In just six weeks, on July 1, 2011, troubling new rules will go into effect governing the mediation of disputes arising under the California Environmental Quality Act, California Public Resources Code §21000, et seq. (CEQA). These new rules — enacted last fall as part of Senate Bill 1456 (SB 1456) as a substitute for the more substantial CEQA reform many sought — appear at first blush to encourage resolution of disputes prior to the filing of any lawsuit challenging a public agency’s compliance with CEQA. On deeper review, however, the new rules appear to provide a new tool for delay and gamesmanship without meaningfully increasing the chances of settling legitimate disputes. This can cause trouble for energy projects.
When a lead agency approves a project, the common practice under CEQA is for that agency to file a notice of determination (NOD), as doing so commences a short statute of limitations for any actions challenging the lead agency’s compliance with CEQA. Short limitations periods under CEQA aim to provide certainty to project applicants and avoid project delay. Beginning on July 1, 2011, however, project opponents may have a new arrow in their quiver to delay project implementation, an unintended consequence of SB 1456.
New Public Resources Code Section 21167.10, added as part of SB 1456, permits any “person” who wishes to bring a CEQA action challenging a lead agency’s approval of a project to file a notice requesting mediation with the lead agency and real party in interest within five business days from the date the lead agency files its NOD. This provision applies to NODs filed on or after July 1, 2011. If the lead agency accepts the request for mediation, the applicable statute of limitations for filing a CEQA lawsuit is automatically tolled until the mediation is completed.
Although resolution of disputes without litigation can be beneficial to project implementation, there appear to be several problems with Section 21167.10 as drafted.
First, other than the requirement that a person file a request for mediation with the real party in interest and the lead agency, Public Resources Code Section 21167.10 does not specifically require the project applicant’s/real party in interest’s consent to or participation in the actual mediation process. This is a very troubling omission. This creates a potential opportunity for inappropriate delay by project opponents, especially if counsel for the lead agency and counsel for the real party in interest are not in close communication on this issue immediately following the project’s approval. We especially foresee the potential for abuse if project opponents profess a willingness to engage in good-faith mediation efforts, thereby convincing a well-meaning lead agency to accept the request (potentially even over the project applicant’s objections), only to cause a long delay in the resolution of the litigation.
Second, Section 21167.10 does not say when the mediation must be completed, nor does it make clear that mediation can be terminated if the parties reach an early impasse or do not participate good faith. We have observed CEQA litigation being abused by litigants with no legitimate environmental interest but who, instead, merely seek to block projects or press projects to make economic concessions. The fact that the new rules fail to include a clear process for calling off mediation that reaches an impasse or is not being pursued in mutual good faith heightens the risk of CEQA litigation abuse.
Since it was always possible to toll the statute of limitations or to stay litigation to allow mediation to occur among willing parties acting in mutual good faith, it seems unlikely that these new pre-litigation mediation rules will offer any meaningful new tool to help resolve CEQA disputes. Given the risks that these new rules create, it will soon be even more imperative than ever for project applicants to communicate with the lead agency’s counsel immediately after project approval to discuss these issues, and, if warranted, to agree on an appropriate mediation process that maximizes the chances for settlement while avoiding the new rules’ opportunities for delay and gamesmanship.
Latham & Watkins has issued a more detailed Client Alert regarding these issues. Please visit the Latham & Watkins website or contact any one of the authors of this post directly if you would like a copy of the Client Alert.