COMMUNITIES FOR A BETTER ENVIRONMENT v. SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT

Filed 12/18/07 Modified and Certified for Partial Publication 1/16/08 (order attached)

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

Story continued from Part I .

Generally, an EIR is required when substantial evidence supports a fair argument that a proposed project may have a significant effect on the environment. [Citations.] . . . . (Pocket Protectors, supra, 124 Cal.App.4th at p. 927; accord, Sierra Club v. California Dept. of Forestry & Fire Protection (2007) 150 Cal.App.4th 370, 381.) Substantial evidence under CEQA includes fact, a reasonable assumption predicated upon fact, or expert opinion supported by fact. (Pub. Resources Code,  21080, subd. (e)(1).) (Mejia, supra, 130 Cal.App.4th at p. 331.) The Guidelines define substantial evidence as enough relevant information and reasonable inferences from this information that a fair argument can be made to support a conclusion, even though other conclusions might also be reached. Whether a fair argument can be made that the project may have a significant effect on the environment is to be determined by examining the whole record before the lead agency. Argument, speculation, unsubstantiated opinion or narrative, evidence which is clearly erroneous or inaccurate, or evidence of social or economic impacts which do not contribute to or are not caused by physical impacts on the environment does not constitute substantial evidence. (Guidelines, 15384, subd. (a).) (Mejia, supra, at p. 332; accord, Pocket Protectors, supra, at p. 927.)

The fair argument test imposes low threshold for requiring the preparation of an EIR and reflects a preference for resolving doubts in favor of environmental review. (No Oil, Inc. v. City of Los Angeles (1974) 13 Cal.3d 68, 84; Mejia, supra, 130 Cal.App.4th at p. 332; Pocket Protectors, supra, 124 Cal.App.4th at p. 928; Architectural Heritage Assn. v. County of Monterey (2004) 122 Cal.App.4th 1095, 1110.) Application of the fair argument test is a question of law for our independent review. [Citations.] We review the trial courts findings and conclusions de novo [citations], and do not defer to the agencys determination [citation], except on legitimate, disputed issues of credibility [citations]. (Bowman v. City of Berkeley (2004) 122 Cal.App.4th 572, 580581; accord, Bankers Hill, Hillcrest, Park West Community Preservation Group v. City of San Diego (2006) 139 Cal.App.4th 249, 257; Gentry v. City of Murrieta (1995) 36 Cal.App.4th 1359, 13991400.)

As explained in more detail in Sierra Club v. County of Sonoma (1992) 6 Cal.App.4th 1307, 13171318: A court reviewing an agencys decision not to prepare an EIR in the first instance must set aside the decision if the administrative record contains substantial evidence that a proposed project might have a significant environmental impact; in such a case, the agency has not proceeded as required by law. [Citation.] Stated another way, the question is one of law, i.e., the sufficiency of the evidence to support a fair argument. [Citation.] Under this standard, deference to the agencys determination is not appropriate and its decision not to require an EIR can be upheld only when there is no credible evidence to the contrary. [Citation.] (Accord, Sierra Club v. California Dept. of Forestry & Fire Protection, supra, 150 Cal.App.4th at p. 381.)

In reviewing an agencys decision, we emphasize that the task of the judiciary is not to question the wisdom of proceeding with a project. Our purpose in reviewing environmental decisions is not to pass upon the correctness of a public entitys conclusions, but only upon the sufficiency of an EIR or negative declaration as an informative document. [Citations.] In so doing, we look to see whether policymakers have been adequately informed of the consequences of their decisions, and whether the public has sufficient information to evaluate the performance of their elected officials. [Citation.] As a result, we must be satisfied that the particular governmental agency involved has fully complied with the procedural requirements of CEQA, because only in this way can a subversion of the important public purpose of CEQA be avoided. . . . [Citation.] (Long Beach Sav. & Loan Assn. v. Long Beach Redevelopment Agency (1986) 188 Cal.App.3d 249, 259.)

With these principles in mind, we turn to appellants contentions.

