New Decision Limits CEQA Categorical Exemptions

Introduction

In a recent decision with potentially broad implications for home builders and developers, the California Court of Appeal narrowed the ability of projects requiring discretionary approvals to obtain a categorical exemption from the California Environmental Quality Act (CEQA). Overturning the trial court, the Court of Appeal in Berkeley Hillside Preservation v. City of Berkeley, A131254 (First Appellate District, February 15, 2012) held that the construction of a relatively large single-family home (6,478 square feet) on a steeply sloped lot in the Berkeley hills presented a fair argument of a significant effect on the environment, and ordered the preparation of an environmental impact report (EIR) for the home.

Berkeley Hillside affects anyone attempting to use a categorical exemption from CEQA, not just residential builders, but its singlefamily home context makes the case especially noteworthy. Wading into the somewhat contradictory case law on the use of CEQA categorical exemptions, the Court of Appeal ruled that the "unusual circumstances" exception to using any categorical exemption is met simply by the existence of evidence that the project in question may have a significant environmental effect.

Background

CEQA generally requires a governmental agency to prepare an EIR for any project which may have a significant effect on the environment.1 There are several types of projects which the state has determined do not typically have a significant environmental effect, and which are therefore exempt from CEQA under so-called "categorical exemptions."2 Such categorically exempt projects historically have included single-family homes and limited in-fill development projects meeting certain requirements, although the use of such exemptions was limited. A project cannot use a categorical exemption, however, when "there is a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances."3 This exception to the categorical exemptions was at issue in Berkeley Hillside.

Courts have interpreted the "significant effect" and "unusual circumstances" language in different ways. The Court of Appeal in Banker's Hill, Hillcrest, Park West Community Preservation Group v. City of San Diego stated that applying the exception involved two distinct inquiries: whether the project at issue involved unusual circumstances, and then whether it was reasonably possible that those unusual...