Valero Refining Co. etc. v. Bay Area Air Quality etc. ( 2020 )

Filed 5/27/20
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
VALERO REFINING COMPANY –
CALIFORNIA,
Plaintiff and Respondent, A151004
v. (San Francisco County
BAY AREA AIR QUALITY Super. Ct. No. CPF-15514407)
MANAGEMENT DISTRICT
HEARING BOARD et al.,
Defendants and Appellants.
An oil refinery, respondent Valero Refining Company California
(Valero), undertook a costly, three-year construction project both to comply
with a consent decree it entered into with the federal government and to
upgrade portions of its facility. The project resulted in a significant reduction
in air pollution, and after constructing it Valero sought approval from the
regional air quality management district to bank the resulting emissions
reductions as valuable environmental credits. It was denied a significant
portion of the requested credits—first by the agency official charged with
deciding the issue, and then by the hearing board to which it appealed. In
this administrative mandamus action, it asked the superior court to set aside
the hearing board’s decision. The superior court did so, remanded the case
back to the hearing board for reconsideration, and the air district has
appealed.
1
The sole issue raised in this appeal concerns the standard of review
that the air district’s hearing board must apply when reviewing the agency
official’s decision denying approval of such emission reduction credits. Here,
the agency official charged with considering the refinery’s banking
application in the first instance denied the credits in question because,
applying a local air district regulation that prescribes the methodology for
measuring emissions reductions, the official calculated a significantly lower
reduction in air pollution than the refinery calculated. The refinery then
appealed the official’s decision to the hearing board, which upheld the
official’s interpretation of the regulation and on that basis declined to disturb
the official’s decision. The superior court ruled the hearing board did not
apply the correct standard of review in deciding the refinery’s appeal, because
the hearing board erroneously declined to consider evidence that denial of the
refinery’s banking application was “unfair” under the circumstances.
We hold the air district hearing board’s standard of review neither
requires nor empowers it to consider whether applying the regulation to the
particular case before it is in some broad sense fair, but instead is limited to a
quasi-judicial inquiry entailing the exercise of its independent judgment to
decide if the agency official’s interpretation of that regulation was correct.
The hearing board could, and did, appropriately consider Valero’s evidence
regarding the fairness of applying the regulation to Valero, but in another
context: in addressing Valero’s claim that the air district was equitably
estopped from applying it here. The superior court erred in construing the
hearing board’s standard of review to permit, and indeed require, the hearing
board to consider some other, more amorphous concept of “fairness.”
Accordingly, we reverse and remand the case to the trial court to address the
2
issues it did not reach, which we will not decide in the first instance on
appeal.
BACKGROUND
A. The Regulatory Framework
In California, regulatory oversight over sources of air pollution is
divided between the State Air Resources Board which has exclusive control
over emissions from motor vehicles, and 35 local and regional air quality
management districts (“air districts”) which have primary responsibility for
the control of air pollution from all other sources. (See Health & Saf. Code,1
§§ 39002, 39003, 39500, 40000; Friends of Outlet Creek v. Mendocino County
Air Quality Management District (2017) 11 Cal. App. 5th 1235, 1239, fn. 4.)
This case, involving emissions from an oil refinery, concerns the scope of
regulatory powers and duties at the air district level.
“Subject to the powers and duties of the state board,” air districts are
empowered to “adopt and enforce rules and regulations to achieve and
maintain the state and federal ambient air quality standards in all areas
affected by emission sources under their jurisdiction, and shall enforce all
applicable provisions of state and federal law.” (§ 40001, subd. (a).)
The regulatory powers and duties of air districts are carried out at
three levels. Each air district has a governing board, composed of locally
elected officials, which adopts substantive rules and regulations through a
public hearing process. (See §§ 40704.5, 40725, subd. (a), 40726.) The
governing board also appoints an air pollution control officer for the district,
commonly referred to in regulatory parlance as the “APCO.” (§ 40750.) The
APCO possesses broad enforcement authority, with responsibility for
1Unless otherwise noted, all further statutory references are to the
Health and Safety Code.
3
enforcing “[a]ll orders, regulations, and rules prescribed by the district
board.” (§ 40752.) The governing board also appoints a five-member hearing
board, comprised of two members of the public and three professionals (one
lawyer, one engineer and one medical expert with specialty in environmental
medicine or related fields).2 (§§ 40800, 40801.) The hearing board serves a
hybrid function; it sits in a reviewing capacity in some types of cases (permit
disputes (see §§ 42302.1 [issuance], 42302 [denial], 42306 [suspension], 42307
[revocation]) and appeals of emissions reduction credit banking decisions
(§ 40713)) and it presides over other types of matters directly in the first
instance, in a non-reviewing capacity (see §§ 42350, subd. (a) [variance
applications], 42451, subd. (a) [abatement proceedings]). It is empowered to
hold public hearings (§ 40808), subpoena witnesses (§ 40840) and “adopt rules
for the conduct of its hearings” (§ 40807). Its decisions may be judicially
reviewed by petition for a writ of mandate under Code of Civil Procedure
section 1094.5. (§ 40864.)
Section 40709 requires each air district to adopt regulations
establishing an air pollution emission offset system. (See § 40709.) Broadly
described, an offset system enables owners of pollution sources who
voluntarily reduce their air pollution emissions below the levels required by
law to receive emission reduction credits (“ERC”), certified by the air district,
that can be banked for future use or sold to other emission sources for profit.