B. There Was Substantial Evidence That NOx Emissions from the Project May Exceed the CEQA Significance Threshold.

Appellants first contend that an EIR was required because they presented a fair argument that the ULSD project would have a significant impact on air quality, as there was substantial evidence the project would generate operational NOx emissions exceeding the CEQA threshold.^[1] The SCAQMD and the Refinery have consistently and successfully asserted that any increase in NOx emissions did not constitute a significant impact because the evidence showed that any estimate of projected increases fell within the level of NOx emissions allowed by the Refinerys RECLAIM permit. But the undisputed evidence in the FND demonstrated that the Refinerys NOx emission levels have never approached the over 8,000 ppd set by the RECLAIM permit. By utilizing the RECLAIM permits maximum figure as the baseline for the ULSD project, the SCAQMD improperly calculated the baseline environmental setting on the basis of merely hypothetical conditions as opposed to realized physical conditions on the ground. (San JoaquinRaptorRescueCenter v. County of Merced (2007) 149 Cal.App.4th 645, 658 (San JoaquinRaptorRescueCenter).) Accordingly, the SCAQMD abused its discretion by reaching its conclusion of no significant impact from NOx emissions in a manner contrary to law.

1. Facts relating to NOx emission level calculations.

In the draft negative declaration, the SCAQMD concluded that the ULSD project would generate no increase in operational NOx emissions.^[2]The draft negative declaration did not include any information about the Refinerys existing level of NOx emissions; rather, it stated only that the ULSD project would result in a net reduction of NOx emissions. On appellants behalf, Dr. Fox submitted comments to the draft negative declaration in which she concluded that the ULSD project would generate approximately 560 ppd in NOx emissions from an increase in utilities necessary to support the increase in hydrotreating to reduce the diesel sulfur content. Relying on Dr. Foxs analysis, appellants further commented that the SCAQMDs conclusion that the ULSD project would generate no NOx emissions employed an erroneous baseline, premised on the improper assumption there would be no impact from the Refinerys generating anything below the maximum permitted level of NOx emissions.

The FND presented slightly higher NOx emissions calculations, acknowledging that the ULSD project would generate an increase of 8.9 ppd of NOx emissions from an increase in delivery trucks to deliver additional catalysta figure below the CEQA significance threshold of 55 ppd. Responding to appellants improper baseline argument, the SCAQMD for the first time explained that the Refinery operated pursuant to a RECLAIM permit and that it had relied on the permit conditions to calculate the baseline for the ULSD project. Thus, for NOx emissions from non-RECLAIM sourcese.g., delivery trucksthe baseline focused on the specific equipment to be added or modified: The emissions baseline for new equipment . . . is considered zero, and all emissions associated with such new equipment are considered emission increases resulting from the proposed project. For NOx emissions from RECLAIM sources, the SCAQMD used a baseline setting based on the emissions levels allowed by the RECLAIM permit. The FND summarized: For both RECLAIM sources and non-RECLAIM sources, where the project will simply result in increased utilization of existing equipment, and the equipment will remain within the operating parameters specified in previously issued permits, emission calculations were not presented in the Negative Declaration. This is because no discretionary approval is required for the increased utilization, and because the baseline emissions and the post-project emissions are the same, that is, they are both the permitted emissions.

Addressing the calculations rendered by Dr. Fox, the SCAQMD concluded that even if accurate levels of increased utilization of existing equipment were excluded from the baseline, any increases would remain below the level of significance. More specifically, the SCAQMD calculated that, at worst, the ULSD project would involve increased utilization of the oldest boiler at the Refinery, the existing hydrogen plant and the existing electrical generation equipment, all of which together would result in increased NOx emissions of approximately 456 ppd. Calculating the baseline as the Refinerys initial RECLAIM allocation of 8,318 ppd of NOx added to the CEQA significance threshold of 55 ppd, the SCAQMD reasoned that any emission level below 8,373 ppd would not be considered significant. Because the emissions associated with increased utilization of existing equipment (456 ppd), coupled with the Refinerys existing RECLAIM allocation (2,343 ppd), fell well below the 8,373 ppd level, the SCAQMD concluded that emissions would remain less than significant even under appellants methodology.

