Second District Court of Appeal Upholds EIR for Transfer of 41,000 Acre-Feet Per Year of State Project Water Despite Uncertain Status of the Monterey Agreement

December 2009

On December 17th, 2009, the Second Appellate District Court of Appeal issued an opinion in Planning & Conservation League v. Castaic Lake Water Agency, No. B200673 (Castaic Lake), finding that an Environmental Impact Report (EIR) for a long-embattled water transfer between the Kern County and Castaic Lake Water Agencies complied with the California Environmental Quality Act (CEQA). The Court rejected the argument that the Department of Water Resources (DWR) had to conduct CEQA review of the transfer because it relies on the Monterey Agreement framework, and found that the EIR for the transfer had properly acknowledged uncertainties relating to the Monterey Agreement and sufficiently analyzed the transfer’s alternate water supply scenarios.

Background
As has been painfully obvious for decades, the State Water Project (SWP) simply cannot provide enough water each year to satisfy full delivery under DWR’s water service contracts. The 1995 Monterey Agreement among DWR and the SWP contractors attempted to address this shortfall by, among other things, creating a framework that would free up water previously allocated to agricultural use and make it available for transfer to urban suppliers. The environmental analyses for the Monterey Agreement and its resulting water transfers have provided fodder for the courts ever since. The Third District Court of Appeal ordered the initial EIR for the Monterey Agreement to be decertified in part because it had been prepared by a local water agency instead of DWR. Planning & Conservation League v. Department of Water Resources (2000) 83 Cal.App.4th 892. In the wake of this decision, the Second District decertified the initial EIR for the Kern-Castaic transfer because it had tiered off the decertified Monterey Agreement EIR. Friends of Santa Clara River v. Castaic Lake Water Agency, 95 Cal.App.4th 1373 (2002).

In 2004, Castaic issued a revised EIR approving the Kern-Castaic transfer that does not tier off the decertified Monterey Agreement EIR, but includes an independent analysis of the relevant water supply issues. In particular, the 2004 EIR examines three possible water supply scenarios to account for the uncertain status of the Monterey Agreement—the next draft EIR for which was released in 2007 and is an almost inevitable candidate for legal challenge. In 2005, plaintiffs sued Castaic on the ground that the 2004 EIR contravenes CEQA. [At the same time, Los Angeles County prepared an EIR for the West Creek residential subdivision relying on the Kern-Castaic water transfer, and the EIR was upheld on appeal, Santa Clarita Organization for Planning the Environment v. County of Los Angeles, 157 Cal.App.4th 149 (2007).] The trial court rejected plaintiffs’ arguments against the Castaic EIR, but found the EIR to be substantively defective nonetheless. Both sides appealed the trial court’s decision.

The Decision
The Second District Court of Appeal first examined the procedural challenges to the 2004 EIR. Plaintiffs’ principal contention was that only DWR could properly serve as “lead agency” and conduct environmental review of the Kern-Castaic transfer because the transfer was part of the Monterey Agreement, and because DWR, unlike Castaic, had the requisite expertise to review the transfer. The court rejected both arguments.

First, the Court concluded the Kern-Castaic transfer was not part of the Monterey Agreement. Although the Monterey Agreement provided an important framework, the transfer itself was not even a “gleam in the planner’s eye” when the Monterey Agreement was penned. Moreover, the fact that the transfer was implemented before DWR could finally certify the (still pending) Monterey Agreement EIR did not mean that the transfer necessarily became part of the project under DWR’s environmental review. Instead, the Court reasoned, the Kern-Castaic transfer had “significant independent or local utility,” meaning it could reasonably be reviewed by a local agency independent from the Monterey Agreement itself. In fact, noted the court, the transfer could have taken place using pre-Monterey Agreement authority. Second, the Court found that Castaic’s preeminent role in carrying out this discrete transfer rendered it the logical choice for lead agency. Castaic is tasked with planning and providing for its own water needs and actually negotiated the transfer with Kern. A public agency that shoulders primary responsibility for creating and implementing the project is the lead agency for a CEQA project, even when other agencies have a role in the project. The fact that DWR approved the transfer and supplied water did not make it the lead agency; DWR is required by law to facilitate all such transfers of SWP supply.

Another issue in the case was the trial court’s ruling that the 2004 EIR was flawed because it failed to adequately explain how the transfer may be affected by the outcome of the Monterey Agreement as amended and, therefore, did not (as required by CEQA) adequately disclose the analytic route for consideration of its alternate three water supply scenarios. On appeal, the Court held that the EIR was not subject to challenge on this ground: one may not argue that an EIR is deficient unless the alleged grounds for noncompliance were presented to the adopting agency during the public comment period. Since petitioners had never specifically objected to the 2004 EIR’s discussion of the three scenarios, the EIR was beyond challenge on those grounds.

Nonetheless, the Second District found that even if petitioners had objected to the three scenarios discussion in a timely manner, such a challenge would fail on the merits. The 2004 EIR described the relationship between the three water supply scenarios and the potential outcomes of the Monterey Agreement in “considerable detail,” and explained that the outcome of the Monterey Agreement could affect the underlying contractual regime. Although the Court found that the 2004 EIR’s discussion “could have been clearer,” it noted that “absolute perfection” is not required of an EIR, and that the discussion was adequate to bridge the analytic gap between the Monterey Agreement and the water supply scenarios.

The Castaic Lake decision is the latest in a series of cases in which local agencies’ CEQA analysis is challenged when larger-scale environmental analyses are still in the works. Consistent with the California Supreme Court’s decision in Vineyard Area Citizens for Responsible Growth v. City of Rancho Cordova, 40 Cal. 4th 412 (2007), this case further demonstrates that a local agency may either defer its analysis or, as here, engage in some level of duplication. The case also provides another helpful example of the point that an uncertain water supply is not necessarily a death knell to projects that would rely on that supply. It is enough to describe the uncertainty, detail alternative plans, and analyze the possible environmental effects of putting those plans into effect. Whether DWR can follow an equally defensible path for the Monterey Agreement EIR remains to be seen.