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California, U.S. Environmental Challenges Can Coexist (1)

Aug. 1, 2022, 6:43 PMUpdated: Aug. 1, 2022, 10:37 PM

California counties can’t seek to unwind a state-federal settlement of a lawsuit over hydroelectric licensing at the US’s largest earthen dam, but they can challenge the adequacy of a report a state agency uses without running afoul of federal law preemption, a divided California Supreme Court ruled Monday.

In so doing, the justices in part reversed an appellate ruling that the Federal Power Act preempts state court challenges to an environmental impact report conducted to comply with the federal Clean Water Act. The report was prepared under the California Environmental Quality Act, or CEQA, the state law that predates the National Environmental Policy Act and, like NEPA, requires environmental assessments of proposed actions.

Concerns about the Oroville Dam’s stability were magnified following a spectacular failure of the dam’s spillway after heavy rains in 2017, which led to evacuations downstream. Critics of the project had previously claimed the license extension sought by the California Department of Water Resources failed to properly take into account the effects of climate change on wildlife near the dam.

The high court agreed with the appellate panel’s 2018 conclusion that allowing Butte and Plumas counties to challenge the state’s settlement agreement, which was prepared as part of the proceedings with the Federal Energy Regulatory Commission on the dam’s hydroelectric operations, “would pose an obstacle to FERC’s congressionally granted exclusive authority on those matters.”

“But the same is not the case for the Counties’ challenge to the environmental sufficiency of the EIR more generally, insofar as a compliant EIR can still inform the state agency concerning actions that do not encroach on FERC’s jurisdiction. Nothing clearly precludes our courts from considering a challenge to the sufficiency of the EIR in these circumstances and ordering, for example, DWR to reconsider its analysis if warranted,” Justice Goodwin Liu wrote for the majority.

California-designed Preemption?

Chief Justice Tani Cantil-Sakauye in a opinion concurring in part, and dissenting in part, joined by Justice Carol Corrigan, agreed with the majority that certain aspects of CEQA’s implementation were preempted and “would favor a faithful application of the high court’s law of preemption.”

But, Cantil-Sakauye said, “in its haste to acquiesce to DWR’s pointless and redundant invocation of CEQA, the majority has devised its own version of federal preemption, relying on a vague and inappropriate application” of the court’s 2017 decision involving a railroad.

“The majority’s new preemption tolerates state interference in exclusive federal authority so long as the state’s interference does not ‘directly’ conflict with federal action — in other words, so long as the state does not create a situation in which it is impossible simultaneously to comply with state and federal mandates,” she wrote.

“This limited preemption may seem appropriate to the majority, but it bears no resemblance to the United States Supreme Court’s articulation of the doctrine of preemption, which must be our guide,” the chief justice said. “In adopting its own version of preemption, the majority tolerates DWR’s unnecessary delay of FERC’s licensing proceedings, turns a blind eye to Congress’s invocation of field preemption through the enactment of Section 27, and sweeps purposes and objectives preemption under the rug.”

Climate Change Concerns

The court remanded for further consideration of the counties’ remaining claims, largely unaddressed by the Court of Appeal’s decision, and to resolve any open questions such as whether there are procedural or other bars to those claims.

“This addresses a very practical issue of CEQA’s application harmoniously with federal law as it relates to the state’s exercise of its own sovereignty in applying state law to its own decisions relating to its review and decisionmaking on its own dam project,” said Roger B. Moore, an Oakland, Calif., attorney who represents the counties.

The state Department of Water Resources in a statement said it “is pleased with today’s ruling from the California Supreme Court. We are still reviewing the opinion and its implications and cannot comment further at this time.”

The state acted on its own behalf in demanding the review ahead of deciding whether to pursue another 50-year FERC lease to operate the dam, about 74 miles north of Sacramento, Calif. FERC licenses over 120 hydroelectric facilities in the state, according to the California State Association of Counties.

The neighboring counties challenged renewing the license, arguing the extension failed to properly consider climate change’s effects on the dam. The counties contend requiring state agencies to comply with CEQA when assessing environmental impacts of projects “is an essential expression of California’s sovereignty, protected under the U.S. Constitution’s federalist system.”

It’s the second time the state high court ordered the case returned to the appeals court. Justices in 2019 ordered the appeals court reconsider its 2018 decision based on the separate high court ruling. The appeals court in 2019 again held the counties’ claim was preempted.

The case is County of Butte v. Department of Water Resources (State Water Contractors), Cal., No. S258574, opinion 8/1/22.

(Added quotes from Roger Moore and state in 11th and 12th paragraphs, rejiggered lead.)

To contact the reporter on this story: Joyce E. Cutler in San Francisco at jcutler@bloomberglaw.com

To contact the editors responsible for this story: Renee Schoof at rschoof@bloombergindustry.com; Andrew Harris at aharris@bloomberglaw.com