City of Morgan Hill v. Bay Area Air Quality

• Citation: 13 Cal.Rptr.3d 420,118 Cal.App.4th 861
• Decision Date: 14 May 2004
• Docket Number: No. A102518.,A102518.
• Court: California Court of Appeals
• Parties: CITY OF MORGAN HILL et al., Plaintiffs and Appellants, v. BAY AREA AIR QUALITY MANAGEMENT DISTRICT et al., Defendants and Respondents; Calpine Incorporated, Real Party in Interest and Respondent; California Energy Resources Conservation and Development Commission, Intervener and Respondent.

13 Cal.Rptr.3d 420

118 Cal.App.4th 861

CITY OF MORGAN HILL et al., Plaintiffs and Appellants, v. BAY AREA AIR QUALITY MANAGEMENT DISTRICT et al., Defendants and Respondents;

Calpine Incorporated, Real Party in Interest and Respondent;

California Energy Resources Conservation and Development Commission, Intervener and Respondent.

No. A102518.

Court of Appeal, First District, Division 4.

May 14, 2004.

Stephan C. Volker, San Francisco, Gretchen E. Dent, Oakland, Joshua A.H. Harris, Law Offices of Stephan C. Volker, for plaintiffs and appellants.

Brian C. Bunger, Alexander G. Crockett, for defendants and respondents.

Jeffery D. Harris, Christopher T. Ellison, Ellison, Schneider & Harris, Sacramento, for real party in interest and respondent.

William M. Chamberlain, Sacramento, Richard C. Ratliff, Kerry Willis, for intervener and respondent.

REARDON, J.

One who would construct and operate a California power plant must first obtain an interconnected set of federal, state and regional agency approvals. In this case, City of Morgan Hill and others¹ oppose approval of a natural gas power plant, arguing that the project fails to comply with the California Environmental Quality Act (CEQA). (See Pub. Resources Code,² §§ 21000-21177.) An official of respondent Bay Area Air Quality Management District (District) — a regional agency charged to implement the federal Clean Air Act — issued a prevention of significant deterioration (PSD) permit for the power plant. (See 42 U.S.C. §§ 7401-7671q.) After the power plant was also certified by respondent California Energy Resources Conservation and Development Commission (Commission), the District's hearing board (Board) dismissed the City's administrative appeal of the District official's decision to issue the permit.

Turning to the courts, the City filed a petition for writ of mandate challenging the Board's dismissal of its appeal and the District official's issuance of the underlying permit. The trial court sustained demurrers to the petition without leave to amend on alternative state and federal grounds. On appeal from the trial court's subsequent order dismissing its petition for writ of mandate,³ the City argues inter alia that the District violated CEQA when it approved the PSD permit. As we find that the trial court properly sustained the demurrers, we affirm its order dismissing the petition for writ of mandate.

I. FACTS⁴

In April 1999, respondent Calpine Incorporated⁵ sought a certificate from the Commission to construct and operate the Metcalf Energy Center, a 600-megawatt natural gas-fired power plant proposed to be built in San Jose.⁶ (See Santa Teresa Citizen Action Group v. City of San Jose (2003) 114 Cal.App.4th 689, 697, 7 Cal.Rptr.3d 868.) In May 1999, Calpine also sought a PSD permit from respondent Air Pollution Control Officer (APCO) — an official of the District — to establish that the power plant satisfied federal Clean Air Act standards intended to prevent the significant deterioration of air quality. (See 42 U.S.C. §§ 7470-7479; see also 40 C.F.R. § 51.166 (2003).)

In October 2000, the Commission issued its final staff assessment (FSA) of Calpine's application for a power plant certificate. In February 2001, the Governor issued an executive order requiring local, regional and state agencies making CEQA decisions on power plant proposals to use the Commission FSA in the same manner as it would use an environmental impact report (EIR) prepared by a lead agency. (See Governor's Exec. Order No. D-26-01 (Feb. 8, 2001) (Exec. Order No. D-26-01).) In May 2001, the District's APCO issued a PSD permit for the proposed Metcalf Energy Center, relying on the FSA as the functional equivalent of an EIR. (See Health & Saf.Code, §§ 40750-40753.)

In June 2001, the City filed an administrative appeal of the APCO decision to issue the PSD permit to the Board. The City alleged that the permit failed to comply with CEQA and District regulations implementing that statute. (See Health & Saf.Code, §§ 40800-40865, 42302.1.) The City also filed a PSD permit appeal with the federal Environmental Appeals Board (EAB). In August 2001, the EAB denied review of the PSD permit. In doing so, it specifically declined to rule on state law issues such as CEQA compliance on jurisdictional grounds. On these nonfederal matters, the EAB held that the petitioners' "redress is in another forum."⁷

In September 2001, the Commission granted a certificate to construct and operate the Metcalf Energy Center power plant.⁸ It identified itself as the lead agency for purposes of CEQA and stated that the documents associated with the certification process constituted the functional equivalent of an EIR. (See §§ 21165, 25519, subd. (c).) The Commission required many conditions of certification, including 55 conditions relating to air quality — 47 of those as required by the District as a condition of its PSD permit.