(Elk Hills Power, LLC v. Board of Equalization (2013) 57 Cal. 4th 593, 603.)3
2 No officer or employee of the district may sit on the hearing board.
(§ 40803.)
3 Specifically, section 40709 provides that every air district board
“shall establish by regulation a system by which all reductions in the
emission of air contaminants that are to be used to offset certain future
increases in the emission of air contaminants shall be banked prior to use to
offset future increases in emissions.” (§ 40709, subd. (a).) The intent of the
4
Approval of emissions reductions through an offset system results in the
issuance of a certificate evidencing the ownership of all approved reductions.
(§ 40710.) Each air district offset system is subject to disapproval by the
state board within 60 days of adoption. (§ 40709, subd. (a).)
The Legislature has prescribed two levels of agency action for
regulatory approval of ERCs. Under section 40709, the initial decision rests
with the APCO. (See § 40709, subd. (a) [emission reductions “shall be
registered, certified, or otherwise approved by the district air pollution
control officer before they may be banked”].) Pursuant to section 40713, if the
APCO refuses to register, certify or otherwise approve an application for
emission reductions under section 40709, the applicant may seek review of
that decision by the district hearing board, which must hold a hearing to
decide “whether the application was properly refused.” (§ 40713.)
The underlying dispute here arose under regulations promulgated by
the Bay Area Air Quality Management District (the “air district”) concerning
the banking of ERCs, which we summarize briefly for context. The air
district’s regulations state that emissions reductions calculated in accordance
with its specified methodology qualify as “emission reduction credit” if they
exceed the reductions required by law, rule, regulation or the district’s Clean
Air Plan. The regulations also specify that the reductions must be “real,
permanent, quantifiable, and enforceable.” Subject to exceptions not
system is to “provide a mechanism for districts to recognize the existence of
reductions of air contaminants that can be used as offsets, and to provide
greater certainty that the offsets shall be available for emitting industries.”
(Id., subd. (b).) Substantively, it specifies that “[t]he system shall provide
that only those reductions in the emission of air contaminants that are not
otherwise required by any federal, state, or district law, rule, order, permit,
or regulation” are eligible for being banked and used to offset future increases
in air pollution emissions. (Id., subd. (a).)
5
pertinent here, ERCs are then “bankable,” meaning they can be deposited
into the air district’s “emissions bank.”
The air district’s regulations require an application to deposit an
emission reduction in the district’s emissions bank, on forms specified by the
APCO. However, the regulations prohibit the submission of a banking
application for pollutant sources that are subject to an abatement order or
other similar formal order “until compliance with the emissions limitations
which are the subject of the . . . order is achieved.”
The dispute in this case turned on the meaning of regulation 2-2-605.1,
which specifies one aspect of the methodology for calculating emission
reduction credits. That regulation mandates the use of a “baseline period” to
calculate emissions reductions that “consists of the 3 year period immediately
preceding the date that the application is complete.”4 (Italics added.) The
baseline period reflects the “before” input in what is essentially a “before and
after” calculation mandated by the air district’s regulations. In dispute here
was the meaning of the phrase “the application.” We will elaborate further
below.
B. These Proceedings
1. The Construction Project
In 2005, Valero entered into a consent decree with the United States
Environmental Protection Agency to settle litigation charging it with
violations of the Clean Air Act. The consent decree required Valero to take
4 In full, regulation 2-2-605.1 states: “The baseline period consists of
the 3 year period immediately preceding the date that the application is
complete (or shorter period if the source is less than 3 years old). The
applicant must have sufficient verifiable records of the source’s operation to
substantiate the emission rate and throughput during the entire baseline
period.”
6
certain steps to reduce air pollution emissions at its refinery in Benicia,
California, including installing some new equipment (a “scrubber,” to scrub
one type of pollutant from its fluid coker).
At issue here are reductions in air pollution that resulted from a project
that included both the equipment necessary to enable compliance with the
consent decree and additional upgrades Valero decided to undertake
voluntarily at the same time. As described by Valero, the project “was an
integrated project” that included decommissioning two furnaces and their
associated equipment and replacing them with two more efficient furnaces, a
set of modern catalytic reduction beds and two flue gas scrubbers. According
to Valero, about $500 million of its $750 million total outlay for the project
was spent to achieve emissions reductions beyond those required by the
consent decree. Valero opted to undertake greater than required
improvements in order to modernize its refinery, expand its processing
capability and make significant emissions reductions that it could use in the
future.
In April 2008, Valero filed a permit application with the air district
requesting authority to construct these improvements.5 Under the air
district’s “New Source Review” regulations (Regulation 2, Rule 2), the
purpose of that permit review process was to ensure that certain new or
modified sources of air pollution would achieve no net increase in emissions.
(See § 40919, subd. (a)(2).)
5 Technically, the furnace upgrades were addressed in a separate
written amendment to the April 2008 permit application filed several months
later, in December 2008. No party ascribes any significance to that fact,
however, and in their briefing both parties treat the permit application as
having been filed in April 2008. We will do the same.
7
Valero’s permit application expressly anticipated seeking approval of
credit for the resulting emissions reductions. Its permit application (in
section 7.0, entitled “Banking Credits”) stated that the project would result in
a reduction in emissions and that “Valero will submit an application to bank
ERCs from these reductions under separate cover.” The air district deemed
the permit application to be complete on May 16, 2008. Subsequently, on
December 15, 2008, the authority-to-construct permit issued.
