California recently signed into law Senate Bill (SB) 7, which re-enacts and expands the California Environmental Quality Act (CEQA) streamlining provisions for “environmental leadership development projects” (ELDPs) that were originally adopted in the 2011 Jobs and Economic Improvement Through Environmental Leadership Act (Assembly Bill [AB] 900). AB 900 sunset on January 1, 2021; SB 7 extends the sunset through January 1, 2026. SB 7 also expands the types of projects that can be certified as ELDPs to include certain qualifying housing development projects, and provides revised procedures for the quantification and mitigation of greenhouse gas (GHG) emissions for eligible projects.
As additional background, while courts are required to give CEQA actions preference over all other civil actions, CEQA imposes no deadline for a court to render a decision. AB 900 established and SB 7 carries forward expedited CEQA judicial review procedures for ELDPs. Specifically, if the Governor certifies a project as an ELDP, any court action (including any appeals) challenging the certification of the environmental impact report (EIR) or the approval of the project must be resolved within 270 days, to the extent feasible.
Eligible Leadership Project Types
The following project types are eligible to be certified as ELDPs under SB 7:
- Non-industrial projects (as defined to include residential, retail, commercial, sports, cultural, entertainment, or recreational uses) that are certified as LEED gold or better and, where applicable, achieve a 15-percent greater standard for transportation efficiency than for comparable projects. These projects must be located on an infill site, and must be consistent with specified policies in any applicable sustainable communities strategy (SCS) or alternative planning strategy (APS). In addition, these projects must result in a minimum investment of $100,000,000 in California upon completion of construction.
- Clean renewable energy projects and clean energy manufacturing projects.
- New: Housing development projects that meet all of the following conditions: (i) the project is located on an infill site; (ii) the project is consistent with specified policies in any applicable SCS or APS; (iii) the project will result in a minimum investment of $15,000,000, but less than $100,000,000, in California upon completion of construction; (iv) at least 15% of the project is dedicated as affordable housing, unless an applicable local inclusionary zoning ordinance establishes a higher minimum percentage; (v) no part of the project shall be used for a short-term vacation rental unit (less than 30 days), or designated for hotel, motel, or other transient lodging use (however, residential hotels for very low and low income housing are permitted); and (vi) no part of the project shall be used for manufacturing or industrial uses. A “housing development project” is defined to include a project for residential units only; mixed-use development consisting of residential and nonresidential uses, with at least two-thirds of the square footage designated for residential use; or, transitional or supportive housing.
Additional Conditions for Certification
As the law is now in effect, the Governor may certify an eligible project for CEQA streamlining, before the lead agency certifies the final EIR for the project, if multiple conditions are met, including the following key conditions:
- For construction labor requirements, the project must pay prevailing wages, and — as a new requirement added in SB 7 — the project must use a “skilled and trained workforce,” for all construction work.
- The project must not result in any net additional emission of GHGs, including GHG emissions from employee transportation. For eligible leadership projects other than housing developments, GHG mitigation measures must prioritize direct project emissions reductions and local direct emissions reductions, before relying on carbon offsets. The intent is to maximize environmental and public health benefits to those people who are most impacted by the project.
- Multi-family residential projects certified as an ELDP must provide unbundled parking, such that private vehicle parking spaces are priced and rented or purchased separately from dwelling units, except for units subject to affordability restrictions where the cost of parking spaces cannot be unbundled.
- The project applicant must agree to pay the costs of the trial court and the court of appeal in hearing any case challenging the project, including payment of costs for the appointment of a special master if deemed appropriate by the court.
- The project applicant must agree to pay the costs of preparing the administrative record for the project. In addition, the administrative record must be prepared concurrently with the review and consideration of the project.
In 2011, AB 900 established expedited CEQA judicial review procedures for a limited number of projects — large-scale projects meeting extraordinary environmental standards and providing significant jobs and investment. Based on the legislative materials, from 2012–2020, 17 projects were certified under AB 900. Of these, only two projects have been built to-date, and neither includes housing.
Seeking to help address California’s affordable housing crisis, SB 7 somewhat expands AB 900 to apply to “smaller” housing development projects. However, eligibility still remains restrictive, particularly with respect to the strict labor and prevailing wage requirements. Thus, the real-world impact of expanding AB 900 remains to be seen. For example, the SB 7 legislative materials note that many infill housing projects are eligible for existing statutory or categorical exemptions under CEQA, without having to meet the additional conditions, process, and expense associated with AB 900 / SB 7. As a result, the statutory scheme may be more suited for large projects “with teams of attorneys and consultants,” rather than smaller housing projects that may be exempt from CEQA or eligible for a negative declaration, and not required to prepare an EIR, under current law.
Finally, as to GHG emissions, SB 7 reflects California’s increasing focus on achieving local clean air co-benefits and reducing the reliance on carbon offsets, even though offsets are expressly allowed by CEQA Guidelines section 15126.4(c). The bill prioritizes on-site and local direct GHG emissions reductions over offsets for all eligible project types (but for specified housing development projects). This change was evidently made, at least in part, in response to the Golden State Warriors arena (Chase Center) project in San Francisco, which is one of the two completed AB 900 projects. In the Chase Center project, to offset its construction emissions, the Warriors purchased offsets sourced from Florida at a cost of $3.50/ton. The SB 7 legislative materials observed that the total cost of offsetting construction emissions for the $1.4 billon Chase Center was $39,869, contrasting that figure with the $52,800 cost of a single courtside season ticket in the 18,064-seat Chase Center.
[This alert does not constitute legal advice and no attorney-client relationship is created by viewing or responding to this alert. Legal counsel should be sought for answers to specific legal questions.]