After issuing the certificate, the Commission appeared as amicus curiae before the Board in the City's appeal of the PSD permit, arguing that its authority preempted the District's jurisdiction. In December 2001, the Board dismissed the City's appeal, finding that it had no subject matter jurisdiction over any PSD permit issues because federal law required them to be resolved by the EAB. It also concluded that the EAB's August 2001 decision was a proper and full adjudication of the issues properly before that body. To the extent that state law issues were involved, the Board found that it had no authority to review, override or overturn conditions imposed on a project by the Commission. In March 2002, the Board denied the City's motion for reconsideration of its decision dismissing the City's appeal.⁹ (See Health & Saf.Code, § 40861.)

In September 2002, the City petitioned for a writ of mandate in the trial court, challenging the APCO and Board decisions. (See Code Civ. Proc., § 1085, subd. (a).) Calpine was named as a real party in interest and the Commission intervened in the action. The City filed its first amended petition in November 2002. In it, the City sought to set aside the PSD permit, to vacate the Board's denial of its appeal, and to overturn the Board's decision denying reconsideration of that denial. The District, the Commission and Calpine demurred to the City's first amended petition, arguing inter alia that the trial court had no subject matter jurisdiction in the case.

The trial court issued a tentative decision to overrule the demurrers and held a hearing on the matter. In March 2003, the trial court sustained the demurrers on two grounds. First, it found that the Commission had conducted all required CEQA review. The fact that the PSD permit was issued in May 2001 before the Commission issued its certificate in September 2001 was held to be irrelevant. Alternatively, the trial court found that the PSD permit was a federal permit that did not require any state CEQA review. It sustained the demurrers without leave to amend and dismissed the first amended petition with prejudice.

II. STANDARD OF REVIEW

Before we address the merits of this case, we review the standard of review that we apply when doing so. It is well established that a demurrer tests the legal sufficiency of the complaint. (Hernandez v. City of Pomona (1996) 49 Cal.App.4th 1492, 1497, 57 Cal.Rptr.2d 406; Sargoy v. Resolution Trust Corp. (1992) 8 Cal.App.4th 1039, 1041, 10 Cal.Rptr.2d 889.) On appeal from a dismissal entered after an order sustaining a demurrer, we review the order de novo, exercising our independent judgment about whether the petition states a cause of action as a matter of law. (See Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125, 271 Cal.Rptr. 146, 793 P.2d 479, cert. den. 499 U.S. 936, 111 S.Ct. 1388, 113 L.Ed.2d 444; Desai v. Farmers Ins. Exchange (1996) 47 Cal.App.4th 1110, 1115, 55 Cal.Rptr.2d 276.) We give the petition a reasonable interpretation, reading it as a whole and viewing its parts in context. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58; see Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967, 9 Cal.Rptr.2d 92, 831 P.2d 317.) We deem to be true all material facts that were properly pled. (Serrano v. Priest (1971) 5 Cal.3d 584, 591, 96 Cal.Rptr. 601, 487 P.2d 1241.) We must also accept as true those facts that may be implied or inferred from those expressly alleged. (Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403, 44 Cal.Rptr.2d 339.) We may also consider matters that may be judicially noticed, but do not accept contentions, deductions or conclusions of fact or law. (Serrano v. Priest, supra, 5 Cal.3d at p. 591, 96 Cal.Rptr. 601, 487 P.2d 1241.)

If the petitioner has stated a cause of action under any possible legal theory, we will order that the demurrer be overruled. (See Aubry v. Tri-City Hospital Dist., supra, 2 Cal.4th at pp. 966-967, 9 Cal.Rptr.2d 92, 831 P.2d 317.) However, if no liability exists as a matter of law, we affirm the trial court's order sustaining the demurrer. (See Baughman v. State of California (1995) 38 Cal.App.4th 182, 187, 45 Cal.Rptr.2d 82.) We independently construe statutory law, as its interpretation is a question of law on which we are not bound by the trial court's analysis. (California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 699, 170 Cal.Rptr. 817, 621 P.2d 856; see Baughman v. State of California, supra, 38 Cal.App.4th at p. 187, 45 Cal.Rptr.2d 82.)

With this standard of review in mind, we turn to the merits of the issues raised in the City's appeal. As an appellate court, we generally review the trial court's ruling, not the reasons it gave for that ruling. (See Jackson v. Ryder Truck Rental, Inc. (1993) 16 Cal.App.4th 1830, 1836, 20 Cal.Rptr.2d 913; McCorkle v. State Farm Ins. Co. (1990) 221 Cal.App.3d 610, 615 fn. 2, 270 Cal.Rptr. 492.) However, because of the complexity of the issues involved in this...