2. Legal principles governing the determination of the baseline environmental setting.

Before the impacts of a project can be assessed and mitigation measures considered, an EIR must describe the existing environment. It is only against this baseline that any significant environmental effects can be determined. (Guidelines,  15125, 15126.2, subd. (a).) (County of Amador v. El Dorado County Water Agency (1999) 76 Cal.App.4th 931, 952.) According to Guidelines section 15125, subdivision (a): An EIR must include a description of the physical environmental conditions in the vicinity of the project, as they exist at the time the notice of preparation is published, or if no notice of preparation is published, at the time environmental analysis is commenced, from both a local and regional perspective. This environmental setting will normally constitute the baseline physical conditions by which a lead agency determines whether an impact is significant. The description of the environmental setting shall be no longer than is necessary to an understanding of the significant effects of the proposed project and its alternatives. (See also Fat v. County of Sacramento (2002) 97 Cal.App.4th 1270, 12801281 [addressing the adequacy of the baseline in a negative declaration as opposed to an EIR].)

In San Joaquin Raptor Rescue Center, supra, 149 Cal.App.4th 645, the court highlighted the varying approaches to the determination of a projects baseline, stating: Although the baseline environmental setting must be premised on realized physical conditions on the ground, as opposed to merely hypothetical conditions allowable under existing plans [citations], established levels of a particular use have been considered to be part of an existing environmental setting. [Citations.] Environmental conditions may vary from year to year and in some cases it is necessary to consider conditions over a range of time periods. [Citation.] (Id. at p. 658.) There, the question was whether the impacts from a mine expansion project should be measured against a baseline of a four-year average of mine operations (240,000 tons per year) or against the level of permitted mine operations (100,00 tons per year). (Ibid.) Although the court ultimately concluded that the EIR was inadequate because it failed to identify the baseline assumptions employed for assessing impacts, it reasoned that substantial evidence supported using established mine operations as the baseline. (Id. at pp. 658659.) Reiterating the principle that established usage of the property may be considered to be part of the environmental setting, the court found that evidence of the mines production average established such use, whereas the evidence of the more restrictive permit was not part of the record. (Id. at p. 659.)

Applying established usage to determine a baseline environmental setting is not a new concept. In Environmental Planning & Information Council v. County of El Dorado (1982) 131 Cal.App.3d 350 (EPIC), the court held that two EIRs prepared for the Greenstone and Camino-Fruitridge area plans were inadequate because they compared the environmental impact of those plans to the existing general plan rather than to the existing environment. For example, the Greenstone area plan EIR represented that the plan resulted in a reduction of the population holding capacity from over 70,000 persons to 5,800, and that such a reduction in density would thus result in no unfavorable impact on air quality. (Id. at p. 356.) Similarly, the EIR and supplemental EIR for the Camino-Fruitridge area plan provided: The proposed plan establishes a population holding capacity of 22,440 while the existing plan provides a population holding capacity of 63,600. A substantial population reduction is then realized. . . . . Intutively [sic] a population reduction of 65% would decrease any potential impacts by the same percentage. (Id. at p. 357.) The court explained why the EIRs comparisons to the general plan failed to evaluate the area plans impacts: The comparisons, however, are illusory, for the current populations of those areas are approximately 3,800 for the Camino-Fruitridge area and 418 for the Greenstone area. The proposed plans actually call for substantial increases in population in each area rather than the illusory decreases from the general plan. (Id. at p. 358.) The court concluded that both EIRs were insufficient as informative documents because they failed to consider the impacts that each area plan would have on the environment in its current state. (Id. at pp. 357358.)

