SUNFLOWER ALLIANCE, Plаintiff and Respondent, v. DEPARTMENT OF CONSERVATION et al., Defendants; REABOLD CALIFORNIA, LLC, Real Party in Interest and Appellant.
S287414
In the Supreme Court of California
June 25, 2026
First Appellate District, Division Five A167698; Contra Costa County Superior Court N221503
S287414
Opinion of the Court by Guerrero, C. J.
This case involves the proposed conversion of a dormant well that was previously used to extract oil and gas into an active well that would be used to inject treated wastewater, the byproduct of oil and gas drilling, back into the ground. The California Department of Conservation‘s Geologic and Energy Management Division (CalGEM) determined that the project was exempt from the California Environmental Quality Act (
We hold that the phrase “negligible or no expansion of existing or former use” in CEQA‘s class 1 exemption pertains to an expansion or change in the nature or degree of a structure or facility‘s use, not the risk of environmental harm caused by such
Because the Court of Appeal below misinterpreted the class 1 exemption, we reverse its judgment and remand for the court to reconsider the applicability of the exemption to the proposed well conversion at issue here under the proper analytical framework. In light of our holding, it is unnecessary for us to reach the second question on which we granted review, whether an agency may claim a categorical exemption from environmental review under CEQA while also adopting project conditions relating to potential environmental effects.
I. FACTUAL AND PROCEDURAL BACKGROUND
Reabold California, LLC (Reabold) has a leasehold in the Brentwood Oil Field, located in Contra Costa County, where Reabold conducts oil and gas drilling activities. Reabold‘s leasehold, known as the Ginochio Lease, contains two active oil wells and a third inactive well, which the parties identify as the Ginochio Well. The Ginochio Well was built in 1963 and was
When oil or gas is extracted from the earth, it creates a wastewater byproduct. (Sunflower Alliance v. Department of Conservation (2024) 105 Cal.App.5th 771, 778 (Sunflower Alliance).) Reabold currently disposes of the wastewater produced by its active wells by trucking it to an offsite location. Reabold estimates that its active wells produce 300 barrels (12,600 gallons) of wastewater each day, which requires heavy trucks to travel hundreds of miles per week.
As an alternative to trucking wastewater offsite, the oil and gas industry sometimes uses water injection wells, known as “Class II” wells,2 to inject the wastewater — once it has been treated — into an underlying aquifer. (See Sunflower Alliance, supra, 105 Cal.App.5th at p. 778.) Because water injection wells have the potential to affect nearby clean water sources, they are subject to extensive state and federal regulations. (See id. at p. 777;
The Brentwood Oil Field already has two active water injection wells, although neither is located on the Ginochio Lease. In 2020, Reabold applied for a “Project Approval Letter” (see
The technical report explained that, if the project was approved, approximately 10,950,000 barrels (459,900,000 gallons) of treated wastewater would be injected into the Ginochio Well over a period of 20 years and deposited into an underlying “exempted aquifer” determined to have no “beneficial use.” (See
Despite these assurances, CalGEM, the State Water Board, and the Central Valley Regional Water Quality Control Board (Regional Water Board) initially expressed concerns
The water boards also voiced concerns about migration of the injected wastewater into clean water sources. In its initial review, the Regional Water Board observed that if “the estimated reservoir pressure is great enough to cause fluids to migrate vertically,” the nearby fault line, as well as two other abandoned wells, could potentially act as conduits from the injection site to an overlaying clean water aquifer. Additionally, the State Water Board noted the presence of “22 [active] water wells located in the study area” that “withdraw from several overlying aquifers used for domestic, agriculture, and public supply purposes.” The State Water Board requested that CalGEM provide confirmation that fluids would be confined within the injection zone and noted that “[a]djustments to any aquifer parameter will affect thе [area of review3] radius and
In response to these concerns, Reabold provided a revised technical report to CalGEM and the water boards, in which Reabold represented that it had conducted pressure testing at three distances from the Ginochio Well demonstrating the nearby fault was sealing. CalGEM agreed with Reabold‘s interpretation of the pressure testing data and represented to the water boards that “all wellbores within a quarter mile of the proposed injection well,” including the two abandoned wells that had been identified earlier, “were found to meet zonal isolation requirements.” However, the Regional Water Board, noting the pressure calculations had been based on estimates, remained concerned that “actual reservoir pressure may be great enough to cause fluids to migrate vertically into the overlying USDW, and that the [area of review/zone of endangering influence] calculations may not be representative of proposed injection activities.” The board was also concerned that injection activities could “reactivate” the fault line.
