Wal-Mart’s trying hard to be green. And, despite the arguments of a local citizen group in Ceres, one appellate court has concluded that this isn’t a problem under the California Environmental Quality Act.

In this case – involving a Wal-Mart in Ceres – the Fifth District Court of Appeal ruled that the mere fact that a project increases the amount of recycling – or includes biodegradable plastic – doesn’t trigger a requirement for environmental analysis in a project’s environmental impact report.

A group called Citizens For Ceres challenged the EIR in court on several grounds. The group was represented by Brett Jolley, a Stockton lawyer who often represents citizen groups opposing Wal-Mart projects in the Central Valley.

On the recycling question the Fifth District said: “Unlike traditional waste disposal methods, such as landfilling, recycling is not itself an environmental problem, but is instead a solution to the problems presented by those traditional methods.” Therefore, the issues related to recycling are, by definition, not environmental problems. “[W]e agree with Wal-Mart and the city that when a project will result in increased demand for recycling services, this often can be treated as an economic rather than an environmental impact and need not be analyzed in the EIR.”

The case also dealt with some interesting issues involving the economic rationale for a statement of overriding considerations under CEQA, which is required to approve a project in the face of significant impacts. The citizen group had challenged the statement of overriding considerations, saying the project would not generate increased tax revenue and more jobs as the city and Wal-Mart claimed. But the court said the record contained “substantial evidence of probable benefit” and basically said judges don’t have to be economists.

In a followup to a previous appellate ruling, the court overruled the trial court and decided that Wal-Mart should not have been barred from recovering the $48,000 cost of preparing the administrative record in the case.

The court also rejected the citizen group’s argument that the EIR did not adequately deal with issues associated with possible urban decay, saying that the city had adequately conditioned the project with requirements that Wal-Mart maintain the

store it would be abandoning until a new tenant is found.

The proposed development project is a 300,000-square-foot retail center known as Mitchell Ranch Center, which would be anchored by a 190,000-square-foot Super Wal-Mart that includes 56,000 square feet for groceries. The non-grocery portion of the store is comparable in size to an existing Wal-Mart in Ceres that would be closed as a result of this project’s construction.

The project’s approval process and EIR dragged out for several years and at one point Wal-Mart bought the property from the underlying developer and became the applicant. Citizens For Ceres brought a very wide-ranging legal challenge to the EIR, but both the trial judge and the appellate court ruled in favor of the city and Wal-Mart on all counts.

The appellate court’s ruling on the recycling question may be an important precedent. Citizens For Ceres had argued that the city should have assessed the environmental impact of the recycling created by the project because Wal-Mart uses a biodegradable plastic known as polylactic acid, or PLA, in its packaging. Polylactic acid is sometimes known as “corn plastic”.

The city documented that its current recycling facilities had more than enough capacity to handle the additional material from the Wal-Mart. But Citizens’ consulting engineer made the following argument about why the city should have done an environmental analysis on the recycling:

PLA can compromise other plastic in the waste stream, which can reduce the opportunity to recycle the other materials, which in turn could threaten the city’s ability to meet the state’s AB 939 recycling targets.

The city’s response was that PLA is already in Ceres’ waste stream. The city separates PLA out of the waste stream after recycling is picked up and then sends it to the landfill, where it biodegrades, so therefore there is no environmental impact worth analyzing.

The Court of Appeal acknowledged that the amount of recyclable waste would go up because of the Wal-Mart project, but concluded: “This is substantial evidence that the project will cause an increase in recycling; but as we have explained, an increase in recycling in itself is not an adverse environmental impact. It is not substantial evidence that the increase may be more than the city’s recycling contractor can handle. For that reason, it does not support a fair argument that there is a significant impact needing discussion in the EIR.”

Regarding PLA, the court noted: “Because of the sorting problem (PLA products cannot be recycled with other plastic and must instead be separated and either composted or landfilled), a major increase in PLA waste from a proposed project could conceivably lead to a reduction in recycling and an increase in landfilling.” However, the court concluded: “There is no evidence of this type of problem in this case, however.”

The discussion of the statement of overriding consideration could be important as well, because the Court of Appeal concluded that courts don’t have to second-guess a lead agency’s analysis of the economic benefits of a project.

Ceres had hired Bay Area Economics to do an economic analysis. BAE found that the project would increase sales tax receipts by $327,000 per year and increase the number of jobs over the current Wal-Mart fom 375 to 580, in large part because of the other stores and restaurants that would be located in the center. Citizens For Ceres challenged all these numbers and BAE’s underlying assumptions. Among other things, Citizens argued that many of the new jobs would be part-time. Indeed, Citizens submitted as evidence a report from the San Diego County Taxpayers Association, released in 2000, on the subject of Wal-Mart and part-time jobs – but the city submitted a letter from the association three years later saying the report was outdated.

The appellate justices decided that it was not their job to second-guess an economic analysis: “It is not our role to make a factual finding about whether the project will truly benefit or harm the job market. It is not enough for a challenger to present some evidence opposed to the agency’s findings, for we do not resolve conflicts in the evidence under the substantial evidence standard. The only question is whether the record contains substantial evidence of a probable benefit. It does.”

On the question of who should bear the cost of preparing the voluminous administrative record in the case – often an contentious issue in CEQA cases – the court overruled the trial judge and said Wal-Mart could recover the costs. However, the court remanded to the trial court the question of how much cost Wal-Mart could recover. The administrative record was the subject of a previous appellate ruling on the Ceres Wal-Mart -- Citizens for Ceres v. Superior Court (2013) 217 Cal.App.4th 889. In that case, the court ruled that pre-approval communications between the city and Wal-Mart were not privileged, which of course increased the cost of preparing the administrative record.

On the urban decay question – a topic of increasing interest in CEQA lawsuits– the appellate court reaffirmed a trend from other cases and narrowed the issue only to the physical deterioriation of vacant stores. The court ruled that a mitigation measure requiring Wal-Mart to beef up maintenance of its old store while it is vacant was sufficient to take the urban decay issue down to a level of insignificance. The court declined to rule more expansively about the likely impact of the new Wal-Mart on a wide range of other stores in the vicinity.

The Case:

Citizens of Ceres v. City of Ceres, No. F071600, September 12, 2016

The Lawyers:

For Citizens for Ceres: Brett Jolley, Shore, McKinley & Conger,

For City of Ceres: Edward A. Grutzmacher, Meyers, Nave, Riback, Silver & Wilson,

For Wal-Mart: Edward P. Sangster, K & L Gates,