Relying on EPIC, the court in City of Carmel-by-the-Sea v. Board of Supervisors (1986) 183 Cal.App.3d 229 (City of Carmel), superseded by statute on other grounds as recognized in People ex rel. Brown v. Tehama County Bd. of Supervisors (2007) 149 Cal.App.4th 422, 450, similarly concluded that whether a project may have a significant impact should be determined by comparing the project to the existing physical environment, not to what is possible under existing zoning. There, a hotel that was subject to a land use plan (LUP) permitting the development of up to 75 residential units on the site (Mission Ranch) sought rezoning of its property to permit continued use of the hotel and future residential development. (City of Carmel, supra, at pp. 233234.) Although the rezoning application generated controversy concerning its scope and its impact on adjacent wetlands, the county prepared a negative declaration to address the impact of the rezoning. (Id. at p. 234.) The appellate court affirmed the trial courts order setting aside the rezoning decision, concluding that there was substantial evidence that the rezoning may have significant impacts. (Id. at pp. 241, 245.) Importantly, in reaching this conclusion the court expressly rejected the argument that no significant impacts could result because the maximum number of units allowed under the rezoning would be 65, which was less than the 75 units already allowed under the LUP. The court explained: In assessing the impact of the rezoning, it is only logical that the local agency examine the potential impact on the existing physical environment. The rezoning designation sought by Mission Ranch includes uses which do not presently exist and which would significantly expand the present resort hotel use. This is the effect which must be analyzed. A comparison between what is possible under the LUP and what is possible under the rezoning bears no relation to real conditions on the ground. (Id. at p. 246.)

Indeed, multiple cases have held that CEQA requires that a proposed project must be evaluated by comparing the impacts of the project to the existing physical environment. (E.g., Woodward Park Homeowners Assn., Inc. v. City of Fresno (2007) 150 Cal.App.4th 683, 693, 707710 (Woodward Park) [EIR for proposed office and retail project held inadequate where it compared impacts of projectincluding NOx emissionsto the office and retail development that could be built under existing zoning, not to the existing physical condition of the property]; Fat v. County of Sacramento, supra, 97 Cal.App.4th at pp. 12801281 [approval of negative declaration for proposed project upheld where impacts measured against actual physical condition of the property, despite that it had developed beyond what was allowed by permit]; Save Our Peninsula Committee v. Monterey County Bd. of Supervisors (2001) 87 Cal.App.4th 99, 118128 (Save Our Peninsula) [EIR for proposed residential development held inadequate where baseline water use figures were based on assumptions about water use that were unsupported by either existing conditions or evidence of historical use]; cf. Christward Ministry v. Superior Court (1986) 184 Cal.App.3d 180, 190 [CEQA review required for amendment to general plan to add a waste management facility even though such a facility may have been allowed under a special use permit; the local agency is required to compare the newly authorized land use with the actually existing conditions, not with hypothetically permitted facilities that did not exist].) Succinctly summarized, these cases stand for the principle that [a] baseline figure must represent an environmental condition existing on the property prior to the project. (Save Our Peninsula, supra, at p. 123.)

Another line of cases, however, appears to hold that permitted conditions constitute an appropriate baseline by which to measure a proposed projects environmental impacts. In Fairview Neighbors v. County of Ventura (1999) 70 Cal.App.4th 238 (Fairview Neighbors), the EIR measured the traffic impacts from proposed modifications to a mining facility against the traffic levels allowed under an existing conditional use permit. Rejecting a challenge that the EIR should have measured the projects impacts against actual, existing traffic levels, the court found that [t]he instant EIR appropriately assumes the existing traffic impact level to be the traffic generated when the mine operates at full capacity pursuant to the entitlement previously permitted by CUP-1328, as extended by the compliance agreement. (Id. at
pp. 242243.) The court added that comparing the effects of the project against actual traffic figures would have been misleading because the mining operations traffic flow fluctuated greatly over time based on varying levels of demand, production and other factors. (Id. at p. 243.) The court in Benton v. Board of Supervisors (1991) 226 Cal.App.3d 1467, 1473, 1476 (Benton), also concluded that the impacts of a modified proposal for a winery should be measured against a winery that had already been approved and permitted. Likewise, in Committee for a Progressive Gilroy v. State Water Resources Control Bd. (1987) 192 Cal.App.3d 847, 863 (Gilroy), the court held that an EIR was not required to evaluate the impacts of restoring a wastewater treatment facilitys capacity to previously permitted levels.