To address these remaining concerns, CalGEM submitted to the Regional Water Board a revised draft project approval letter, which would impose several conditions on the project. Under the terms of the revised letter, pressure fall off testing was required prior to injection to determine the reservoir pressure, permeability, and the potential for any conduits. The revised letter further required Reabold to report its testing results to CalGEM and mandated that a “new Zone of Endangering Influence shall be calculated if the values for
Along with its project approval, CalGEM issued a notice of exemption (NOE), in which CalGEM described the project as “allow[ing] disposal of [wastewater] into a Class II Water Disposal well proposed to be installed in an existing well boring” that was “currently listed as plugged and abandoned.” CalGEM determined that the “project is categorically exempt from CEQA under the ‘Class 1’ [citation] exemption per the CEQA Guidelines and CalGEM‘s regulations [citation] because the project proposes minor alteration of an existing previously permitted well involving a negligible expansion of former use.” CalGEM further determined that no exceptions to the class 1 exemption applied, as there was “no substantial evidence that there are any ‘unusual circumstances’ associated with the proposed project that create a reasonable possibility that the activity will have a significant effect on the environment or that significant ‘cumulative impacts’ would result.” (See
Sunflower Alliance (Sunflower) challenged CalGEM‘s
The Court of Appeal reversed, concluding that “any expansion of the well‘s use is negligible because, under the facts here, the environmental risks of injecting the water are negligible.” (Sunflower Alliance, supra, 105 Cal.App.5th at p. 777.) The court reasoned that it could not “construe ‘negligible’ to mean that any new use, or change in use,” would disqualify a project from the class 1 exemption. (Id. at p. 784.) Rather, the analysis should focus “on the consequences of a change in use,” consistent with CEQA‘s broad aim to protect the environment. (Sunflower Alliance, at p. 784, italics added.) The court explained, “No purpose is served by myopically focusing on whether a use is new, thereby excluding from the exemption many projects that would cause no environmental harm — precisely the type of borderline projects for which categorical exemptions are useful.” (Id. at p. 785.) The court credited the regulatory agencies’ determination that “the injected water
We granted Sunflower‘s petition for review.
II. DISCUSSION
“CEQA sets out the applicable standard of review: ‘In any action or proceeding . . . to attack, review, set aside, void or annul a determination, finding, or decision of a public agency on the grounds of noncompliance with [CEQA], the inquiry shall extend only to whether there was a prejudicial abuse of discretion. Abuse of discretion is established if the agency has not proceeded in a manner required by law or if the determination or decision is not supported by substantial evidence.‘” (City of San Diego v. Board of Trustees of California State University (2015) 61 Cal.4th 945, 956, quoting
In this case, the trial court found that substantial evidence did not support CalGEM‘s determination that the proposed well conversion fell within the class 1 exemption because “it was ‘not convinced that changing an oil and gas well into a water injection well involves negligible or no expansion of use.‘” (Sunflower Alliance, supra, 105 Cal.App.5th at p. 780.) The Court of Appeal reversed based on its interpretation of the class 1 exemption as encompassing projects where a change in use has only a negligible risk of environmental harm. (Id. at pp. 784, 790.) We granted review to determine the correct interpretation of the class 1 exemption. This issue “‘involves [a] pure question[] of law‘” subject to de novo review. (Protecting Our Water & Environmental Resources v. County of Stanislaus (2020) 10 Cal.5th 479, 495.)
