Supreme Court Denies Review of California Appeals Court Ruling that State Water Board’s Duty to Prevent Waste and Unreasonable Use of Water is “Highly Discretionary”

August 28, 2023

On February 27, 2023, in a much anticipated decision, California’s Second District Court of Appeal overruled the trial court by determining that the State Water Resources Control Board (“State Water Board”) did not violate its duty to prevent waste and unreasonable use of water when it declined to investigate wastewater discharges from four Los Angeles area Publicly Owned Treatment Works (“POTWs”). The Court found that the State Water Board’s duty under state law to prevent waste and unreasonable use of water is “highly discretionary” and does not require an investigation or assessment of every allegation of unreasonable use. The Appeals Court updated its decision on June 2, 2023. (Los Angeles Waterkeeper v. State Water Resources Control Board, 92 Cal.App.5th 230 (2d Dist. 2023).)

The Appeals Court upheld the trial court’s ruling on demurrer that the Los Angeles Regional Water Quality Control Board (“Los Angeles Board”) had no duty to evaluate the reasonableness of the POTWs’ discharges because a regional board’s purview is water quality, not water rights or water use. Thus, an unreasonable use assessment is a power strictly reserved for the State Water Board.

The Appeals Court also upheld the trial court’s conclusion that Water Code section 13389 did not mandate environmental review under the California Environmental Quality Act (“CEQA”) when wastewater discharge permits are issued under the federal Clean Water Act because the section cited by Los Angeles Waterkeeper (“Waterkeeper”), Public Resources Code section 21002, merely states a legislative policy without imposing environmental review requirements. Lastly, the Appeals Court reversed the trial court’s award of over $730,000 in attorney fees to Waterkeeper, explaining that attorney fees can only be awarded to successful parties. As expected, Waterkeeper filed a Petition for Review with the California Supreme Court, which was denied on August 23, 2023.

Prior Proceedings and Trial Court Decisions

The Los Angeles Board renewed four POTW permits despite Waterkeeper’s insistence that the Los Angeles Board and State Water Board were obligated under the California Constitution and Water Code to determine whether the quantity of wastewater discharged from the POTWs constituted waste or unreasonable use. Waterkeeper petitioned the State Water Board to review the Los Angeles Board’s permitting decisions, but the State Water Board declined review. Consequently, Waterkeeper filed four petitions for writs of mandate against the Los Angeles Board and State Water Board.

The Los Angeles Board and State Water Board filed a demurrer to all four writ petitions, asserting that the petitions failed to state facts sufficient to constitute a cause of action because the California Constitution and Water Code: (1) do not impose a duty on the Los Angeles Board to make an unreasonable use assessment whenever issuing wastewater discharge permits, and (2) do not require State Water Board to investigate every alleged instance of unreasonable water use, which would overtax its resources and otherwise infringe on its discretion.

The trial court overruled the State Water Board’s demurrer, but sustained the Los Angeles Board’s demurrer. After trial, the trial court granted Waterkeeper’s writ against the State Water Board finding that, due to the uniquely large size of the combined discharges of the four POTWs, the State Water Board had a duty to assess whether these discharges constituted waste or unreasonable use and granted Waterkeeper’s fee motion, awarding them $737,932.84 in attorney fees for being a “successful party” under Code of Civil Procedure section 1021.5. The State Water Board appealed the ruling against the State Water Board and the fees award, and Waterkeeper appealed the rulings related to the Los Angeles Board and CEQA.

Second District Court Decision

The Second District Appeals Court reversed the trial court’s judgment regarding the State Water Board and affirmed the trial court’s decisions on demurrer regarding the Los Angeles Board’s lack of duty regarding unreasonable use and the lack of applicability of CEQA to the Los Angeles Board’s permit decisions. The Appeals Court also reversed the trial court’s order granting Waterkeeper attorney fees. The Appeals Court’s decision hinged on four justifications:

1)  The State Water Board’s “Duty” to Evaluate Waste and Unreasonable Use is Discretionary and Equivalent to Enforcement Discretion.