On December 31, 2010, after two years of construction, Valero
permanently shut down the two older furnaces, and about two months later,
on February 23, 2011, the two new furnaces began operating. Over the next
several months, Valero underwent mandatory emissions testing of the new
equipment so the district could verify it complied with all permit limitations.
The testing was completed and certified in September 2011.
2. The APCO’s Decision on Valero’s Banking Application
In order to satisfy the air district’s requirement that emissions
reductions be “real, permanent, verifiable and enforceable” to qualify as an
ERC, Valero believed it could not submit a banking application until the old
furnaces had been permanently shut down, the new ones had been built and
tested and Valero had modified its federal operating permit.6
After the improvement project was operational, Valero submitted an
application (in March 2012) to bank the resulting emissions reductions. In
its banking application, Valero calculated its emissions reductions using the
same baseline period it had used in its permit application: a three-year
Valero obtained an amended federal operating permit in
6
December 2010.
8
period ending in March 2008 (before it had performed the refinery upgrades),
the date corresponding with its permit application.7
The air district had instructed Valero to use this baseline period in its
permit application,8 and it also was the same baseline period the air district
used in engineering evaluations of the project it prepared in connection with
Valero’s permit application. The engineering evaluations had stated, “The
baseline emissions shall be calculated in accordance with Regulation 2-2-605
[Basis: Banking],” which Valero had taken to mean that the same baseline
period would be used to bank its emission reductions. The engineering
evaluations also contained statements that led Valero to believe it could not
submit a banking application until the project had been completed,9 which
was consistent with the district’s regulation (2-4-401) that prohibits the
submission of a banking application for pollutants that are the subject of a
formal order such as the consent decree until after the emission limitations
required by the order are achieved.
7 Although Valero submitted its permit application in April 2008, and
the application was deemed complete in May, March was the last month for
which it had a complete set of emissions data to calculate its projected
emissions reductions for the application.
8 Valero’s permit application had originally proposed an even earlier
baseline period.
9 For example, the evaluation stated that “Valero may bank any
allowable excess of emissions reductions, in accordance with Regulation 2,
Rule 4, after the project is built and the actual equipment has shut down.” A
district employee testified this statement meant only that a banking
certificate could not issue until after the equipment had been shut down but
did not mean Valero could not have submitted a banking application with its
NSR permit application. The engineering evaluation also said that
reductions “shall be eligible for banking after being demonstrated by source-
testing or other means acceptable to the APCO.”
9
In November 2014, after lengthy wrangling with Valero, the APCO
issued a final decision authorizing the banking of a significantly lower
number of ERCs than Valero sought. Interpreting regulation 2-2-605.1 to
require the use of a three-year baseline period ending on the date Valero’s
banking application was deemed complete (May 15, 2012), the APCO
measured the reductions against a more recent baseline period (May 2009 to
May 2012) than the period in Valero’s banking application (April 2005 to
March 2008). The more recent baseline period included the period after
Valero had shut down its existing furnaces but not yet brought the new ones
online (i.e., when no emissions were generated), and extended into the post-
project period when its emissions were lower than they had been prior to
construction of the project. In all, Valero argued that the more recent
baseline period captured about 18 months of post-change emissions rather
than reflecting three full years of pre-change emissions. As a result, Valero
argued, this baseline period was not representative of Valero’s pre-change
emissions, it understated the true level of emissions reductions Valero had
achieved and using it to calculate Valero’s emissions reductions for purposes
of the banking application reduced the amount of ERCs Valero could receive.
3. Valero’s Appeal to the Hearing Board
Valero appealed to the hearing board, and the matter proceeded to a
five-day hearing at which both parties submitted pre-hearing briefs,
presented evidence and argued.
Rule 3.6 of the hearing board rules (Rule 3.6) sets forth the board’s
standard of review, and the scope of this rule is the central issue in this
appeal. It states: “The traditional legal presumption is one of the correctness
of a regulatory agency’s action. California Evidence Code Section 664 (‘It is
presumed that official duty has been regularly performed’). The Board may
10
not readily substitute its judgment for that of the District’s expertise. The
Board’s role is to determine whether the APCO’s interpretation of the
applicable legal requirements in its action is fair and reasonable and
consistent with other actions of the APCO and whether the APCO followed
proper and appropriate procedures and guidelines. The burden of proof in an
appeal is on the party challenging the APCO’s action or finding. California
Evidence Code Section 660. [¶] The scope of the Hearing Board’s review is
deference to the District’s determination with the burden on the Appellant(s)
to show the District’s action was erroneous. Specifically, it is the Board’s
task to determine whether the agency’s interpretation of its duty was
reasonable and if its performance of that duty was regularly performed.”
Valero argued the APCO’s use of a baseline period ending on the
completeness date of the banking application, rather than a pre-project
baseline ending in March 2008, was legally erroneous. It argued that the
“application” date as used in regulation 2-2-605.1 meant the completion date
for the application that made the emissions reductions enforceable: either the
application seeking an authority-to-construct permit in cases (like this one)
that required such a permit, and in all other cases (such as emissions
reductions resulting only from a shutdown of equipment), the banking
application itself.