A. CEQA: General Principles
“‘CEQA was enacted to advance four related purposes: to (1) inform the government and public about a proposed activity‘s potential environmental impacts; (2) identify ways to reduce, or avoid, environmental damage; (3) prevent environmental damage by requiring project changes viа alternatives or mitigation measures when feasible; and (4) disclose to the public the rationale for governmental approval of a project that may significantly impact the environment.‘” (Union of Medical Marijuana Patients, Inc. v. City of San Diego (2019) 7 Cal.5th 1171, 1184–1185 (Union Medical).) As an overriding principle, “‘CEQA embodies a central state policy to require state and local governmental entities to perform their duties “so that major consideration is given to preventing environmental damage.“‘” (Id. at p. 1185.)
To meet these objectives, CEQA prescribes detailed procedures for governmental decisions relating to projects that may have significant environmental impacts. “‘CEQA review is undertaken by a lead agency, defined as “the public agency which has the principal responsibility for carrying out or approving a project which may have a significant effect upon the environment.“’ [Citation.] A putative lead agency‘s implementation of CEQA proceeds by way of a multistep decision tree, which has been characterized as having three tiers. [Citation.] First, the agency must determine whether the
At the first step, the lead agency determines whether a proposed activity qualifies as a project triggering CEQA review in the first instance. CEQA defines a “‘[p]roject‘” as “an activity which may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment,” and which is funded, undertaken, or approved by a public agency. (
If a proposed activity qualifies as a project, the lead agеncy must proceed to the second step of the CEQA decision tree. In this step, the lead agency must determine whether the project is exempt from CEQA “under either a statutory exemption [citation] or a categorical exemption set forth in the CEQA Guidelines.” (California Building Industry Assn. v. Bay Area Air Quality Management Dist. (2015) 62 Cal.4th 369, 382 (Building Industry).) “The statutory exemptions, created by the Legislature, are found in
However, there are some exceptions to the exemptions, carved out by the Secretary, under which a project that might otherwise fall within a categorical exemption must nonetheless proceed with CEQA review. (See
We have previously recognized that the core motivating principle behind CEQA is to protect our state‘s environmental resources. “In enacting CEQA, the Legislature declared its intention that all public agencies responsible for regulating activities affecting the environment give prime consideration to preventing environmental damage when carrying out their duties.” (Mountain Lion Foundation v. Fish & Game Com. (1997) 16 Cal.4th 105, 112 (Mountain Lion); see Tomlinson v. County of Alameda (2012) 54 Cal.4th 281, 285 [CEQA and its implementing regulations “embody California‘s strong public
In this case, no party disputes that the proposed well conversion qualifies as a “‘[p]roject‘” under CEQA. (
We hold that the class 1 exemption may apply to new uses of an existing facility that involve “negligible or no expansion” of an existing or former use (
B. The Plain Text of CEQA‘s Class 1 Exemption Requires Consideration of the Nature and Scope of a Proposed Expansion of Use, Not the Consequential Risk of Environmental Harm
CEQA and its Guidelines are subject to the same general statutory interpretation principles. (See Berkeley Hillside Preservation v. City of Berkeley (2015) 60 Cal.4th 1086, 1097 (Berkeley Hillside) [“Generally, the rules that govern interpretation of statutes also govern intеrpretation of administrative regulations“].) Our core task is “‘to adopt the construction that best gives effect to the Legislature‘s intended purpose.’ [Citation.] In determining that intended purpose, we follow ‘[s]ettled principles.’ [Citation.] ‘We consider first the words of a statute, as the most reliable indicator of legislative intent.‘” (Union Medical, supra, 7 Cal.5th at pp. 1183–1184.) We therefore begin by analyzing the plain text of the class 1 exemption, “giving effect to its usual meaning and avoiding interpretations that render any language surplusage.” (Berkeley Hillside, at p. 1097.) In performing this analysis, we do not view the text of the exemption in isolation, but rather, consider it “’ “in the context of the statutory framework as a
The plain text of the class 1 exemption first requires that the proposed project be limited to “the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features.” (
However, the class 1 exemption does not reach all projects that might qualify as minor alterations to existing facilities. Rather, it is expressly limited to projects within that category “involving negligible or no expansion of existing or former use.” (
Sunflower contends the word “expansion” excludes new uses from the scope of the class 1 exemption. In Sunflower‘s view, the word “expansion” can only mean an increase in degree of an existing or former use. Sunflower points to a dictionary definition of “expansion” as “the act or process of expanding“; “expand,” in turn, is defined to mean “to increase the extent, number, volume, or scope of.” (Merriam-Webster Dict. Online (2026) <https://www.merriam-webster.com/dictionary/expansion> [as of June 25, 2026]; id. at <https://www.merriam-webster.com/dictionary/expand> [as of June 25, 2026]; all Internet citations in this opinion are archived by year, docket number and case name at <http://courts.ca.gov/opinions/cited-supreme-court-opinions>.) Even assuming the exemption reaches new uses, Sunflower argues, the exemption should only apply where a change in use is itself negligible without regard to potential environmental effects.
