By Leslie Z. Walker

In Planning and Conservation League v. Castaic Lake Water Agency (2009) 180 Cal.App.4th 210, the Castaic Water Agency (“Castaic”) succeeded in extracting its agreement with Kern County Water Agency (“Kern”), if only for a moment, from the tangles of the Department of Water Resources’ (“DWR”) Monterey Agreement.

I.          Background   

A.        Monterey Agreement

By way of background, the Monterey Agreement was negotiated in December of 1994 between the DWR and five of its 29 water contractors. The Agreement changed the distribution of water in the case of water shortage. The original contracts with DWR identified a maximum amount of water that DWR had agreed to provide the contractor if the water is available (“Table A” water). The original contracts contained Articles 18(a) and 18(b) which provided that in the case of a temporary water shortage, the amount of water delivered for agricultural purposes would be reduced (Article 18(a)), and in the case of a permanent shortage, deliveries to every contractor would be reduced through an amendment of Table A allocations (Article 18(b)). The Monterey Agreement amended the original contracts to eliminate the water reduction provisions in article 18 and to provide instead that each supplier was entitled to a prorated portion of the available water, based on its Table A amount, regardless of whether the water was used for agricultural or urban purposes. Central Coast Water Authority (“Central Coast”) prepared an EIR for the Monterey Agreement. In 2000, the Third Appellate District determined that the Monterey Agreement EIR was defective, ordered it decertified, and held that DWR, not Central Coast had to prepare and certify a new EIR. (Planning & Conservation League v. Department of Water Resources (2000) 83 Cal.App.4th 892.)

B.        1999 EIR

In 1999, Castaic prepared an EIR for the transfer of 41,000 acre-feet of water from Kern to Castaic. The court found the EIR was defective because it tiered off the decertified Monterey Agreement EIR, relying on the decertified Monterey Agreement EIR to establish that the environmental effects of the Monterey Agreement were negligible. (Friends of the Santa Clara River v. Castaic Lake Water Agency (2002) 95 Cal.App.4th 1373.) The court rejected Friends of the Santa Clara River’s (“Friends”) subsequent attempt to enjoin the Kern-Castaic transfer. After Friends appealed this decision, the parties entered into a settlement agreement, permitting compliance with the Monterey Agreement pending DWR’s certification of the new EIR, but obligated DWR to include an analysis of the potential environmental effects of the Kern-Castaic transfer.

C.        2004 EIR

In 2004, Castaic prepared a new EIR for the Kern-Castaic transfer. The 2004 EIR did not tier off of the Monterey Agreement EIR. The Planning and Conservation League (“PCL”) and the California Water Impact Network (“CWIN”) (together, “Appellants”) filed petitions challenging the sufficiency of the 2004 EIR. The trial court found the EIR defective and issued a writ but rejected the key contentions of PCL and CWIN. PCL and CWIN appealed, and Castaic cross appealed. Appellants claimed the 2004 EIR was inadequate because 1) Castaic was not the proper lead agency; 2) the 2004 EIR misrepresented the relevance of the pending Monterey Agreement EIR and 3) the EIR contained errors related to the project and its alternatives. On cross-appeal, Castaic claimed the case was barred by Res Judicata by Friends of Santa Clara River v. Castaic Lake Water Agency, supra, 95 Cal.App.4th 1373, which invalidated the EIR Castaic prepared in 1999 for the Kern-Castaic transfer.

II.        Res Judicata Claim

The appellate court found the action was not barred by the doctrine of Res Judicata because the previous action was brought by parties who were not in privity with PCL and CWIN and the prior suit was based on a factually distinct EIR – the 1999 EIR as opposed to the 2004 EIR.

III.       EIR Adequacy

A.        Lead Agency

1.         Relationship of Monterey Agreement to Kern-Castaic Transfer  

Appellants claimed DWR, not Castaic, should have been the lead agency for the 2004 EIR because the Kern-Castaic transfer was part of the Monterey Agreement under environmental review by DWR. The appellate court rejected this agreement, first looking at whether the Monterey Agreement contemplated the Kern-Castaic transfer. Quoting Laurel Heights Improvement Association v. Regents of the University of California (1988) 47 Cal.3d 376, 396, the court explained that:

“an EIR must include an analysis of the environmental effects of future expansion or other action if 1) it is a reasonably foreseeable consequence of the initial project and 2) the future expansion or action will be significant in that it will likely change the scope or nature of the initial project or its environmental effects.”

The court explained that since “the Kern-Castaic transfer was only a ‘glean in the planner’s eye’ at the time of the Monterey Agreement, the transfer fell outside the original Monterey Agreement EIR, and was properly considered a separate EIR.”

