Court Upholds City's Reliance on CEQA Exemption, Reaffirms Canons of Statutory Interpretation

In April 2021, a developer applied to the City of King City, California (City), for a proposed 18,000-square-foot Grocery Outlet store (Project). The Project site was a former 1.6-acre car sales lot adjacent to Highway 101 and surrounded by commercial buildings, parking lots, a cemetery and the county sheriff's department. In support of its application, the developer submitted an "environmental assessment," which documented the Project's eligibility for the Class 32 Infill Categorical Exemption (Cat. Ex.) – a popular California Environmental Quality Act (CEQA) streamlining tool for infill residential development projects. To qualify for the Class 32 Cat. Ex., among other things, a project must be located "within city limits on a project site of no more than five acres substantially surrounded by urban uses."

The City's Planning Commission approved the Project and agreed it was exempt from CEQA under the Class 32 Cat. Ex. A local citizen appealed the Planning Commission's decision to the City Council, arguing that the City was required to prepare a full environmental impact report (EIR) to comply with CEQA. The City Council denied the appeal and upheld the City's project approvals and CEQA determinations.

In Working Families of Monterey County v. King City Planning Commission, Case No. H051232 (Oct. 21, 2024), Working Families of Monterey County (Petitioners) filed a CEQA challenge against the Project in Monterey County Superior Court. The Petitioners alleged that the City abused its discretion in applying the Class 32 Cat. Ex. because the Project was not located in an "urbanized area," as defined in CEQA Section 21071(a) (population 100,000 or more) or CEQA Guidelines Section 15387 (population 50,000 or more). The Petitioners also alleged the Project did not meet the definition of an "infill site," as defined in CEQA Section 21061.3, since the project site was not previously developed for "qualified urban uses." Lastly, the Petitioners alleged the City failed to adequately analyze air quality impacts associated with increased traffic from the Project.

In June 2023, the trial court denied the petition, ruling that text of the CEQA Guidelines codifying the Class 32 Cat. Ex. does not require a project to be located on an "infill site" in an "urbanized area," as said terms are defined elsewhere in CEQA and that substantial evidence supported the City's determination that the Project was exempt under the Class 32 Cat. Ex.

Court of Appeal Decision

On appeal before the California Court of Appeal, Sixth Appellate Division, the Petitioners maintained that the terms "in-fill development" and "urban uses" (as used in the Class 32 Cat. Ex.) had to be interpreted using the CEQA statutory definitions of "in-fill site," "urbanized area" and "qualified urban uses." Accordingly, the Petitioners argued that the Project did not qualify for the Class 32 Cat. Ex. because it was located in a rural area (not on an "in-fill site," in an "urbanized area" or surrounded by "qualified urban uses," as said terms are defined elsewhere in CEQA).

The court disagreed and upheld the trial court's determination that the Project satisfied all qualifying criteria for the Class 32 Cat. Ex. In doing so, the court reaffirmed numerous important canons of statutory interpretation that apply in CEQA cases, including the following:

• Interpretation of the CEQA Guidelines. First, the court clarified that the principles governing statutory interpretation also apply to administrative regulations, e.g., the CEQA Guidelines. Under the well-known Berkeley Hillside Preservation v. City of Berkeley decision, regulatory language should be given its plain, commonsense meaning. If the CEQA Guidelines are clear and unambiguous, a court's task is over. However, if the intent of an administrative agency cannot be discerned from a regulation's plain language, courts may turn to extrinsic aids such as legislative history, public policy and the broader regulatory scheme. In analyzing CEQA Guidelines Section 15332, the court acknowledged potential ambiguity and reviewed the intent of the California Natural Resources Agency in adopting the Class 32 Cat. Ex. In doing so, the court found no evidence that the Agency intended to restrict the Class 32 Cat. Ex. to projects that satisfied the definitions of "in-fill site," "urbanized area" and "qualified urban uses," as defined elsewhere in CEQA and the CEQA Guidelines. The court found these terms "notably absent" from the language of CEQA Guidelines 15332, reinforcing the conclusion that the categorical exemption applies broadly to qualifying infill development projects without imposing additional definitional constraints.
• Omission of Terms. The court also endorsed a long-standing canon of statutory interpretation set forth by the California Supreme Court: Courts "may not broaden or narrow the scope of the provision by reading into it language that does not appear in it or reading out of it language that does." Contrary to the Petitioners' argument, the court was unwilling to read into the Class 32 Cat. Ex. definitions that appear in other sections of CEQA or the CEQA Guidelines.
• Distinct Terminology. The court also emphasized another fundamental principle of statutory construction: "[w]here different words or phrases are used in the same connection in different parts of a statute, it is presumed the Legislature intended a different meaning." Applied here, the phrase "surrounded by urban uses" could not be construed to mean an "urbanized area" as defined in CEQA Guidelines Section 15387. In other words, it must be presumed that the California Governor's Office of Planning and Research (OPR) intended a different meaning in the Class 32 Cat. Ex. by using the different phrase (i.e., "surrounded by urban uses").
• Statutory Prohibition on Expanding CEQA Requirements. Lastly, the court highlighted the important mandate found in CEQA section 21083.1 that prohibits courts from interpreting CEQA in a manner that imposes procedural or substantive requirements beyond those explicitly stated in the statute or CEQA Guidelines. Here, the Petitioners' interpretation of the CEQA Guidelines effectively required environmental reviews for projects that the California Natural Resources Agency and OPR have determined to not have significant environmental impacts.

Applying the substantial evidence standard of review, the court reviewed the applicant's environmental assessment and held that it provided adequate support for the City's determination that the Project qualified for the Class 32 Cat. Ex.

The court also declined to address the Petitioners' argument regarding the adequacy of the environmental assessment's analysis of the Project's air quality impacts. The court reiterated that a project qualifying for a Cat. Ex. under CEQA is not subject to CEQA's requirements, including the preparation of EIRs or other analyses. The court emphasized that a Cat. Ex. allows projects to proceed without any additional CEQA compliance and, for that reason, the Petitioners' reliance on CEQA case law addressing the adequacy of EIRs was misplaced.

Implications of the Decision

The Working Families of Monterey County v. King City Planning Commission decision reaffirms that a project must meet the qualifying criteria for a Class 32 Cat. Ex. (e.g., be located in "city limits" and substantially surrounded by "urban uses"), but a project does not need to satisfy other CEQA or CEQA Guidelines-defined terms (e.g., be located on an "in-fill site" or in an "urbanized area"). The decision should bolster local agencies' reliance on the Class 32 Cat. Ex., especially for qualifying projects that may be located within the "city limits" of smaller jurisdictions. Further, the decision reinforces canons of statutory interpretation that should govern in CEQA litigation, including that courts should refrain from interpreting CEQA (as well as the CEQA Guidelines) in ways that would impose procedural or substantive requirements beyond those expressly stated in statute or the CEQA Guidelines.

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