On August 19, 2019, the California Supreme Court ruled on a fundamental California Environmental Quality Act (CEQA) issue: when is a zoning ordinance amendment considered a “project” subject to CEQA? The ordinance at issue was San Diego’s attempt to regulate the construction and operation of cannabis dispensaries within the City. The City concluded that the ordinance was not a “project” because it did not have the potential to cause a physical change in the environment.

The California Supreme Court ultimately disagreed with the City. In Union of Medical Marijuana Patients, Inc. v. City of San Diego (UMMP) the Court held that CEQA does not automatically apply to all zoning ordinance amendments (overruling a previous Court of Appeal’s decision holding to the contrary). However, the zoning ordinance amendments at issue in San Diego were certainly a “project” and thus do not evade CEQA review on the basis San Diego provided.

The Court’s ruling has direct implications for those businesses depending on such zoning amendments, providing an opportunity for a municipality or stakeholder to argue that any desired amendment does not necessarily trigger CEQA review. It is also of great importance to the cannabis industry, who can now be near certain that zoning ordinance amendments specifically for dispensary construction and operation may qualify as “projects” subject to CEQA. We discuss both of these impacts in greater detail below.

Background

In UMMP, the City amended its zoning ordinance to allow medical marijuana dispensaries to be located within the City, but further imposed restrictions as to the location and manner of operation of the dispensaries. The City concluded that its amendment action was not a “project” pursuant to CEQA, and therefore did not require any environmental review. CEQA defines a “project” as including any activity undertaken by a public agency and “which may cause either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment.” CEQA, Cal. Pub. Res. Code section 21065. 

UMMP subsequently challenged the City’s conclusion, claiming the ordinance was conclusively a “project” under CEQA section 21080(a), or, alternatively, that the amendment met the general definition of “project” under CEQA section 21065. Section 21080(a) excepts certain activities from the definition of “project,” but states that the definition of “project” still includes and applies to “discretionary projects proposed to be carried out or approved by public agencies, including, but not limited to, the enactment and amendment of zoning ordinances . . . unless the project is exempt from [CEQA].” CEQA, Cal. Pub. Res. Code section 21080. Applying either section, UMMP argued, because the City’s amendment was a “project,” the City should have conducted an environmental impact report on the physical changes the amendment would create, such as increased traffic.

The Court’s Decision in UMMP

UMMP’s argument that the City’s ordinance categorically qualifies as a CEQA “project,” was based on the bright line test adopted by the Court of Appeal in Rominger v. County of Colusa (2014) 229 Cal.App.4th 690. UMMP asserted that because “amendment to zoning ordinance” is expressly listed in section 21080(a), every zoning ordinance amendment is categorically a “project” subject to CEQA review.

The Court disagreed, criticizing Rominger for considering section 21080(a) separately and apart from the rest of CEQA, including section 21065, and rejecting its bright line rule. The Court found that section 21080 does not override section 21065. The list of example activities in section 21080(a), such as an amendment to zoning ordinances, are examples that may meet the definition of a “project” if the activity also satisfies section 21065.

The Court further stated that “[t]o subject such activities [like zoning] to CEQA as a matter, of course, serves no obvious public policy purpose.” The Court pointed out the scope of CEQA jurisdiction should not be so broad to risk CEQA becoming a tool to delay public agency actions that have no effect on the environment. As such, section 21065 must be considered in determining whether an activity is a “project.”

The Court also found that it may be reasonably foreseeable that the ordinance may cause an indirect physical change in the environment. The Court noted that the ordinance allows for the construction of several new businesses throughout the City, possibly altering traffic patterns. 

Impact

The Court, by rejecting Rominger’s bright line test, correctly adjusts the focus back upon whether an activity meets the definition of a “project” under section 21065. The Court also held that an ordinance may have a reasonably foreseeable change in the environment because of what it permits. Here, the construction of several new businesses and possible new traffic patterns will be created. The City’s reliance upon individual businesses having to comply with CEQA for their own projects, however, does not excuse the City’s duty to review pursuant to CEQA.

As for what the potential impacts may include, the UMMP case has been sent back to the lower court for further consideration. 

Beveridge & Diamond's NEPA and Historic Preservation Reviews practice group has been involved with NEPA and state analogues (like New York’s SEQRA and California’s CEQA) since the earliest implementation of these statutes. We help clients navigate the environmental review and permitting process to help them build their projects. B&D also advises stakeholders in the industrial hemp and cannabis industry on environmental issues and regulations impacting their businesses. For more information on CEQA requirements for cannabis businesses or assistance in obtaining compliance, please contact the authors.

Possession, use, distribution, and sale of cannabis may be a federal crime. This alert is not intended to provide any guidance or assistance in violating federal law, or in providing guidance or assistance in complying with federal law.