Reabold, adopting the Court of Appeal‘s interpretation, argues that an expansion in use can encompass new uses, and an expansion in use is negligible for purposes of the class 1 exemption so long as its expected environmental effects are negligible. While Reabold does not contend that the class 1 exemption expressly refers to environmental risks, it characterizes this reading of the exemption as consistent with CEQA‘s overarching purpose of protecting the environment. In Reabold‘s view, “the entire point of categorical exemptions is to carve out projects” that do not have significant effects on the environment, and the “class 1 exemption cannot be divorced from that foundation.”
We conclude that the agencies’ interpretation of the class 1 exemption is closest to the mark. Even putting aside any deference that may be owed to CNRA as the agency empowered to promulgate the Guidelines,5 the agencies’ interpretation is
It is clear from the wording of the class 1 exemption that it is concerned with negligible “expansion[s] of . . . use,” and that “use” refers to the “existing or former” use of the existing structures or facilities implicated in the project at issue. (
At the same time, contrary to Reabold‘s view, the class 1 exemption does not extend to any change in use provided the change results in “negligible or no expansion” in the risk of environmental harm. (
We are not at liberty to expand or contract the scope of the class 1 exemption beyond these plain terms. (Mountain Lion, supra, 16 Cal.4th at pp. 116, 125.) The Legislature has made clear that risk of environmental harm is properly considered by the Secretary in adopting regulations that designate classes of projects as categorically exempt, not by agencies or reviewing courts in deciding whether a particular project falls under an exemption. As we have previously explained,
We have emphasized that, in directing the Secretary to adopt categorical exemptions, the Legislature has evinced an intent to require the Secretary to “apply their expertise” in identifying categories of projects that will not have a significant effect on the environment. (Berkeley Hillside, supra, 60 Cal.4th at p. 1101.) This does not mean that projects falling within the categorical exemptions never have the potential to affect the environment. Rather, “[i]n listing a class of projects as exempt, the Secretary has determined that the environmental changes typically associated with projects in that class are not significant effects within the meaning of
Here, the Secretary has determined that class 1 projects, defined to include projects involving minor alterations to existing facilities resulting in either no or only a negligible expansion in the use of the facility, will typically not have a significant effect on the environment and are therefore exempted from a comprehensive environmental review. If we were to interpret the exemption to apply, notwithstanding its plain terms, whenever a lead agency or reviewing court determines an expansion in use will not result in significant environmental effects, we would be bypassing the category the Secretary has defined in favor of the overarching standard the Secretary was tasked with implementing. Such a holding would usurp the Secretary‘s role in defining the exemption categories and change the meaning of the category identified by the Secretary. The Secretary‘s adoption of a regulation designating
The interpretation of the class 1 exemption as turning on the scope of an expansion or change in use rather than environmental effects is also generally consistent with the three-step analysis we have long recognized and applied to
Interpreting the class 1 exemption as extending to minor alterations to existing facilities having no or only a negligible risk of environmental harm risks conflating
Notwithstanding this general framework, there are other categoricаl exemptions — not relevant here — that appear to involve at least a surface level consideration of environmental effects at the exemption determination stage. (See, e.g.,
C. Reabold‘s Counterarguments Are Unavailing
Reabold asserts three main arguments in support of its contention that we should interpret the class 1 exemption to encompass any expansion of use so long as the risk of environmental harm is negligible or nonexistent. They are unpersuasive.
