The Court of Appeal has again upheld a public agency’s dismissal of project alternatives as economically infeasible, even though the project’s environmental impact report did not include an economic analysis. The ruling is the third published decision in two years in which a court has said that an economic analysis does not have to be part of an EIR.

The latest decision came in a case brought by the Sierra Club over a proposed winery at the entrance to the Napa Valley.

“Sierra Club may be correct that the public was not part of the debate of the economic feasibility of the project,” the court ruled, “but as we read CEQA, it does not require the public to be a part of that debate, although it requires the public to be informed if its officials choose economic feasibility over environmental concerns in approving a project.”

Two years ago, an appellate court ruled that San Francisco could rely on an in-house report regarding economic feasibility of project alternatives that was not included in an EIR. San Franciscans Upholding the Downtown Plan v. City and County of San Francisco, 102 Cal.App.4th 652 (see CP&DR Legal Digest, November 2002). Last year, a court ruled that Madera County could use a consultant’s analysis that was not included in an EIR to determine that a smaller project was economically infeasible. Association of Irritated Residents v. County of Madera, 107 Cal.App.4th 1383 (see CP&DR Legal Digest, June 2003). In both of those cases, courts held that it was permissible for officials to make a decision based on substantial evidence in the record, even if the environmental document did not contain the evidence. The latest decision from Napa County builds upon the San Francisco and Madera County rulings.

In 1999, Beringer Wine Estates applied for a use permit to allow development on a 218-acre site near the Napa Airport. Beringer proposed 1.4 million square feet of development for warehousing and storage, winemaking, blending, bottling and office uses. Beringer also proposed a 115-acre vineyard to be irrigated with treated wastewater from the winemaking operation. Essentially, Beringer sought to consolidate its operations, which are spread out at various Napa Valley sites.

The Napa County Conservation, Development and Planning Department certified an environmental impact report for the project in December 2001, and soon thereafter approved a conditional use permit. The EIR found that the project would have a significant and unavoidable impact on about half an acre of wetlands that provides habitat for endangered fairy shrimp. However, the department adopted findings of overriding considerations that cited the overall benefits of the project.

The Sierra Club appealed to the Board of Supervisors, but the board approved the EIR and use permit. The environmental group then sued the county, arguing that the county violated CEQA and that the use permit was inconsistent with the Airport Industrial Area Specific Plan. Napa County Superior Court Judge Stephen Kroyer ruled for the county. The Sierra Club appealed, and a three-judge panel of the First District Court of Appeal, Division One, upheld the lower court.

The pivotal issue was the absence in the EIR of the economic feasibility study of project alternatives that would avoid impacts of the wetlands. The EIR listed six alternatives, but dismissed three of those, all of which involved different locations, without environmental analysis. The other three alternatives — called “no project,” “wetlands preservation,” and “reduced development” — were studied but rejected as infeasible, at least partly because they would not meet Beringer’s stated business objectives.

The Sierra Club argued in court that the absence of economic analysis in the EIR rendered the document legally inadequate, and that the Board of Supervisors should not have considered evidence that was not available to the public. For support, the environmental group pointed to the landmark case, Laurel Heights Improvement Assn. v. Regents of University of California, (1988) 47 Cal.3d 376 (Laurel I). In that case, the state Supreme Court said that CEQA mandated a “meaningful analysis of alternatives in the EIR,” and that reasons for rejecting alternatives “must be discussed in the EIR in sufficient detail to enable meaningful participation and criticism by the public.”

The First District, however, was not convinced. “Nothing in Laurel I requires EIRs to analyze the economic feasibility of a particular alternative or limits the evidence an agency can consider in deciding issues of economic feasibility,” Justice William Stein wrote. “The court found only that an EIR cannot abstain from the process of identifying and analyzing alternatives by accepting, at face value, an official’s assertions that there are no feasible alternatives. Laurel I, accordingly, stands for the proposition that the EIR must identify alternatives and analyze their impacts on the environment. The agency may or may not reject those alternatives as being infeasible, but the public must be informed of their existence. Here, the EIR did identify alternatives and analyze their impacts on the environment. Laurel I requires no more.”

The Sierra Club pointed out that the public did not have the chance to review the economic analysis that was the basis for the Board of Supervisors’ decision, as the public did in the San Francisco case. Apparently, supervisors based their findings at least partially on a last-minute letter provided by Beringer. No matter, said the court. “That the public in San Franciscans had access to a comprehensive analysis of economic feasibility does not mean that the public must have access to such a comprehensive analysis before a project may be approved,” Stein wrote.

“It is of no matter that the evidence of economic infeasibility here was far less detailed than the evidence in San Franciscans,” Stein continued. “The question is simply whether the agency’s finding was supported by substantial evidence. Moreover, as was true of the appellants in San Franciscans, Sierra Club neither introduced, nor can it cite to, evidence suggesting that some alternative was in fact fully feasible.”

As for the project’s consistency with the specific plan, the court found no conflict. The specific plan requires protection of all wetland and stream habitat where feasible, the court noted. In this instance, the county found protection to be infeasible.

The Case:
Sierra Club v. County of Napa, No. A101941, 04 C.D.O.S. 8146, 2004 DJDAR 10939. Filed August 6, 2004. Ordered published September 1, 2004.
The Lawyers:
For Sierra Club: Thomas Lippe, (415) 777-5600.
For the county: Laura Jean Anderson, county counsel’s office, (707) 259-8252.
For Beringer Wine Estates: David Meyer, Dickenson, Peatman & Fogarty, (707) 252-7122.