John R. Lawson Rock & Oil, Inc. v. State Air Res. Bd.

• Decision Date: 31 January 2018
• Docket Number: F074003
• Citation: 230 Cal.Rptr.3d 1,20 Cal.App.5th 77
• Court: California Court of Appeals Court of Appeals
• Parties: JOHN R. LAWSON ROCK & OIL, INC., et al., Plaintiffs and Respondents, v. STATE AIR RESOURCES BOARD et al., Defendants and Appellants.

20 Cal.App.5th 77

230 Cal.Rptr.3d 1

JOHN R. LAWSON ROCK & OIL, INC., et al., Plaintiffs and Respondents,

v.STATE AIR RESOURCES BOARD et al., Defendants and Appellants.

F074003

Court of Appeal, Fifth District, California.

Filed January 31, 2018

Xavier Becerra, Attorney General, Robert W. Byrne, Assistant Attorney General, Randy L. Barrow and Nhu Q. Nguyen, Deputy Attorneys General, for Defendants and Appellants.

Wanger Jones Helsley, Timothy Jones, John P. Kinsey, and Steven K. Vote, Fresno, for Plaintiffs and Respondents.

Dorothy Rothrock; Heather Wallace, Sacramento; and Michael Jacob, for California Manufacturers & Technology Association, Automotive Specialty Products Alliance, California Business Properties Association, California Chamber of Commerce, California Independent Oil Marketers Association, California Professional Association of Specialty Contractors, California Retailers Association, Consumer Specialty Products Association, National Elevator Industry, Inc., and Pacific Merchant Shipping Association as Amici Curiae on behalf of Plaintiffs and Respondents.

DETJEN, J.

OVERVIEW

This case involves modifications to a set of regulations first adopted in 2008, known as the "Truck and Bus Regulation" (the regulations). In 2014, the State Air Resources Board (the Board) adopted proposed modifications to the Truck and Bus Regulation, extending certain deadlines for small fleet operators to comply with the regulations. John R. Lawson Rock & Oil, Inc. (Lawson), a fleet operator that had already incurred financial liability complying with the regulations, along with a related interest group, the California Trucking Association (collectively respondents), filed a writ petition against the Board and Richard Corey in his official capacity as Executive Officer of the Board (defendants and appellants) alleging the 2014 modifications were improper under both the California Environmental Quality Act (CEQA) and California's Administrative Procedures Act (APA).

The trial court ultimately ruled in respondents' favor on both claims. With respect to CEQA, the court concluded the Board made several errors, including approving a project prior to the completion of an environmental study, adopting the wrong baseline for its analysis, incorrectly concluding the modifications would have no significant adverse impact on the environment, and improperly applying a piecemeal approach to the environmental review. With respect to the APA, the trial court found the Board conducted an incomplete economic impact analysis.

For the following reasons we conclude the trial court correctly determined the Board's actions violated CEQA. We find, however, that the violations are narrower than found by the trial court. We further find the Board's conduct violated the APA, voiding the modified regulations. We therefore affirm the trial court's judgment on the grounds set forth below.

FACTUAL AND PROCEDURAL BACKGROUND

In January 2010 a regulatory scheme called the Truck and Bus Regulation, first passed in late 2008, became effective. (See Cal. Code Regs., tit. 13, § 2025.) The regulations are designed to reduce emissions of diesel particulate matter (PM), oxides from nitrogen (NOx), and greenhouse gases from large diesel vehicles. It does so, in part, by requiring vehicle owners to retrofit and upgrade existing vehicles to the equivalent of 2010 or newer model year engines.

Shortly before the regulations became effective, staff notified the Board that the ongoing global recession had substantially reduced overall trucking activity since the regulations were first envisioned, potentially warranting modifications to the expected regulations. The Board responded by delaying some reporting deadlines and requesting proposals for modifications to the regulations. The subsequent proposal resulted in certain modifications to the original regulations that would delay the initial compliance dates by a year and further defer engine replacements by two or more years for most fleets. These changes also eliminated a requirement that certain light trucks utilize a particulate matter filter and provided a 10-year window where only engines 20 years old, or older, would require modernization. The Board notes in its briefing that no legal challenges were filed against these modifications.