First, as alluded to above, Reabold argues that the class 1 exemption must be interpreted with its greater purpose in mind. According to Reabold, the “entire point of [
Second, Reabold contends that some examples of class 1 exempted projects, i.e., the incorporation of bicycle lanes into an existing street (
Finally, echoing the Court of Appeal, Reabold argues that it is not inconsistent with
It is true that some consideration of environmental effects comes into play when considering the unusual circumstances exception to a categorical exemption. Beyond that general point, however, we disagree with Reabold‘s understanding of how the unusual circumstances exception functions within
A party challenging applicаtion of a categorical exemption has the burden of producing evidence supporting the claimed exception to that exemption. (Berkeley Hillside, supra, 60 Cal.4th at p. 1105.) “[T]o establish the unusual
We therefore have interpreted the unusual circumstances exception as involving a two-part inquiry. (Berkeley Hillside, supra, 60 Cal.4th at p. 1115.) First, the lead agency must determine whether a project involves “unusual circumstances,” which is a factual question. (Id. at p. 1114.) If so, the lead agency must then determine whether there is a “fair argument” the project may have a significant effect on the environment due to those unusual circumstances. (Id. at p. 1115.) Thus, the unusual circumstances exception will apply only if findings of ”both unusual circumstances and a potentially significant effect” have been made. (Ibid.)
As the agencies point out, Reabold‘s interpretation of the class 1 exemption would instead require a lead agency to consider potential environmental effects even where no unusual circumstances apply, thus rendering the key component of the unusual circumstances exception superfluous. As we have
In addition, the agencies raise a practical concern with Reabold‘s view. They argue that the
D. Project Conditions Relating to Environmental Effects
In addition to the statutory interpretation question addressed above, Sunflower raises the issue of whether a lead agency may impose project conditions relating to environmental effects while simultaneously declaring a project to be exempt from
Although the parties have briefed this additional issue, we decline to address it. (
III. DISPOSITION
We hold that the class 1 exemption requires a determination of whether a project involves a negligible expansion or change in an existing or former use of the structure or facility in question. Because the Court of Appeal relied on an incorrect understanding of the class 1 exemption in determining
GUERRERO, C. J.
We Concur:
CORRIGAN, J.
LIU, J.
GROBAN, J.
EVANS, J.
CHAVEZ, J.*
__________________________
* Associate Justice of the Court of Appeal, Second Appellate District, Division Two, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
SUNFLOWER ALLIANCE v. DEPARTMENT OF CONSERVATION
S287414
Supreme Court of California
June 25, 2026
The majority today holds that the words “negligible or no expansion of existing or former use” mean “negligible or no expansion of existing or former use.” I agree, of course. Who wouldn‘t?
I write separately, however, to acknowledge that the dilemma the Court of Appeal in this case faced was somewhat more complex. The question the court sought to address was not whether the words of the California Environmental Quality Act (
“Negligible” is a relative term, as the Court of Appeal recognized; what is “negligible” for one purpose may well be substantial for another. So, like all such inquiries, the question whether an expansion of use is “negligible” demands some frame of reference. Here, to find that frame, the Court of Appeal looked to statutory purpose. Given
I agree with the majority that the Court of Appeal erred in its analysis of the issue. But as I see it, the court‘s error was not in looking for a yardstick for measuring a “negligible” expansion of use. Nor, importantly, did the court err in turning to
As the majority explains, the error in the Court of Appeal‘s approach was identifying “negligible” expansions entirely by whether, in the court‘s judgment, the expansion poses a more-than-negligible risk of environmental harm. But the point of the class 1 exemption is not to enable courts (or, for that matter, lead agencies) to skip the next step of the
The examples listed in the
If a proposed project or class of projects resembles or can reasonably be analogized to one of these or other section 15301 examples, then the exemption applies and the inquiry ends. This is because when a proposed project resembles a project the Secretary of CNRA has already determined to involve “negligible or no expansion of use,” then it is reasonable to conclude that the proposed project also involves “negligible or no expansion of use.” (
Ultimately, to determine whether the expansion at issue here is “negligible,” the primary task for the Court of Appeal on remand will be to measure the expansion — i.e., converting a
As the majority notes, there also remains the question whether the agency with technical expertise in this area, CalGEM, has permissibly determined that well conversions of this type, in general, are unlikely to have significant environmental effects. (See
KRUGER, J.