 14, § 15051, subd. (d).)*fn15

Plaintiffs contend the MOU cannot be a valid interagency agreement designating the Board as the lead agency, because the Board was not a signatory to the MOU. We disagree. Although the Board did not sign the MOU, the Board was designated as part of the management team (see fn. 12, ante) and accepted its status as the lead agency. The regulation does not specify the form of an agreement designating a lead agency. Viewing the record in its entirety, we agree with respondents that there was a valid interagency agreement designating the Board as lead agency.

Finally, plaintiffs fail to explain how designating the Board as lead agency resulted in prejudice. (See Fall River Wild Trout Foundation v. County of Shasta (1999) 70 Cal.App.4th 482, 491-493; Rural Landowners Assn. v. City Council (1983) 143 Cal.App.3d 1013, 1023 [where "failure to comply with the law results in a subversion of the purposes of CEQA by omitting information from the environmental review process, the error is prejudicial"].)*fn16 Although plaintiffs point to their other CEQA claims, none hinges on the purported mistaken designation of the Board as lead agency. Plaintiffs assert "the misclassification of the lead agency is the reason" for "incongruity" between the EIR's review and the later decision to phase the project (discussed at Part C, post). But plaintiffs do not explain why the purported incongruity was caused by designating the Board as lead agency. When an appellant fails to tender a developed argument for prejudice, the point will be deemed forfeited. (See Paterno v. State of California (1999) 74 Cal.App.4th 68, 105-106.) In the absence of evidence, we will not presume that DFG's status as merely a responsible agency, as opposed to lead agency, impaired its ability to apply its expertise on fish and wildlife matters to the project.

Accordingly, we conclude that the trial court correctly rejected plaintiffs' contentions regarding designation of the Board ...

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