Court of Appeal Clarifies Water Supply Assessment Role in California Environmental Quality Act Process for Land Development Projects

Held: SB 610 Water Supply Assessments May Not Be Litigated Prior To Project Approval

April 17, 2008 | Bulletin No. 889725.1

Opponents of a proposed land development project may not challenge the adequacy of a public water supplier’s Water Supply Assessment (“WSA”) prior to a city’s or county’s completion of California Environmental Quality Act (“CEQA”) review and approval of the project whose water supply was analyzed in the WSA, according to an April 16, 2008 decision by the Second District Court of Appeal in California Water Impact Network v. Newhall County Water District, et al. (“C-WIN”),(2008) 161 Cal.App.4th 1464.

C-WIN is the first published judicial decision directly interpreting the procedural requirements of SB 610, the Water Supply Assessment Law codified at Water Code section 10910 et seq. The decision clarifies the relationship between the WSA procedure administered by water supply agencies, the CEQA review procedure administered by city and county land-use agencies, and the role of courts in reviewing the adequacy of a land-use agency’s determination that water supplies will be adequate to serve a proposed development project. C-WIN provides much-needed guidance to water supply agencies, city and county land-use agencies, and development project proponents trying to navigate California’s increasingly complex maze of water supply, environmental and land-use planning laws.

SB 610 - The Water Supply Assessment Law

In 1995, the California Legislature enacted SB 901 (later codified in Water Code sections 10910-10915) to ensure that cities and counties would assess the adequacy of available water supplies to meet projected water demand prior to approving significant new land development projects. In 2001, perceived shortcomings in SB 901 compliance led the California Legislature to enact two further laws—SB 610 and SB 221—to tighten the linkage between water supply availability and land-use planning decisions. SB 610 focused on improving the Water Supply Assessment, or WSA, procedure previously established by SB 901. Among other things, SB 610 expanded the scope of development projects triggering the WSA procedure and expanded the informational requirements of the procedure, particularly with respect to groundwater supplies.

The WSA law requires that before cities or counties approve certain classes of projects (e.g., residential developments over 500 units) as lead agencies under CEQA, they must request preparation of a WSA by the public water supplier identified to serve the proposed development project. The public water supplier has 90 days to prepare and approve a WSA after receiving a request from a city or county land-use agency. The WSA must assess the supplier's projected water availability and the projected water demand in its service area over a 20-year horizon, including supply and demand projections in normal water years, dry water years and multiple-dry water years (i.e., in droughts). The public water supplier's WSA must conclude whether projected supplies will be adequate to serve existing demand, demand from the proposed development project, and demand from planned future uses.

After the water supplier's governing body (i.e., board of directors) approves the WSA, it must be submitted to the city or county land-use agency (i.e., the lead agency) for physical incorporation into the CEQA document being prepared for the proposed development project. The WSA law provides for the lead agency's CEQA document (i.e., an environmental impact report ["EIR"] or negative declaration) to evaluate the water supply and demand information in the WSA. Ultimately, the WSA law requires the lead agency to make a determination "based on the entire record, whether projected water supplies will be sufficient to satisfy the demands of the project, in addition to existing and planned future uses." (Water Code § 10911(c).)

Facts

The case arose when GateKing Properties (“Applicant”) proposed to develop a 584-acre industrial/business park (“Project”) in the City of Santa Clarita (“City”). The Project was sufficiently large to trigger the WSA procedure, so the City requested preparation of a WSA by Newhall County Water District (“District”), the local water retailer identified to serve the proposed Project. The City included the WSA in its EIR, completed the EIR review process, and approved the Project.

Environmental organizations challenged the City’s Project approval, alleging that the EIR inadequately analyzed water supply availability. The trial court rejected the challenge, but the Court of Appeal reversed and ordered the City to conduct further EIR review of water supply availability. (See California Oak Foundation v. City of Santa Clarita (2005) 133 Cal.App.4th 1219.)

In response to that first round of litigation, the City requested another, updated WSA from the District. Prior to the District’s approval of the new WSA, project opponents filed objections. The District nevertheless approved the WSA and forwarded it to the City for incorporation into the remedial EIR analysis.