The Court next considered whether the project should have been reviewed by DWR as part of the Monterey Agreement EIR. In other words, the court considered whether Castaic’s preparation of a separate EIR constituted improper piecemealing. Relying on the analysis in Del Mar Terrace Conservancy, Inc. v. City Council (1992) 10 Cal.App.4th 712, the court found that Castaic properly considered the transfer as a separate project because “the transfer had significant independent or local utility in view of its benefits to Castaic’s service area and the relative autonomy from the Monterey Agreement.” The court based this decision on the fact that substantial evidence showed 1) “the transfer could have been implemented under the pre-Monterey Agreement contractual regime,” and 2) “that the parties intend to continue the transfer, regardless of DWR’s environmental review of the Monterey Agreement.”

Appellants also contended that CEQA compliance mandates that either DWR conduct the environmental review of the transfer or Castaic await the outcome of DWR’s review of the Monterey Agreement before approving the transfer. The court found that Castaic could properly certify the 2004 EIR prior to the new Monterey Agreement EIR, provided that the 2004 EIR adequately assessed the environmental impact of the Monterey Agreement, to the extent necessary for a fully informed decision regarding the Kern-Castaic transfer.

2.         Castaic as Lead Agency

Appellants contended that DWR, should have been the lead agency for the 2004 EIR because DWR has expertise in both the computer models used to assess the water supply scenarios and the scenarios themselves because they hinge on the implementation of the Monterey Agreement, for which DWR is conducting environmental review.

The appellate court disagreed, explaining the public agency that “shoulders primary responsibility for creating and implementing a project is the lead agency, even though other public agencies have a role in approving or realizing it.” The court explained that Castaic, rather than DWR, has carried out the Kern-Castaic transfer and therefore was the correct lead agency for the project.

B.        Significance of Pending Monterey Agreement

Appellants claimed that the 2004 EIR improperly described the transfer as final, despite its relationship to DWR’s incomplete assessment of the Monterey Agreement. They claim that the 2004 EIR 1) improperly assumes the transfer will occur, regardless of the result of the Monterey Agreement EIR; 2) inadequately discloses the possibility that DWR may reach different conclusions regarding the availability of water for the transfer and 3) fails to discuss the potential impact of implementing the transfer under the pre-Monterey contractual regime. The court rejected all of these arguments, finding that the 2004 EIR adequately described the circumstances surrounding the Kern-Castaic transfer’s relationship to the Monterey Agreement EIR, adequately described data differences between its findings and those of DWR, and adequately discussed the contractual entitlements under the pre-Monterey Agreement scenario.

C.        No Project Alternative

Appellants challenged the no project alternative in the 2004 EIR, arguing that the EIR should have analyzed the scenario in which neither the Kern-Castaic transfer, nor the Monterey Agreement were implemented. The no project alternative described in the 2004 EIR is the scenario in which the Kern-Castaic transfer did not occur, but the Monterey Agreement was still in effect. Appellants contended that Castaic was obliged to examine the possibility that the transfer would not occur and the pre-Monterey Agreement contractual regime was restored.

Citing to Planning and Conservation League v. Department of Water Resources, supra, 83 Cal.App.4th 892, 917-918 the court explained the no project alternative, “is a factually based forecast of the environmental impacts of preserving the status quo.” Since the Monterey Agreement was currently in effect, the status quo was the absence of the Kern-Castaic transfer, but the presence of the Monterey Agreement. The court found that CEQA did not require the 2004 EIR to examine the joint impact of the absence of the transfer and the restoration of the pre-Monterey Agreement contractual regime.

III.       Failure to Exhaust Administrative Remedies

Castaic challenged the trial court’s determination that the 2004 EIR was defective in its failure to explain that the outcome of the Monterey Amendments EIR may have had an impact on the transfer. The appellate court found however that the 2004 EIR was not subject to challenge on those ground because appellants failed to exhaust their administrative remedies on the issue. The court explained that “petitioner bears the burden of demonstrating that the issue raised in the judicial proceeding were first raised at the administrative level. The objections must be sufficiently specific so that the agency has the opportunity to evaluate and respond to them.” The court described a number of objections made by appellants during the public comment period, but concluded that none of the objections “attached the adequacy of the analytic route drawn in the EIR between the pending DWR Monterey Agreement EIR and the proposed transfer.

IV.       Conclusion

In sum, the appellate court did not require the impossible: it did not require Castaic await the completion of the EIR for the entire Monterey Agreement, nor did it require that Castaic step back through history to analyze the transfer as if the Monterey Agreement had never occurred. Castaic described in detail the uncertainties that surrounded the agreement, and the appellate court found this was sufficient, even in light of California Oak Foundation v. City of Santa Clarita (2005) 133 Cal.App.4th 1219.

Leslie Z. Walker is an associate at Abbott & Kindermann, LLP.  For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.