A common and critical feature among the three foregoing cases was prior environmental review. In Benton, supra, 226 Cal.App.3d 1467, the court noted that the project under review was merely a modification of a project which had already been approved following environmental review and expressly distinguished EPIC and City of Carmel on the ground that those cases did not involve projects which had undergone earlier, final CEQA review. (Benton, supra, at p. 1477, fn. 10.) The court in Fairview Neighbors, supra, 70 Cal.App.4th at page 242, cited Bentonin highlighting the fact that the project which constituted the baseline had already undergone environmental review. And in Gilroy, supra, 192 Cal.App.3d 847, the court ruled not only that prior CEQA review was relevant to the determination of the baseline, but also that the reestablishment of a requirement previously approved under CEQA did not constitute a project subject to environmental review. (Id. at p. 863 [The reestablishment of discharge requirements within previously approved levels is merely a separate governmental approval of the original project and does not itself constitute a new project under CEQA].)^[3]

Reconciling the two lines of authority, we conclude that a projects baseline is normally comprised of the existing environmental settingnot what is hypothetically allowed pursuant to existing zoning or permitted plans. Where prior environmental review has occurred, though, the existing environmental setting may include what has been approved following CEQA review. The City of Carmel court clarified this distinction, responding to the argument that an EIR for the proposed development would be duplicative, since the scope of the project was already permitted by the LUP. (City of Carmel, supra, 183 Cal.App.3d at pp. 252253.) The court noted that environmental review was necessary to address the specific effects arising from the proposed project and importantly cautioned that [t]he fact that County was following state law by conforming zoning to the LUP (Gov. Code, 65860) does not by itself excuse preparation of appropriate environmental documents. (Id. at pp. 247, 253.)

3. The SCAQMD abused its discretion by comparing the ULSD projects NOx emissions impacts to the maximum RECLAIM permit emission level.

In the FND, the SCAQMD relied on Benton and Fairview Neighbors in explaining its baseline calculations, stating case law has held that the actual physical environment includes that which the operator has a legal right to build and operate under permits which have already been issued. Elaborating on its selection of the baseline as the maximum level of emissions allowed by the RECLAIM permit, the SCAQMD further explained: For both RECLAIM sources and non-RECLAIM sources, where the project will simply result in increased utilization of existing equipment, and the equipment will remain within the operating parameters specified in previously issued permits, emission calculations were not presented in the Negative Declaration. This is because no discretionary approval is required for the increased utilization, and because the baseline emissions and the post-project emissions are the same, that is, they are both the permitted emissions. In other words, the SCAQMD calculated the baseline level of NOx emissions for the ULSD project as over 8,000 ppd, because that is the level allowed by the RECLAIM permit. In the alternative, the SCAQMD asserted that even if emission increases associated with existing equipment were not included as part of the baseline, they would remain less than significant because they would not exceed the RECLAIM permit levels. Thus, even the SCAQMDs worst case of 456 ppd of NOx emissions would not trigger environmental review because those emissions would remain well below the permitted level of over 8,000 ppd.

We conclude that both of the SCAQMDs positions are flawed. The increased use of existing equipment must be evaluated as part of the project, not part of the baseline. Moreover, the SCAQMDs own estimates of the emissions resulting from that increased use constituted substantial evidence that the ULSD project may have a significant impact on the environment, as the emissions exceeded the CEQA significant threshold.

a. The increased use of existing equipment must be evaluated as part of the ULSD project, not part of the baseline.

According to CEQA, a project includes an activity which may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and which includes an activity supported in whole or in part by a public agency. (Pub. Resources Code, 21065.) The Guidelines confirm that [p]roject means the whole of an action, which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. (Guidelines, 15378, subd. (a).) The term [p]roject is given a broad interpretation in order to maximize protection of the environment. [Citation.] (Lighthouse Field Beach Rescue v. City of Santa Cruz (2005) 131 Cal.App.4th 1170, 1180; accord, Friends of the Sierra Railroad v. Tuolumne Park & Recreation Dist. (2007) 147 Cal.App.4th 643, 653 [CEQAs conception of a project is broad].)

Guided by these principles, we conclude that any environmental review of the ULSD project must encompass the increased use of existing equipment outlined in the FND, including the increased utilization of existing steam generation equipment, hydrogen plant production and electrical generation equipment. The circumstances here are akin to those in San Joaquin Raptor Rescue Center, supra, 149 Cal.App.4th 645, where the court found that an EIR inadequately analyzed the impact of a mining operation on the groundwater supply because it fails to take into account and analyze the impact of substantially increased levels of production at the mine. . . . The conclusion in the EIR that water consumption will remain at current baseline levels, even after production is dramatically increased . . . is not supported by substantial evidence or reasoned analysis.^[4] (Id. at p. 662; see also Lighthouse Field Beach Rescue v. City of Santa Cruz, supra, 131 Cal.App.4th at pp. 11961197 [nothing in the baseline concept excuses a lead agency from considering the potential environmental impactsof increases in the intensity or rate of use that may result from a project].)