Valero also asserted in its reply brief before the hearing board that,
under the circumstances, the air district should be equitably estopped from
using the banking application completeness date to set the baseline period.
Specifically, it argued that the district “should not be permitted to assert a
different position on the baseline [period] than the one it [applied to Valero’s
permit application] in part because Valero detrimentally relied on the
District’s statements and actions . . . .”
11
The APCO argued that the “application” date used in regulation 2-2-
605.1 meant only the banking application and not some other one. It argued
that the “declining baseline” that results when an applicant delays
submitting its banking application was adopted by design “ ‘to encourage
applicants to complete their applications in a timely manner,’ ” and that the
history of the current version of the rule reflected that intention. It also
argued the plain language of the regulation supported its interpretation and
the district’s treatment of prior applications interpreted the regulation
consistently to have the same meaning it was applying to Valero.
The APCO also addressed Valero’s estoppel argument, both contending
that it was not timely made and therefore was waived and opposing it on the
merits. Valero responded to that procedural objection by invoking Rule 3.6
and contending the estoppel arguments in its reply brief were the same
arguments it had previously advanced in its prehearing briefing about the
hearing board’s standard of review, just reframed.
After the five-day evidentiary hearing concluded, the hearing board by
a divided 3-2 vote upheld the APCO’s interpretation of the banking
regulation and dismissed Valero’s appeal. Applying Rule 3.6 in a ten-page
written ruling, the hearing board concluded that “the APCO’s interpretation
of Regulation 2-2-605.1, and its application of that provision in this particular
case, was fair and reasonable and consistent with other actions of the ACPO”
and that the APCO “applied this interpretation fairly and consistently to
Valero in the same manner as it has applied to other similarly-situated
applicants seeking to bank emission reduction credits under similar
circumstances.” It reached this conclusion principally by examining the
regulation’s language, its regulatory context, evidence from various sources of
12
the air district’s intent and two prior instances in which the district
had applied the regulation similarly.
The hearing board also rejected Valero’s equitable estoppel theory. It
did so principally on factual grounds, finding there was nothing in Valero’s
permit application, the engineering evaluations, the permit, its banking
application or the banking decision itself that was “inconsistent with the
APCO’s position that the baseline period for the banking application is based
on the date of the banking application itself.” It rejected Valero’s theory that
Valero had relied on assurances by air district staff that the same baseline
period would be used for both the permit application and the later banking
application, observing that there was no evidence that Valero ever confirmed
such an understanding in writing. “Furthermore,” it stated, “the position of
an individual Air District staff member does not bind the agency as a whole,
especially in cases where such a position was not reflected in the actual
permitting documents that District staff prepared, and where it was not the
position that the APCO took in approving the . . . permit application or
banking application.” It concluded that Valero had “not demonstrated that
the APCO ever took an inconsistent position that would justify a conclusion
that the APCO’s position in this matter was unreasonable or otherwise
improper.”
The hearing board was not entirely unsympathetic to Valero, however.
It concluded its ruling with advisory suggestions “encourag[ing]” the air
district both to “reconsider the fairness of denying banking credits under
these circumstances” and to “make its interpretation of the baseline rules
clear to the public and to regulated entities that may be affected by it.” Quite
presciently anticipating these proceedings, it also encouraged the parties to
engage in settlement discussions.
13
4. The Superior Court’s Ruling
Valero then filed a petition for writ of mandate pursuant to Code of
Civil Procedure section 1094.5 against the hearing board, the air district and
the air district’s APCO, Jack Broadbent (collectively, the “air district
parties”). The first cause of action alleged the hearing board did not proceed
in the manner required by law with respect to the proper standard of review.
The second cause of action alleged the hearing board’s ruling was not
supported by the findings. And the third cause of action alleged the hearing
board’s findings were not supported by substantial evidence.
The superior court (the Honorable Harold E. Kahn) issued a writ of
mandate, vacating the board’s decision and remanding the matter for a new
hearing. It ruled that the hearing board had prejudicially abused its
discretion by not applying the correct standard of review under Rule 3.6.
Specifically, it concluded that the hearing board had “improperly limited its
consideration of Valero’s appeal to the sole question of whether the APCO’s
interpretation of [regulation] 2-2-605.1 was reasonable.” The court ruled
that, “[r]ead as a whole and within the context of administrative law,
Rule 3.6 quite clearly has its origins in and therefore should take its meaning
from the case law on the independent judgment standard of review,”
observing that the rule “incorporates all aspects of the independent judgment
standard,” including “the presumption of correctness of the APCO’s decision,
the exercise of the Board’s own judgment not in a way that is in derogation of
the presumption of correctness, and the Board’s obligation to set aside the
APCO’s decision when the Board’s own judgment shows that the APCO’s
decision was erroneous.” It concluded that the hearing board “erred in
determining that Rule 3.6 required it to dismiss Valero’s appeal once it
determined that the APCO’s interpretation of [regulation] 2-2-605.1 was
14
reasonable . . . . The Board’s decision not to consider any of the facts adduced
from the evidence received by the Board that persuaded all five members of
the Board that the denial of Valero’s application was unfair to Valero shows
that, had the majority properly construed Rule 3.6, there is a significant
possibility that one or more of the three persons who voted to dismiss Valero’s
appeal may have decided the appeal differently.” (Italics added.) The
superior court appears to have been addressing Valero’s first cause of action
and not to have reached Valero’s second and third causes of action.
