A state appellate court that ordered preparation of an environmental impact report on a Metropolitan Water Agency habitat conservation project has ruled that MWD cannot slice the project into smaller pieces and proceed without an EIR. The Fourth District Court of Appeal said MWD and Riverside County Superior Court Judge Gloria Trask — who issued a writ of mandate following the earlier Fourth District decision — misread the first ruling. "The effect of the trial court decision is to allow the entire project (with the single exception of mitigation credits for the take of certain state-listed species) to proceed without any environmental review whatsoever," Justice Thomas Hollenhorst wrote for the unanimous three-judge panel of the Fourth District, Division Two. Michelle Ouellette, attorney for the Riverside County Habitat Conservation Agency, the real party in interest, said the court appeared to be urging the sides to settle their dispute. "You don't publish something like this, without any precedential value, unless you're trying to send a message," Ouellette said. Lawyers for the Audubon Society could not be reached for comment. The MWD, the U.S. Fish & Wildlife Service, the state Department of Fish & Game, and the Riverside County Habitat Conservation Agency jointly prepared the Lake Mathews Multiple Species Habitat Conservation Plan and Natural Communities Conservation Plan. The plan — which is the "project" for CEQA purposes — covers 6,000 acres owned by MWD around Lake Mathews, and it creates a 5,110-acre multi-species reserve. The plan also is intended to serve as a basis for "incidental take" permits for six endangered species and dozens of target species. The reserve would act as a mitigation bank for MWD and for developers from all over Southern California. For the plan, MWD provided a detailed mitigated negative declaration. In 1999, the Fourth District ruled that the San Bernardino Valley Audubon Society had made a fair argument that the project would have a significant effect on endangered, threatened and other plant and animal species and, therefore, an EIR was required. The court said the plan provided a "blank check" for developers wanting to build on habitat for endangered species — even though state officials maintained that development projects that relied on the mitigation bank would need their own environmental reviews. San Bernardino Valley Audubon Society v. Metropolitan Water Dist., (1999) 71 Cal. App. 4th 382 (see CP&DR Legal Digest, May 1999). The appellate court then sent the case back to Judge Trask, who issued a peremptory writ of mandate ordering MWD to set aside the mitigated negative declaration. The writ also prevented the DFG from using the reserve to issue mitigation credits to offset the take of state-listed species. The Audubon Society then asked for reconsideration, arguing that MWD was going ahead with all parts of the project except the issuance of mitigation credits for taking rare species. Judge Trask stuck by the earlier writ, but she was again reversed by the Fourth District. On appeal, MWD argued that the mitigation banking was separate and distinct from other parts of the project. The agency contended that Public Resources Code § 21168.9 allowed Judge Trask to separate parts of the project and issue an order affecting only those specific project activities that are out of compliance with CEQA. But the Fourth District said no. The MWD could either prepare an EIR for the whole project, or abandon the project. And MWD could not argue severability on appeal, because Judge Trask did not use § 21168.9 as a basis for limiting her order. "[T]he trial court did not consider whether the mitigation bank was severable, it did not consider whether severance would prejudice full compliance with CEQA requirements, and it did not find that the rest of the project was or was not in compliance with CEQA," Justice Hollenhorst wrote. The MWD "was us to make these findings for them … ." The Audubon Society argued that the project's 17 discretionary actions were based on the mitigated negative declaration, and the appellate court should block all discretionary actions based on the voided environmental document. But the Fourth District declined to take that route. "However," Hollenhorst wrote, "we do agree with Audubon that the primary defect in the trial court's judgment and peremptory writ is its failure to require CEQA compliance. In other words, the trial court invalidated only one part of the project, the issuance of mitigation credits for the take of certain state-listed species, without requiring the completion of an EIR for the project." "Despite our prior determination that a full EIR was required for the project, the trial court's judgment and writ did not specifically require CEQA compliance for the project," the court held. The court remanded the case back to Judge Trask. The Case: San Bernardino Valley Audubon Society v. Metropolitan Water District, No. E027043, 01 C.D.O.S. 4812, 2001 DJDAR 5839. Filed June 8, 2001. The Lawyers: For the Audubon Society: Raymond W. Johnson, Johnson & Sedlack, (909) 506-9925. For MWD: Norman Flette, deputy general counsel, (213) 217-6240, and John Clairday, deputy general counsel (213) 217-6314. For Riverside County Habitat Conservation Agency: Michelle Ouellette, Best, Best & Krieger, (909) 686-1450.