We cannot agree with the SCAQMDs and the trial courts conclusion that increased emissions from existing equipment must be considered part of the baseline because those emissions would be allowed by the RECLAIM permit. As discussed above, courts have accepted a baseline environmental setting premised on permitted levels where the permits were the result of prior environmental review. (See Fairview Neighbors, supra, 70 Cal.App.4th at p. 242; Benton, supra, 226 Cal.App.3d at p. 1477, fn. 10; Gilroy, supra, 192 Cal.App.3d at p. 863.) Here, in contrast, there was no evidence that the impacts from the existing equipment that would be utilized as part of the ULSD project had ever been subject to environmental review. Rather, the record demonstrated that two of the four boilers that would serve as part of the steam generating equipment were constructed before the enactment of CEQA and thus had never undergone review. Though the other two boilers were constructed after CEQA, nothing in the FND indicated that they had been subject to environmental review. The cogeneration unit, which was also a part of the steam generating equipment for the ULSD project, was subject to CEQA review in 1987 and 1996, but the FND failed to apportion the emissions generated by that unit from those generated by equipment which had never been reviewed. There is thus no way to ascertain how much of the ULSD projects 456 ppd of NOx emissions would be generated by equipment never subject to CEQA review.

In view of the absence of prior environmental review, we are guided by the general rule that the baseline environmental setting must be premised on actual physical conditions on the ground, as opposed to merely hypothetical conditions allowable under existing plans or permits. (San Joaquin Raptor Rescue Center, supra, 149 Cal.App.4th at p. 658; accord, Save Our Peninsula, supra, 87 Cal.App.4th at p. 123; City of Carmel, supra, 183 Cal.App.3d at p. 246.) According to the FND, the Refinerys NOx emissions did not approach the RECLAIM permits upper limit of 8,318 ppd. Rather, the Refinerys NOx emissions during the period 1999 to 2003 ranged from a low of 3,249 ppd in 2001 to 2002, to a high of 4,592 ppd in 1999 to 2000. During the most recently period reported2002 to 2003the Refinerys NOx emissions averaged 3,567 ppd. The SCAQMD should have utilized these figures, as opposed to the maximum emissions figure allowed by the RECLAIM permit, as the ULSD projects baseline for NOx emissions.

We find no merit to the SCAQMDs assertion that, at a minimum, it had discretion to employ a different baseline than the actual conditions at the Refinery. (See Woodward Park, supra, 150 Cal.App.4th at p. 710 [The proposition that an agency sometimes can choose a baseline other than existing physical conditions is implicit in the Guidelines statement that existing physical conditions are normally the baseline].) We do not find that the RECLAIM program or the policies behind it warrant the SCAQMDs employing a baseline that bears no relation to real conditions on the ground. (City of Carmel, supra, 183 Cal.App.3d at p. 246.) In the FND, the SCAQMD asserted that the RECLAIM program sufficiently addressed any impact arising from the use of existing equipment and that the programs NOx emission level should serve as the ULSD projects baseline becauseregardless of the number of pieces of equipment at a RECLAIM facility or the variability of operation and emissions from eachthe facility always must ensure that it operates within its allocation, or purchase RECLAIM trading credits from other RECLAIM facilities that have reduced their emissions. In view of the RECLAIM programs emissions allocation method, the SCAQMD reasoned that the baseline emissions and the post-project emissions are the same, that is, they are both the permitted emissions.