This appeal by the air district parties then followed.
DISCUSSION
I.
Appellate Jurisdiction
Before turning to the merits of this appeal, we first address whether
this appeal was timely filed and conclude that it was.
Under California Rules of Court rule 8.104 (rule 8.104), a 60-day
deadline to appeal commences when “the superior court clerk serves on the
party filing the notice of appeal a document entitled ‘Notice of Entry’ of
judgment or a filed-endorsed copy of the judgment, showing the date either
was served,” assuming (as is true here) that nothing has triggered an even
earlier deadline. (Cal. Rules of Court, rule 8.104(a)(1)(A).) In this case, the
air district parties filed their notice of appeal more than 60 days after the
superior court clerk mailed the parties a file-stamped copy of the appealable
judgment accompanied by a proof of service, and so we requested
supplemental briefing concerning the appeal’s timeliness.10 (See Hollister
10 Contrary to the suggestion by the air district parties, the appealable
judgment was the court’s order granting a writ of mandate, not a “judgment”
that it subsequently entered. (See Molloy v. Vu (2019) 42 Cal. App. 5th 746,
753, fn. 6.)
15
Convalescent Hosp., Inc. v. Rico (1975) 15 Cal. 3d 660, 667 [if appeal is
untimely “ ‘the court has no discretion but must dismiss the appeal of its own
motion even if no objection is made’ ”]; Cal. Rules of Court, rule 8.104(b).)
The supplemental briefing disclosed that the superior court clerk’s
mailing was sent to an incorrect address. At the air district parties’ request,
we have taken judicial notice of the notice of change of address their counsel
had filed in the superior court several months earlier. As now enlarged by
that document, the record thus reveals that the superior clerk mailed the
judgment to appellants’ counsel’s former address of record, not to counsel’s
current address of record.
Our research has revealed no authority addressing whether a clerk’s
mailing of notice of entry of judgment to counsel’s former rather than current
address of record commences the deadline to appeal under rule 8.104, but we
have no hesitation concluding it does not.
Under rule 8.104, service “may be by any method permitted by the
Code of Civil Procedure.” (Cal. Rules of Court, rule 8.104(a)(2).). Code of
Civil Procedure section 1013, which prescribes the requirements for valid
mail service, requires papers to be addressed to “the office address as last
given by that person on any document filed in the cause.” (Italics added.) That
was not done here. After a notice of change of address has been filed with the
court, as it was here, mail sent to a former address of record does not
constitute proper service under section 1013. (See Lee v. Placer Title Co.
(1994) 28 Cal. App. 4th 503, 510 [notice of dismissal sent to prior address of
record held ineffective]; see also Gamet v. Blanchard (2001) 91 Cal. App. 4th
1276, 1286 [trial court notices sent to address not specified in party’s notice of
change of address were “faulty” and “inadequate,” rendering resulting
judgment void].)
16
Because the clerk’s notice of entry of judgment was not properly served,
it did not satisfy rule 8.104. “[S]trict compliance” with Code of Civil
Procedure section 1013 is required (Valley Vista Land Co. v. Nipomo Water &
Sewer Co. (1967) 255 Cal. App. 2d 172, 174), and therefore “[n]otice of an
appealable judgment or order mailed to an incorrect address is not sufficient
to constitute legal notice” for purposes of calculating the deadline to appeal.
(Moghaddam v. Bone (2006) 142 Cal. App. 4th 283, 288 [notice of entry of
judgment addressed with wrong zip code held ineffective]; see also Triumph
Precision Products, Inc. v. Insurance Co. v. North America (1979)
91 Cal. App. 3d 362, 365 [notice of entry of judgment listing correct street
address for appellant’s counsel but omitting law firm name]; Valley Vista
Land Co., at pp. 173–174 [notice of entry of judgment with incorrect street
address].)
Citing dicta that notice of entry of judgment mailed to an incorrect
address would trigger the 60-day deadline to appeal upon “proof notice was
actually received” (Moghaddam v. Bone, supra, 142 Cal.App.4th at p. 288
[construing former Rules of Court rule 2]), Valero urges us to deem this
appeal untimely because appellants did receive the clerk’s mailing, a fact
ultimately established by a declaration the air district parties filed with their
reply supplemental briefing in order to clarify matters.11 That is irrelevant,
11 Before they did so, Valero filed a request asking us to take judicial
notice of email correspondence between counsel corroborating the fact that
appellants’ counsel possessed a file-stamped copy of the judgment. We now
deny that request, both because such materials are not a proper subject of
judicial notice and they are irrelevant in light of the air district parties’
acknowledgement they did receive the clerk’s notice. We also deny the air
district parties’ request to take judicial notice of the materials that their
counsel did, in fact, receive because the fact of receipt is established by their
counsel’s declaration.
17
however. The fact remains that Rules of Court rule 8.104 was not strictly
complied with.
Although in other contexts, technical defects in giving notice are of no
consequence where it can be inferred that notice was in fact received (see,
e.g., In re T.W. (2011) 197 Cal. App. 4th 723, 729-731 [zip code omitted from
notice of writ advisement under Welf. & Inst. Code, § 366.26(l)(3)]), actual
notice that an appealable judgment has been entered, including by receiving
a notice of entry of judgment or a file-stamped copy of the judgment, does not
trigger the deadline to appeal when notice of entry of judgment has not been
given in accordance with rule 8.104. Even trivial errors in giving notice of
entry of judgment, which this was not, cannot be excused.12 (See Alan v.