The Contested Modifications

In October 2013, the Board received a status update on the Truck and Bus Regulation. In this update, the Board was informed that staff had been working with regulated fleets to meet compliance deadlines. Staff reported that, while "the vast majority of the 260,000 trucks registered in California [that] must comply with the requirements of the regulation [were] already compliant," 20,000 trucks still needed a filter, of which nearly 15,000 were in small fleets of three or fewer. Staff identified January 1, 2014, as a critical upcoming milestone "because it's the first time at least one vehicle for each of these fleets need[s] to become compliant," while noting that "small fleets typically have least access to capital, creating additional challenges" toward compliance.

As part of this update, staff identified "what [the Board] is doing to assist fleets in transitioning into compliance as we approach the upcoming compliance date." Staff pointed to several funding programs available to assist fleets with required modifications and noted "[s]taff is also proposing some new regulatory flexibility to be added to the regulation." As part of this regulatory flexibility, staff indicated it was "proposing to issue a regulatory advisory that would provide fleets that order a [particulate matter] filter or a replacement truck or that are eligible and apply for a grant or a loan to have until July 1, 2014, to complete the steps necessary to come into compliance" and stated "because we are planning to make regulatory changes to provide relief, we believe it is appropriate to provide access to these provisions while staff finalizes them to present to the Board by April 2014." All these proposals were part of what staff described as "a comprehensive strategy which will help many of [the currently noncompliant] fleets transition into compliant trucks." Staff explained that, moving forward, "staff will assess the emission and economic impacts of proposed regulatory changes," and "return to the Board by April 2014 with proposed amendments." In the meantime, staff noted they would issue a regulatory advisory to allow fleet operators to take advantage of the planned flexibility. Based on this presentation, the Board indicated its staff should examine these changes while some members expressed thanks that flexibility was being built into the regulations.

The Board's Regulatory Advisory

In November 2013, the Board issued the expected Regulatory Advisory concerning its plans to modify the current regulations. The Regulatory Advisory described steps the Board "is taking to assist vehicle owners with the transition to the upcoming January 1, 2014, particulate matter ... filter compliance deadline under the Truck and Bus [R]egulation" and expressed its overall goal as providing "additional time for owners to complete their good faith compliance efforts" and "additional flexibility for many lower use vehicles and vehicles that operate solely in certain areas of the State." The advisory explained the Board "will recognize good faith efforts of vehicle owners to comply with the deadline" then in place by ensuring those meeting relevant criteria "will not be subject to enforcement action during the period through July 1, 2014."

Truck owners were also allowed "to take advantage of the following anticipated regulatory changes for all vehicles" prior to the expected April 2014 hearing at which the matter would be again discussed. Staff outlined these anticipated changes as: (1) reopening the period for vehicles to opt-in to the existing low mileage agricultural vehicle extension; (2) reopening the period for vehicles to opt-in to the existing low mileage construction truck extension; (3) reopening the period for vehicles to opt-in to the existing particulate matter phase-in requirements; (4) increasing the thresholds for low-use exemptions; and (5) expanding the definition of " 'NOx exempt' " areas. Staff also explained that the "PM filter requirements for vehicles operated exclusively in the existing and newly proposed 'NOx exempt' areas ... will be delayed one year until January 1, 2015." The advisory further explained that "while ... staff anticipates proposing amendments similar to these administrative changes at the Board's regularly scheduled April 2014 meeting, the changes will not be finalized until approved by the Board." However, "[i]n the event that the proposed amendments differ from those identified above and impact a fleet's ability to comply with the regulation, ... staff will provide fleets that have reported their intent to use these options additional time beyond the Board's April 2014 meeting to come into compliance."

The Initial Statement of Reasons

On March 5, 2014, the Board released a staff report, which included its Proposed Amendments to the Truck and Bus Regulation and its Initial Statement of Reasons for Proposed Rulemaking (initial statement). The initial statement provided recommendations for modifications in line with those discussed at the October 2013 meeting and, relevant to this appeal, included distinct subsections discussing air quality, the environmental impacts analysis, and the economic impacts analysis and assessment. With respect to the disputed modifications, the initial statement sought to provide relief in areas with cleaner air by delaying the compliance schedule for all vehicles operating solely within certain exempt areas by one year for initial compliance and four years for final compliance. For small fleets outside of these areas, staff proposed "to defer the compliance requirements for the second and third truck in a small fleet by one year and two...