Article by Alex Lorca

This important court decision provides clarity to public agencies, as well as developers, as to when certain activities are considered a “project” subject to review under the California Environmental Quality Act.

In 2014, the City of San Diego adopted an ordinance that amended its zoning code to, for the first time, allow medical marijuana dispensaries in certain areas of the City, and to regulate their operation. The City did not undertake environmental review of the amendment under the California Environmental Quality Act (CEQA), finding it exempt from review. A group known as the Union of Medical Marijuana Patients, Inc. (UMMP) challenged the zoning code amendment in court, arguing the City was required to conduct environmental review.

CEQA is a statutory scheme found in the California Public Resources Code that was enacted to ensure public agencies inform their decision-making with environmental considerations.

Generally, CEQA applies to “projects,” which is defined under CEQA, at Public Resources Code § 21065, as an activity that may cause “either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.” This definition requires a public agency to make a factual determination regarding the impact of the proposed activity.

However, another section of CEQA appears to deem certain activities as projects per se, without a factual determination of whether the activity may cause a direct or reasonably foreseeable indirect physical change in the environment. Specifically, Public Resources Code § 21080(a) states CEQA 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….”

UMMP argued that the City’s adoption of the zoning amendment was a “project” under both      § 21080 as a project per se, and also under § 21065 because the zoning amendment could cause – directly or indirectly – a physical change in the environment.

Both the trial court and the court of appeal denied UMMP’s challenge, finding the ordinance was not a project because it did not have the potential to cause a physical change to the environment.

The California Supreme Court reversed. With respect to § 21080, the court found it to be ambiguous in that it could be interpreted to require CEQA review for any “enactment and amendment of zoning ordinances,” or it could be interpreted as a generic list of activities to which CEQA might apply.

The Court resolved the ambiguity using several well-known rules of statutory interpretation. First, the Court noted that statutory provisions such as § 21080 must not be considered in isolation, but rather in the context of the entire statute. Next, the Court noted that where an express definition of a term is provided, it is usually binding on the courts.

Applying these rules, the Court noted the term “project” was defined in CEQA at § 21065, which, as noted, provides that an activity is a “project” if it may cause “either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.”

As such, the Court held that § 21080 must be understood to be a generic list of activities to which CEQA might apply, and confirmed the zoning amendment would only be considered a “project” if it otherwise could “cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment” pursuant to § 21065.

After resolving the conflicting interpretations of § 21080, the Court went on to hold the particular zoning amendment at issues (allowing medical marijuana dispensaries) was indeed a “project” under § 21065 because it had the potential to cause a change in the physical environment in the form of retail construction as well a citywide change in traffic patterns.