American Honda Motor Co., Inc. (2007) 40 Cal. 4th 894, 903 [“the older rule
that technical defects in a notice of entry of judgment are excusable unless
they are so egregious as to preclude actual notice of entry [citation] has not
been applied to . . . rule 8.104(a)(1) . . . ”].) Our Supreme Court has made
clear that rule 8.104 does not require litigants to “guess, at their peril”
whether documents mailed by the court clerk trigger the deadline to appeal.
(Alan, at p. 905.) “ ‘Neither parties nor appellate courts should be required to
speculate about jurisdictional time limits.’ ” (Ibid.)
The issue here is one of first impression, but courts have held that
other attempts to give notice of the entry of judgment that failed strictly to
comply with rule 8.104 were ineffective to trigger the appeal deadline even in
situations when the service clearly did result in actual notice to the appealing
party of the entry of judgment. We are aware of no case reaching a contrary
12 Notice mailed to an address that is not an attorney’s address of
record is not a trivial, technical misstep. We are dealing here not with a
misspelling, a wrong name or a missing zip code but, rather, a totally
incorrect address as reflected in the trial court’s records.
18
result. (See InSyst, Ltd. v. Applied Materials, Inc. (2009) 170 Cal. App. 4th
1129 [electronic service of notice that judgment was entered, with
instructions and hyperlink to electronic file-stamped copy of judgment held
insufficient]; Citizens for Civic Accountability v. Town of Danville (2008)
167 Cal. App. 4th 1158, 1164 [similar]; see also Thiara v. Pacific Coast Khalsa
Diwan Society (2010) 182 Cal. App. 4th 51 [judgment mailed with cover letter
but no proof of service]; Keisha W. v. Marvin M. (2014) 229 Cal. App. 4th 581,
585 [personal service of restraining order but no evidence it was file-
stamped]; In re Marriage of Lin (2014) 225 Cal. App. 4th 471 [appellant
personally present in court when restraining order issued, making order
legally enforceable, followed by court clerk handing written copy to
appellant’s counsel].) “Because appellate time limits are jurisdictional and
cut off litigants’ access to the courts, we strictly construe statutes and rules
concerning the time in which to file a notice of appeal. [Citation.] ‘On
numerous occasions, California courts have resolved ambiguities concerning
appellate jurisdictional time limits to extend, rather than limit, the right to
appeal, even where such interpretations may be considered hypertechnical in
other contexts.’ ” (Lin, at p. 474.) Simply put, “mere knowledge” an
appealable judgment has been entered is not sufficient to start the 60-day
appeal period. (Johnson v. Ralphs Grocery Co. (2012) 204 Cal. App. 4th 1097,
1102, fn. 5; see also Lee v. Placer Title Co., supra, 28 Cal.App.4th at p. 511
[actual notice “does not substitute for compliance with [Code Civ. Proc.,
§] 1013”].)
Valero also cites authority that “mail sent to a former address is
deemed properly served for up to one year after the change of address
because postal regulations require the postal service to forward first class
mail at no charge during that period” (Whitehead v. Habig (2008)
19
163 Cal. App. 4th 896, 903), and contends that because the clerk’s notice in
this case was sent within the one-year mail-forwarding window it should be
deemed properly served absent proof it was not received. We do not agree.
Whitehead is not on point, involved a different issue and opposite facts. It
held that defendants who changed addresses but did not file a notice of
change of address with the court were not denied due process when a notice
of the trial date was mailed to their address of record, even though it was no
longer their current address. (See ibid.) Unlike here, there was no issue in
Whitehead about the validity of mail service under Code of Civil Procedure
section 1013 much less the timeliness of a notice of appeal; quite sensibly,
Whitehead simply held the defendants had no due process right to receive
notice of the trial date at their new address when they never bothered to
change their address of record on file with the court.
Nothing in either Whitehead or in postal mail forwarding regulations
persuades us to interpret rule 8.104 in a manner that “would create a trap for
the unwary.” (Citizens for Civic Accountability v. Town of Danville, supra,
167 Cal.App.4th at p. 1164.) The rule “must be strictly construed to preserve
the right to appeal when possible without doing violence to the language of
the rule.” (Id. at pp. 1163-1164.) Strict construction allows no room to depart
from the requirement, incorporated by rule 8.104(a)(2) (service by any
method “permitted by the Code of Civil Procedure”), that mail service be
accomplished by addressing a notice of entry of judgment to “the office
address as last given by that person on any document filed in the cause”
(Code Civ. Proc., § 1013, subd. (a)). That was not done here.
The air district parties filed their notice of appeal within 60 days of the
date that Valero’s counsel served them with a (properly addressed) notice of
20
entry of judgment. Accordingly, their appeal is timely. (See Cal. Rules of
Court, rule 8.104(a)(1)(B).)
II.
The Hearing Board Applied the Correct Standard of Review.
