Applicants, public agencies and their land use counsel often watch anxiously to see if project opponents will appear at a public hearing to raise objections to a proposed project's CEQA compliance. If project opponents "fail to exhaust" their administrative remedies before elected officials or as part of written public comments, courts have generally refused to entertain CEQA objections raised for the first time in court. In Fall River Wild Trout Foundation v. County of Shasta, 99 C.D.O.S. 1565 (1999), the California Court of Appeals chipped away at the exhaustion doctrine, thereby exposing project approvals to greater judicial risks.
In Fall River, Shasta County adopted a mitigated negative declaration ("MND") and approved an amendment to its zoning ordinance permitting development of 14 residential units along the Fall River. The MND concluded that, although the project might have potential adverse effects on wildlife resources or upon wildlife habitat, the mitigation proposed by the project proponent would reduce those effects to a less than significant level. Although the County sought review and comment from the public, it failed to give the required CEQA notice of intent to adopt the MND to the State Department of Fish and Game ("DFG"), a trustee agency under CEQA.
Plaintiffs Fall River Wild Trout Foundation claimed that the County's failure to give DFG notice violated CEQA, thereby requiring the Court to set aside the County's adoption of the MND and rezoning. Although the Foundation did not exhaust its administrative remedies prior to filing suit, as required by Section 21177 of the Public Resources Code, the Court of Appeals held that (1) plaintiffs were excused from raising the procedural defect before the County Board of Supervisors because the County failed to provide notice to a trustee agency, and (2) the County's failure to give this CEQA notice was a prejudicial abuse of discretion.
Although plaintiffs failed to appear before the County to object to the lack of notice to DFG, the Court ruled that Public Resources Code Section 21177 allows certain exceptions to the exhaustion requirement, one of which includes the public agency's failure to give notice to DFG. Section 21177 provides that exhaustion is not required where "there was no public hearing or other opportunity for members of the public to raise those objections orally or in writing prior to the approval of the project, or if the public agency failed to give the notice required by law." The Court reasoned that the "notice required by law" included both notice to the public and notice to trustee agencies. Ironically, the party that toppled the project approvals was not the party that suffered the lack of notice.
While there are no presumptions under CEQA that an error is prejudicial, the failure to comply with CEQA's procedural review and comment requirements may constitute a prejudicial abuse of discretion. The Court in Fall River stated that where the lack of notice results in a failure to elicit a response from a trustee agency to a MND, "the prejudice is manifest." The Court appeared to have been influenced by the special role of trustee agencies under CEQA to raise public interest concerns, such as DFG's comments on behalf of the State's wildlife resources. The Court concluded that the County's failure to send a copy of the MND to DFG deprived the County of information necessary for informed decision-making and informed public participation.
Given the heightened risks to project approvals under Fall River, public agencies, applicants and their legal counsel need to carefully monitor the CEQA noticing process, to assure that State agencies charged with protecting the environment are properly noticed. Otherwise, an applicant can get to the end of the CEQA process only to find that a costly procedural oversight has unraveled its project entitlements.