BAAQMD is a regional agency that adopts and enforces regulations governing air pollutants in the San Francisco Bay Area. BAAQMD is also responsible for promulgating air pollutant emission "thresholds of significance" for use by CEQA lead agencies when evaluating the potential impact a project proposed within BAAQMD's jurisdiction may have on the environment. In 2010, BAAQMD adopted a CEQA threshold for Toxic Air Contaminants (TACs) and fine particulate matter emissions, along with suggestions for methods of assessing and mitigating impacts from such emissions that are found to be significant. These thresholds would require lead agencies to consider not only whether project emissions could significantly impact the existing environment, but also whether the existing environment would have an air quality or odor impact on the proposed project. Inclusion of the latter analysis as part of the CEQA process could affect the siting and design of new development, including infill development, in the region subject to BAAQMD jurisdiction.

After adoption, CBIA challenged the thresholds because there was no statutory or case law precedent for the reverse CEQA analysis required by BAAQMD. In fact, CBIA argued, that there was a string of unbroken case law that specifically rejected the reverse CEQA argument, including Baird vs. County of Contra Costa (1995) 32 Cal.App.4th 1464; City of Long Beach vs. Los Angeles Unified School District (2009) 176 Cal.App.4th 889; South Orange County Wastewater Authority vs. City of Dana Point (2011) 196 Cal.App.4th 1604; and Ballona Wetlands Land Trust vs. City of Los Angeles (2011) 201 Cal.App.4th 455.

The trial court ordered BAAQMD to rescind the thresholds. The court found that adoption of the thresholds was a project and thus, CEQA review was required. The court did not reach CBIA's reverse CEQA argument. BAAQMD appealed the trial court's ruling.

On appeal, the First Appellate District reversed the trial court. The appellate court rejected the finding that adoption of the thresholds was a project that required CEQA review because the potential effects of the thresholds were too speculative to be reasonably foreseeable. In addition, the Court of Appeal disagreed with the previously unbroken reverse CEQA line of cases cited by CBIA and held that CEQA does in fact require analysis of the potential impacts of the environment on a project and its users.

CBIA sought review by the Supreme Court on three issues, and the Court granted review on just one: Under what circumstances, if any, does CEQA require an analysis of how existing environmental conditions will impact future residents or users (receptors) of a proposed project?

On review, the Supreme Court rejected BAAQMD's argument that CEQA requires an analysis of the environment's impact on a project in every instance. Based on the text of the statute, the Court held that CEQA review should be "limited to those impacts on a project's users or residents that arise from the project's effects on the environment." Requiring a reverse CEQA analysis "in all circumstances would impermissibly expand that scope of CEQA." The Court took a practical view of the situation, noting that if BAAQMD was correct, then the term "environmental effects of a project" would "encompass nearly any effect a project has on a resident or user. Given the sometimes costly nature of the analysis required by CEQA when an EIR is required, such an expansion would tend to complicate a variety of residential, commercial, and other projects beyond what a fair reading of the statute would support."

Ultimately, the Supreme Court reversed the Court of Appeal's decision. The Court remanded the matter back to the appellate court to reconsider the case in light of the Supreme Court's opinion.

As previously reported, developers are weighing in on the recent ruling.