The legal issue we are asked to decide in connection with the air
district’s banking decision is very narrow, and so we begin by clarifying what
is not at issue. We are not asked to decide whether the air district should be
estopped from using an emissions baseline period ending on the date of
Valero’s banking application, a theory Valero advanced before the hearing
board but did not raise in the first cause of action of its petition for writ of
mandate in the superior court and does not raise here. We also are not asked
to decide whether the APCO and the hearing board correctly interpreted the
air district’s banking regulation to require the use of that emissions baseline
period rather than the (more favorable) baseline period Valero used in its
permit application. The merits of that issue were not before the superior
court in Valero’s first cause of action and are not before us now.13 The sole
legal question we are asked to decide is whether the hearing board applied
the proper standard of review in deciding Valero’s appeal. That is all.
We review this legal question de novo. In reviewing an agency’s
decision on a question of law “ ‘ “the trial and appellate courts perform
essentially the same function, and the conclusions of the trial court are not
conclusive on appeal.” ’ ” (Duncan v. Department of Personnel Administration
(2000) 77 Cal. App. 4th 1166, 1174.)
13 We express no opinion whether these merits issues are encompassed
by either of the two remaining causes of action that were mooted by the
superior court’s ruling. The parties are free to address the scope of those two
other claims on remand.
21
The air district parties argue that the hearing board correctly
interpreted and applied its standard of review, and therefore the superior
court erred in vacating the hearing board’s decision and directing it to
reconsider Valero’s appeal. They, along with several amici who have
submitted briefs in support of their position,14 assert that Rule 3.6 requires
the board to determine only whether the APCO’s decision was correct as a
matter of law and does not empower the board to depart from the law based
on board members’ individual views as to whether applying the regulation in
the circumstances before it is substantively fair. The air district parties also
assert, secondly, that the board engaged in exactly the inquiry required by
Rule 3.6 and the superior court erred in concluding otherwise.
Valero, on the other hand, contends Rule 3.6 “goes beyond requiring
simply a check on the ‘legal correctness’ of APCO regulatory interpretations”
and, instead, broadly empowers the hearing board to “go[] beyond the bare
interpretation of the regulations at issue” and consider “ ‘basic principles of
fundamental fairness’ ” in deciding an appeal. It says that “Rule 3.6 specifies
a multi-faceted standard of review under which both facts and law—and not
just mere interpretation of regulations—may be important in determining
whether a banking application was ‘properly refused’ by the APCO.” Indeed,
although Valero’s appellate briefing is somewhat opaque about the contours
of what Rule 3.6 supposedly entails, and it backpedals in its response to
amicus briefing (inconsistently),15 it was quite clear in its briefing before the
14 There are two amicus briefs, one submitted by the California Air
Resources Board and the other by four regional air quality and air pollution
control districts (South Coast, Sacramento, San Joaquin and Monterey Bay).
15 In that filing, Valero asserts repeatedly that “fairness” pertains only
to the proper interpretation of the applicable regulations, arguing for example
that “the Hearing Board was entitled under Rule 3.6 to address the
competing interpretations and to adopt the one that avoided (rather than
22
hearing board. There, Valero expressly conflated the standard of review
required by Rule 3.6 with the principles of equitable estoppel, telling the
hearing board there was in fact no difference (“they are the same
arguments—indeed, the same issues”). Here, since the board members
expressed concerns about the substantive fairness of the outcome—and
indeed, in advisory comments, even encouraged the APCO to “reconsider the
fairness of denying banking credits under these circumstances”—Valero says
that the board prejudicially misconstrued its standard of review and it urges
us to affirm the superior court’s ruling. Second, and relatedly, Valero also
faults the hearing board for considering only whether the APCO’s
interpretation was “reasonable” and nothing more.
We agree with the air district parties.
A. The Hearing Board Is Not Empowered to Review the
APCO’s Decision for “Fundamental Fairness.”
We start with the general principle that the hearing board was
required to exercise its independent judgment in deciding Valero’s appeal. It
could not blindly ratify the APCO’s decision but, rather, was required to
decide the merits of the issues for itself. On appeal, this basic proposition
does not appear to be in contention. The superior court concluded that the
hearing board’s standard of review encompassed the obligation to exercise
independent judgment; Valero argues the trial court “properly recognized
that Rule 3.6 effectively restates the independent standard of review”; and
the air district parties embrace this understanding of the hearing board’s
standard of review as well. They argue the hearing board properly “applied
caused) manifest injustice.” On the other hand, it also asserts repeatedly in
that filing that “Rule 3.6 plainly goes beyond requiring simply a check on the
‘legal correctness’ of APCO regulatory interpretations,” and gives the hearing
board “wide latitude to fashion an appropriate remedy.”
23
its own independent judgment,” and equate the board’s standard of review
with the principles of judicial review prescribed in Yamaha Corp. of America
v. State Bd. of Equalization (1998) 19 Cal. 4th 1 (Yamaha). Under Yamaha,
our Supreme Court’s seminal decision establishing the framework for
assessing the amount of judicial deference an administrative interpretation is
entitled to by the courts, “ ‘The standard for judicial review of agency
interpretation of law is the independent judgment of the court,
giving deference to the determination of the agency appropriate to the
circumstances of the agency action.’ ” (Id. at p. 8.) Moreover, our
independent research has revealed cases in which an independent review
standard has been held applicable to administrative entities acting in a
reviewing capacity that, like the hearing board, have the power to take
evidence, hear from witnesses, entertain argument and render a decision.