Prior to the City’s completion of remedial EIR review on water supply adequacy for the proposed Project—and prior to reapproval of the Project—the California Water Impact Network (“C-WIN”) filed new litigation challenging the adequacy of the District’s new WSA. In response, the District, City, and Applicant (“Respondents”) filed a motion to dismiss, arguing that C-WIN could not challenge the legal adequacy of the District’s WSA prior to the City’s completion of EIR review and approval of the proposed Project. The trial court granted the motion, holding that “WSA’s are not immune from judicial review, but must be challenged and reviewed as part of CEQA review.” (C-WIN, 161 Cal.App.4th at 1475). C-WIN appealed. The Association of California Water Agencies requested and was granted leave to participate as amicus curiae (“friend of the court”).

Appellate Decision

The Second District Court of Appeal in Los Angeles (“Court”) affirmed the trial court’s dismissal of the WSA challenge based on two basic principles of administrative law—finality and exhaustion.

WSA Actionability Is Significant Matter of Public Importance

Before addressing the merits of the case, the Court rejected a proposal to stay resolution of the appeal on the ground that separate litigation challenging the Project’s remedial EIR review of water adequacy might moot the WSA litigation. In pressing forward, the Court explained that the case required prompt resolution, for it presented “significant matters of first impression” and “an issue of important public interest” that would likely recur “[g]iven the increasing public focus and interest on water supply issues as they relate to land use and development.” (Id. at 1476.)

District’s WSA Approval Not Final Action

The Court first assessed whether the District’s approval of the new WSA constituted final agency action that might be subject to judicial review. The Court noted that the WSA law expressly authorizes a city or county to pursue writ of mandate litigation to force a public water supplier to timely provide a WSA for incorporation into the land-use agency’s CEQA process, but that the WSA law does not authorize third-party litigation to review the WSA’s substantive informational adequacy.

After reviewing how the WSA law integrates water agencies’ WSAs into the CEQA review procedures administered by land-use agencies, the Court held that “in our view the WSA is, like respondents and the Amicus Curiae posit, a technical, informational, advisory opinion of the water provider.” The Court explained that “[t]he WSA’s role in the EIR process is akin to that of other informational opinions provided by other entities concerning potential environmental impacts—such as traffic, population density or air quality.” (Id. at 1486.)

The Court observed that a water supplier’s “adoption of a WSA does not create a right or entitlement to water service, or impose, expand, or limit any duty concerning the obligation of a public water system to provide certain service.” (Id. at 1487.) The Court emphasized that “the [CEQA] lead agency is required by statute to make the ultimate determination ... whether water supplies are sufficient” and that, “[u]nder the WSA law framework, the ‘final’ decision for purposes of writ review occurs only after the lead agency acts—completes its obligations under the WSA and CEQA.” (Id at 1487-88.)

The Court observed that its holding was “fully consistent with the manner in which judicial challenges are asserted to assail the adequacy of environmental impact determinations in general,” which are “properly commenced after the lead agency certifies the EIR and approves the project.” (Id. at 1488 [emphasis in original].)

C-WIN Failed to Exhaust Remedies

The Court also found that C-WIN failed to exhaust its administrative remedies before seeking judicial review of the water supply adequacy determination for the proposed Project. The Court noted that the exhaustion doctrine’s principal purposes include “avoidance of premature interruption of administrative processes; allowing an agency to develop the necessary factual background of the case; letting the agency apply its expertise and exercise its statutory discretion; administrative efficiency and judicial economy.” (Id. at 1489.)

The Court held that C-WIN should have presented its water availability concerns to the City before litigating the District’s WSA, because “the City in this case has the power to assess C-WIN’s claims and provide the requested relief.” (Id. at 1491.) The Court found that it is only through that approach that the Court would have the benefit of the views of those having expertise in matters of local land use and water supply issues, including the analysis and recommendations of the City decisionmakers.” (Id.) The Court concluded that “C-WIN has not convinced us that ... asserting a challenge to the WSA as part of a challenge to the EIR after the City has certified the EIR and approved the project, would result in unworkable or inadequate judicial review of the water supply assessment.” (Id. [emphasis in original].)

Conclusion

Mark Twain said, “In California water is for fighting and whiskey is for drinking.” Nowhere does that sentiment remain more true than in the modern-day water wars arising between project opponents and the cities, counties and public water suppliers that are striving to ensure adequate housing and workplaces for California’s growing population. The holding in C-WIN helps to ensure the logical, orderly assessment of water supply adequacy prior to a decision to approve a proposed development project, while ensuring the availability of judicial review to test the basis for a land-use agency’s determination that water supplies will be adequate to serve new development.