The Appeals Court held that any duty that Article X, section 2 of the California Constitution and the Water Code imposes on the State Water Board to prevent waste and unreasonable use of water is “highly discretionary.” The California Constitution and the Water Code simply state that the general welfare requires that unreasonable use of water “be prevented,” without any guidance regarding how the government should execute that policy. Thus, to the extent those provisions impose a duty, the law does not limit the State Water Board’s discretion as to when and how to satisfy that duty.

Importantly, the Appeals Court explained that granting the State Water Board broad discretion represents a practical necessity. The State Water Board does not have unlimited resources, and cannot investigate every allegation of unreasonable use of water or every hose left running in the state. The Appeals Court also reminded Waterkeeper that compelling the State Water Board to direct its discretionary enforcement powers at particular discharges of water that Waterkeeper believes are wasteful, such as the discharges from these four POTWS, is beyond the scope of mandamus, which cannot compel an agency to exercise its discretion in a particular way.

2)  The Los Angeles Board has No Duty to Evaluate Waste and Unreasonable Use.

The Appeals Court clarified that the regional boards’ role in state water law is to regulate water quality, not water use. The Appeals Court found nothing in the Water Code to suggest that the Los Angeles Board’s role in regulating water quality includes the regulation of unreasonable use. While the Water Code broadly delegates to the State Water Board “the adjudicatory and regulatory functions of the state in the field of water resources” (Wat. Code, § 174), as well as the power to “take all appropriate proceedings or actions…to prevent waste [and] unreasonable use” of water (id., § 275), nothing in the Water Code grants the state’s regional boards with equivalent powers. Finding otherwise would expand the regional boards’ role and change the nature of the permitting process without any underlying authority or guidance as to how regional boards should comply.

3)  Public Resources Code Section 21002 does not Mandate Environmental Review in NPDES Permitting Contexts.

Despite Water Code section 13389’s language exempting NPDES permits from CEQA’s Environmental Impact Report (“EIR”) process, Waterkeeper alleged that Public Resources Code section 21002, located in CEQA Chapter 1, imposes its own environmental review requirements.  The Appeals Court disagreed, finding this section merely states a policy that the Legislature intended the EIR process to effectuate. Thus, Section 21002 only has force to the extent an entity otherwise is obligated to prepare an EIR. The Appeals Court refused to read this section of CEQA to impose requirements on the Los Angeles Board when the Legislature has specified no means to carry out those requirements apart from an EIR, from which the Los Angeles Board is expressly exempt under Water Code section 13389.

4)  Waterkeeper is Not Entitled to Attorneys’ Fees.

Code of Civil Procedure section 1021.5 allows an award of attorney fees “to a successful party….in any action which has resulted in the enforcement of an important right affecting the public interest.” The Appeals Court therefore reversed the trial court’s attorney fees award of over $700,000 appealed by the State Water Board since Waterkeeper was no longer a “successful party.”

In summary, this published appellate decision brings some clarity to the scope and breadth of the Waste and Unreasonable Use Doctrine, and clarifies that the NPDES permit process is not required to be the focus of such review. The State Water Board remains able to focus its limited resources on its own priorities to conserve and protect California’s water resources from waste or unreasonable use.

Supreme Court of California Denies Waterkeeper’s Petition for Review

On August 23, 2023, the Supreme Court of California, sitting en banc, summarily denied Waterkeeper’s Petition for Review of the Second District Court of Appeal’s decision. The Supreme Court’s denial will have far-reaching implications for the State Water Board’s discretionary authority to investigate wastewater discharges and for parties seeking attorney fees in enforcement actions under the Water Code and California law. Read the Supreme Court’s succinct decision here.

Downey Brand continues to monitor court decisions affecting regulatory standards to ensure compliance and the best outcomes for its clients. Please contact us with any questions.