The problem with the SCAQMDs comparison is that it is illusory. While the maximum NOx emissions permitted under the RECLAIM program will remain the same both before and after the ULSD project, the FND demonstrated that the RECLAIM permit emission level was approximately twice the level of the Refinerys actual emissions during the four years preceding the inception of the ULSD project. In WoodwardPark, supra, 150 Cal.App.4th 683, the city similarly endeavored to choose a baseline based on hypothetical conditions allowable under a general plan, and the court held that the city lacked discretion to employ a baseline other than existing physical conditions. (Id. at p. 710.) Explaining why a public agency lacks discretion under such circumstances, the court in City of Carmel, supra, 183 Cal.App.3d at page 246, observed that using the maximum number of units allowed under a plan of development as the baseline for a project was misleading and obscured the fact that the proposed project actually calls for substantial increases in population rather than illusory decreases. Here, too, employing a baseline figure premised on emission levels that far exceed the Refinerys actual emissions is misleading and subverts full consideration of the actual impacts that will result from the ULSD project. As in WoodwardPark, [t]here was no reason here why the usual rule requiring the baseline to be the existing physical environment would not apply. (Woodward Park, supra, at p. 710.)

Nor does the fact that the ULSD project is intended to benefit the environment justify the SCAQMDs employing a heightened baseline to assess the projects impacts. As aptly stated in California Farm Bureau Federation v. California Wildlife Conservation Bd. (2006) 143 Cal.App.4th 173, 196: [I]t cannot be assumed that activities intended to protect or preserve the environment are immune from environmental review. [Citations.] [Citations.] There may be environmental costs to an environmentally beneficial project, which must be considered and assessed. The Refinerys existing physical environmental setting should have been utilized as the ULSD projects baseline for ascertaining the impact of increased NOx emissions.^[5]

Story continues as Part III .

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^[1] Appellants frame the same argument in two ways. First, they contend that an EIR was required because they presented substantial evidence in the form of expert testimony that the ULSD project would generate NOx emissions exceeding the CEQA significance threshold of 55 ppd. Second, they contend that an EIR was required because the SCAQMD used an improper baselinei.e., it did not include any emission increases from existing equipment falling within permitted levelsto determine that any increase in NOx emissions from the ULSD project were below the CEQA significance threshold. But given that appellants expert calculated her emissions figures by including the use of existing equipment as a project impact, appellants substantial evidence argument is simply a restatement of its improper baseline argument.

^[2] The SCAQMD further concluded that the ULSD project would generate an increase of 74.12 ppd of NOx emissions during construction, which fell below the CEQA significance threshold of 100 ppd.

^[3] Though the SCAQMD and the Refinery cite Bloom v. McGurk (1994) 26 Cal.App.4th 1307 as authority among this line of cases, that case did not address the determination of a baseline environmental setting. There, the court held a medical waste facility that sought permit renewal without any change in its operations was categorically exempt from CEQA. (Bloom v. McGurk, supra, at pp. 13141316.) The court also held that no EIR was required because the facility was not increasing its permitted capacity. (Id. at pp. 13161317.) That ruling did not hinge on any finding that the facilitys permitted capacity constituted its baseline; rather, the evidence showed that the facility had consistently operated below its permit level, thereby rendering inapplicable Public Resources Code section 21151.1, subdivision (a)(1)(A)(ii), which provided that an EIR was necessary for a project involving [t]he expansion of an existing facility which burns hazardous waste which would increase its permitted capacity by more than 10 percent. (Bloom v. McGurk, supra, at p. 1316.)

^[4] We note that the SCAQMDs April 1993 CEQA Air Quality Handbook (Handbook), excerpts of which are part of the administrative record, similarly describes operational emissions from a project as including those which result from natural gas combustion and the use of electricity and equipment for manufacturing processes and provides that the SCAQMD should endeavor to quantify all operation-related emissions from a project, including emissions from area sources (pool heaters, water heaters, boilers) . . . .

^[5] In the SND, the SCAQMD modified its NOx emissions calculations to account for the addition of SCR technology, reasoning that NOx emissions from both an existing heater and a replacement charge heater would be reduced. Applying an 8.9 ppd NOx emission level for the ULSD project, the SND calculated that NOx emissions would be reduced by 6 ppd assuming an average firing rate and 20 ppd assuming a maximum firing rate. These calculations, however, remained premised on the assumption that NOx emission levels from existing equipment should be considered as part of the baseline and thus did not account for the balance of over 400 ppd of NOx emissions resulting from increased equipment use necessary for the ULSD project.