Tesoro, a major operator in the fuel industry now known as Andeavor, sought approval for its Los Angeles Refinery Integration and Compliance Project. The Project was designed to: (1) improve integration between its Carson and Wilmington refinery facilities to allow for more flexibility to alter output fuel ratios (such as gasoline and jet fuel) in response to market price trends; and (2) reducing pollutant emissions from its crude oil heating unit in order to improve compliance with more stringent air quality regulations. The controversy over the Project centered on the means of reducing the pollutant emissions of the heater unit at the Wilmington facility. Tesoro sought to update the operating permit for the existing unit to establish a new thermal operating limit for the heater at the facility. Tesoro also proposed to shut down its Wilmington Fluid Catalytic Cracking Unit, a major source of air pollution at the facility.
The key differences between the existing operations and the newly proposed operations, particularly for the environmental review analysis, focused on the distinctions between the manufacturer’s guaranteed heat rate of 252 (measured in millions of BTU per hour) and the heater’s maximum heat rate of 302.4. The existing permit was set using the guaranteed heat rate, though Tesoro had historically operated the heater above that amount and the court noted that there was nothing in the record suggesting this was in violation of the existing permit. Tesoro sought to revise the permit to: (1) impose a new air pollution limitation that assumed the heater would never be operated above the 252 heat rate, and (2) raise the thermal operating limit to coincide with the heater’s existing heating capability. This change would allow Tesoro to either process a heavier blend of crude or increase its throughput by 6,000 barrels per day, but not both.
After the South Coast Air Quality Management District (the “District”) certified the EIR and approved the permit, Communities for a Better Environment (“CBE”) filed suit, arguing the EIR was inadequate in four respects: (1) the EIR used the wrong baseline to evaluate the impacts of the Project; (2) the District failed to obtain sufficient information about the pre- and post-project crude oil composition to explain the implications on pollutant emissions; (3) the EIR included no explanation of how the “6,000 barrel” figure was calculated; and (4) the EIR failed to disclose the existing volume of crude oil processed at the facility, nor its unused capacity. The trial court rejected the claims and CBE appealed.
The Second District Court of Appeal rejected each of the four claims raised by CBE and affirmed the trial court decision:
- The court held that the peak baseline selected by the District was proper, rejecting the assertion that the District should have used an “average-value” baseline. It reasoned that the District’s selection, which focused on the impact of peak emissions on the most vulnerable populations, was a rational choice that was supported by substantial evidence. The court pointed to the District’s consistency with the practice of the federal Environmental Protection Agency, and it noted that: (i) the federal and state regulatory purposes were in sync—to protect public health and welfare; (ii) the federal use of the peak baseline was based on data of the existing conditions on the 15 worst days in the 730-day review period; (iii) while not necessarily required, the District always has the option to rely on similar federal efforts that achieve the same goals and purposes; and (iv) CBE’s claim that use of an average is “normal” for baseline ignores the fact that there is no such thing as “normal” when it comes to averages.
- The court held that there was no need for the District to obtain detailed information on pre-project v. post-project crude oil composition, reasoning that such information was irrelevant due to the District’s reliance on the refinery’s “crude oil operating envelope” (defined as the facility’s range of acceptable blends that are within an identified range of weight and sulfur content). This was because operating with any crude that does not fit within the existing operating envelope would require substantial physical changes to other parts of the refinery equipment which were not proposed for the Project. Thus, any increased air emissions that could result from using heavier crude could only be due to the need to burn more fuel to operate the refinery’s burners, which was precisely what the EIR had analyzed.
- The court held that CBE had forfeited its claim regarding the “6,000 barrels” calculation. It reasoned that the claim was not raised during the administrative process and, thus, CBE failed to exhaust its administrative remedies. The court noted that throughout the 1,716 pages of comments provided by CBE and another law firm, the only comment identified by CBE in the record that discussed an increase of 6,000 barrels per day did not raise questions about how the 6,000 figure was calculated; rather, it broadly focused on purported inconsistencies between post-Project capacity and information submitted to the Securities and Exchange Commission on the refinery’s capacity. This, the court held, was insufficient to allow CBE to rely on a broadly applicable comment to support a much more specific claim, even though it could arguably be encompassed in that broader comment.
- Applying the abuse of discretion standard, the court held that the District did not have an obligation to disclose either the existing volume of crude oil processing or the refinery’s unused capacity. CBE had argued that the existing volume information was necessary to verify that the “actual post-project increase in capacity would not exceed the 6,000 barrels per day” assumption. But the court rejected this argument, reasoning that the “6,000 barrels” figure was adequately supported by the EIR’s analysis of the “crude oil operating envelope” which noted that any increase in overall refinery output would require other physical changes to be made to the refinery. As for the unused capacity data, the court rejected the claim as nothing more that “a variant of [CBE’s] preceding [existing volume of crude oil processing] argument.” Furthermore, the court concluded that the data was not needed, because the EIR’s analysis was already otherwise supported by substantial evidence.
Comment: In many respects this is a typical case of deference to agency decision making when making decisions and analyzing impacts in an EIR—support your choices with substantial evidence and you are likely to receive a favorable outcome. One thing that is particularly interesting about this decision, however, is the discussion on exhaustion. Here, the court found that a comment that arguably inferred that there was an issue with the assumed increase in crude oil throughput (6,000 barrels/day), was insufficient to exhaust remedies because it was not specific enough for the District to be able to address the concern. Exhaustion can be a powerful tool to defend environmental review documents, and this case reinforces the commenter’s obligation to provide real specificity if they want to be able to pursue that claim in any subsequent CEQA litigation.
Daniel Cucchi is Senior Associate at Abbott & Kindermann, Inc. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, Inc. at (916) 456-9595.
The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, Inc., or 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.