In Union of Medical Marijuana Patients, Inc. v. City of San Diego, the California Supreme Court considered the definition of a "project" under the California Environmental Quality Act (CEQA).  The Court held that a lead agency needs to consider reasonably foreseeable direct and indirect potential physical impacts on the environment at the outset of the CEQA process and rejected the efforts of the City of San Diego (City) to delay the environmental analysis of a zoning ordinance to a later date.  As a consequence of the ruling, lead agencies may be forced to analyze the potential indirect impacts of activities, like zoning code changes, previously thought to be outside the reach of CEQA.

This case is important because the determination of what activities constitute a "project" is the first step in the CEQA evaluation process.  If a proposed activity is found not to be a "project," a lead agency may proceed without further CEQA review.  The result of this case may well be that public agencies take a more conservative view and determine many more activities constitute a project, thus subjecting such activities to further CEQA review.

The San Diego Ordinance

In 2014, the City approved an ordinance authorizing the establishment of medical marijuana dispensaries and regulating their location and operation.  The City did not conduct environmental review, finding that the ordinance did not constitute a project for the purposes of CEQA.  Union of Medical Marijuana Patients (UMMP) challenged the City's failure to conduct environmental review.  UMMP initially argued that the ordinance should constitute a project because its adoption could have a number of environmental impacts, including forcing residents to drive across the City to reach the few licensed locations, forcing medical marijuana users to grow their own product if the City prosecuted and closed unlicensed locations, and other potential indirect impacts.  After the trial court upheld the City's no-project determination, UMMP argued in the Court of Appeal – for the first time – that the ordinance should be deemed a project as a matter of law under Public Resources Code section 21080, which states that CEQA "shall apply to discretionary projects proposed to be carried out or approved by public agencies, including, but not limited to, the enactment and amendment of zoning ordinances. . . ."  UMMP sought Supreme Court review after the Fourth District Court of Appeals upheld the trial court's decision.

Examples of Discretionary Activities not Per Se Projects for Purposes of CEQA 

At the outset, the Supreme Court held that Public Resources Code section 21080 is ambiguous.  The Court ruled that because "project" is a defined term in Public Resources Code section 21065, the specific definition of project controls over the general list of proposed actions that require discretionary approvals included in section 21080.  "For that reason, we must interpret the listing of public agency activities in section 21080, subdivision (a), merely to offer generic examples of the type of 'discretionary [activities] proposed to be carried out or approved by public agencies' to which CEQA could apply."  (Union of Medical Marijuana Patients, Inc. v. City of San Diego, S238563, p. 21, (emphasis in original).)  In light of this initial holding, the Court clarified that all proposed activities must satisfy the section 21065 definition to qualify as a project for the purposes of CEQA, regardless of the language of 21080, and rejected UMMP's argument.

Muzzy Ranch Test for Determining if a Proposed Activity is a CEQA Project 

After agreeing with the Court of Appeal on the first issue presented, the Supreme Court proceeded to disagree with the conclusion that the City's ordinance did not qualify as a project under the section 21065 test.  The Court relied upon its prior decision in Muzzy Ranch Co. v. Solano County Airport Land Use Commission (2007) 41 Cal.4th 372 (Muzzy Ranch).  Under Muzzy Ranch, local agencies consider whether a proposed activity is a project by considering the potential environmental effects in the abstract, "without regard to whether the activity will actually have an environmental impact."  (Union of Medical Marijuana Patients, Inc. v. City of San Diego, S238563, p. 30, quoting Muzzy Ranch, supra, 41 Cal.4th at p. 381.)  "To encapsulate the Muzzy Ranch test, a proposed activity is a CEQA project if, by its general nature, the activity is capable of causing a direct or reasonably foreseeable indirect physical change in the environment."  (Union of Medical Marijuana Patients, Inc. v. City of San Diego, S238563, p. 32.)  The Court specifically held that the establishment of new medical marijuana businesses could cause indirect physical changes on the environment, and as a result, the City was required to conclude that adoption of the ordinance was a "project" under CEQA.  The City incorrectly stopped at the first step of environmental review; it should have gone on to consider whether the activity was exempt from CEQA, and if not, what level of review was required, i.e., a negative declaration, a mitigated negative declaration or an environmental impact report.

Conclusion 

The Supreme Court has clarified that when determining whether an activity constitutes a project for purposes of CEQA, a lead agency must consider whether the activity may create reasonably foreseeable direct and indirect environmental impacts in the abstract.  More activities may now fall into the CEQA project bucket and may therefore require some level of environmental review.

If you have an activity that a lead agency recently has determined to not be a "project" under CEQA, the Supreme Court's ruling may undermine that determination.  Environmental review may be required if your 180-day statute of limitations has not yet run.