In Communities for a Better Environment v. South Coast Air Quality Management District (South Coast Air II),1 the California Supreme Court addressed whether the South Coast Air Quality Management District (Air District)2 was required, under the California Environmental Quality Act (CEQA),3 to prepare an Environmental Impact Report (EIR) for a new project at a Los Angeles area ConocoPhillips refinery.4 From 2000 to 2001, the Air District,5 the Environmental Protection Agency,6 and the California Air Resources Board7 promulgated or proposed regulations requiring sulfur in diesel fuel be reduced to fifteen parts per million by June 2006. ConocoPhillips submitted a project (the Project) in 2003 to the Air District8 proposing to meet the new low sulfur diesel requirement by operating existing equipment, specifically four boilers and a cogeneration plant, at levels that would generate more nitrogen oxide (NOx) emissions than the refinery emitted before implementation of the Project.9 While overall NOx emissions would rise, NOx emissions from the four existing boilers would remain below ConocoPhillips' allowable levels under previous permits issued by the Air District. Because ConocoPhillips was already permitted to emit NOx from its boilers at the maximum level allowed under its existing boiler permits, the Air District determined that the Project could not have a significant effect on the environment if it increased emissions of the boilers to the maximum level under the existing permits.10
In South Coast II, the California Supreme Court found that the Air District erred in including the maximum emission levels under the existing boiler permits as part of the environmental baseline from which it determined whether the Project required an EIR.11 The Court held that environmental effects of projects subject to CEQA environmental review must be measured against the actual physical conditions existing at the time of project application, not hypothetical situations under existing permits.12 The only time that permits will be considered existing physical conditions and part of the baseline from which environmental effects are measured is when the permit has undergone prior CEQA review.13 If significant adverse environmental effects are found, an EIR must be prepared and mitigation measures suggested.14
In Section I, this Note discusses the California Supreme Court's analysis of the proper baseline for determining whether a project will have a significant effect on the environment. Section II investigates whether the Court's ruling can be reconciled with California Court of Appeals' decisions which had previously held that permitted emission levels should be included within an environmental baseline. Additionally, Section II considers ConocoPhillips' argument that it had a vested property right to emit NOx at previously permitted levels. Finally, Section III discusses implications of the Court's ruling, specifically its precedential value and possible constitutional attacks on the holding.
II. THE CASE
A. Statement of Facts
The Air District was required to complete an EIR for the Project if it found the Project might "have a significant effect on the environment."15 To determine whether a project has a significant effect, the Air District must compare the existing environmental conditions (the Baseline)16 with the environmental conditions that would exist if the Air District approved the Project.17 The Air District had an established significance threshold18 creating a presumption that a project would have a significant effect if it would increase NOx emissions by fifty-five or more pounds per day over the baseline.19 The threshold was set by calculating the amount of NOx that could be released into the Air District and that would remain below "the most stringent [state or federal ambient air quality standards]" when added to the NOx already in the atmosphere.20
The Air District found the Project would increase NOx emissions within a range of 237 and 456 pounds per day. …