(See Quintanar v. County of Riverside (2014) 230 Cal. App. 4th 1226, 1233-
1235 (Quintanar) [hearing officer presiding over appeal of employee
disciplinary proceeding pursuant to county collective bargaining agreement
required to exercise independent judgment regarding appropriate discipline];
Kolender v. San Diego County Civil Service Com. (2005) 132 Cal. App. 4th
1150, 1157 [county civil service commission must “independently review the
facts and law” in appeal from disciplinary order]; accord, Lopez v. Imperial
County Sheriff’s Office (2008) 165 Cal. App. 4th 1, 5 [county appeals board
presiding over appeal of employee termination].) “In any review process, a
provision that the reviewer must hold a full evidentiary hearing tends to
show that the reviewer is supposed to exercise independent judgment; this is
true regardless of whether the review process is contractual or statutory.
Likewise, a provision, whether contractual or statutory, that a reviewer can
‘modify’ a decision tends to show that the reviewer is supposed to exercise
24
independent judgment.”16 (Quintanar, at p. 1235.) There is no reason to
conclude the district’s enactment of Rule 3.6 was intended to circumscribe the
board’s review powers more narrowly. And, as said, no party contends
otherwise.17
Contrary to the trial court’s ruling, however, the hearing board’s
exercise of independent judgment under Rule 3.6 does not encompass a
broader inquiry than simply determining whether the APCO’s interpretation
and application of the applicable regulations was correct as a matter of law.
It does not allow (much less require) the hearing board to decline to apply the
regulations if, in the hearing board’s view, applying them in the case before it
would be “unfair.”18 The trial court erred in holding otherwise.
16 The hearing board’s rules specify it may do this.
17 Although the cases we located in our independent research held that
little or no deference was owed in the circumstances presented there (see
Quintanar, supra, 230 Cal.App.4th at p. 1235 [“Based on the wording chosen
by the parties to the [memorandum of understanding], we conclude that the
Department gave up any requirement that the hearing officer defer to its
discretion”]; Kolender v. San Diego County Civil Service Com., supra,
132 Cal.App.4th at p. 1157 [sheriff’s decision was “not due substantial
deference”]), none involved an agency’s interpretation of its own regulation,
nor a rule specifying a particular standard of review such as Rule 3.6
expressly requiring “deference to the agency’s determination.” Here,
although Valero appears to blow hot and cold on the subject, ultimately we
understand all parties to agree that Rule 3.6 incorporates the principles of
judicial review expressed in Yamaha and its progeny. The parties have not
specified how those factors would apply here, however, and we are not asked
to decide that issue.
18 The parties disagree as to how much deference we must give the
hearing board’s interpretation of its own standard of review embodied in Rule
3.6, but it is unnecessary to decide that issue because we readily agree with
the board’s interpretation even if we give it no deference.
25
First, no statute authorizes the district to promulgate a regulation
empowering its hearing board to engage in such an expansive and amorphous
“fairness” inquiry. (See PaintCare v. Mortensen (2015) 233 Cal. App. 4th 1292,
1305 [“An administrative agency ‘has only as much rulemaking power as is
invested in it by statute’ ”]; Friends of the Kings River v. County of Fresno
(2014) 232 Cal. App. 4th 105, 117 [similar].) The Legislature has specified
that the APCO is legally required to follow the law, i.e., to enforce “[a]ll
orders, regulations, and rules prescribed by the district boards” (§ 40752),
and in the banking context in particular, section 40713 requires the hearing
board to determine only whether the APCO “properly refused” a banking
application.19 It follows that the hearing board is charged with deciding only
whether the APCO “properly” enforced the district’s orders, regulations and
rules on the subject. Nothing more. (See Industrial Indem. Co. v. City and
County of San Francisco (1990) 218 Cal. App. 3d 999, 1009 [“A court must
construe an administrative regulation in light of the enabling statute’s
intent”].) Valero asserts that “[i]t makes no sense to equate ‘properly refused’
with ‘legally correct.’ ” But that rather astonishing position makes no sense.
Indeed, elsewhere in its briefing Valero says the opposite, acknowledging
that the statutory “properly refused” standard entails reviewing for legal
error.20
19 The Legislature has utilized similar language to describe the scope
of other types of appeals before the hearing board. (See §§ 42302 [whether
permit “was properly denied”], 42302.1 [whether permit “was properly
issued”], 42306 [whether permit “was properly suspended”].)
20 Valero points out in its respondent’s brief that Rule 3.6 expressly
requires the hearing board to “determine whether ‘the District’s action was
erroneous’ ” which Valero says “echoe[s] the statutory requirement” under
section 40713 “that the Board determine ‘whether the application was
properly refused.’ ”
26
We also recognize, of course, the hearing board is authorized to “adopt
rules for the conduct of its hearings” (§ 40807), but the fact “ ‘[t]hat an agency
has been granted some authority to act within a given area does not mean
that it enjoys plenary authority to act in that area.’ ” (Friends of the Kings
River v. County of Fresno, supra, 232 Cal.App.4th at p. 117.) That limited
grant of procedural power (governing the “conduct” of hearings), cannot
reasonably be construed as a grant of substantive authority to disregard duly
enacted administrative regulations. Not even Valero seriously points to
section 40807 as a source of legislative authority for the expansive
interpretation of Rule 3.6 it advocates.21
Second, nothing in the plain language of Rule 3.6 itself suggests the
hearing board is to engage in anything other than a traditional quasi-judicial
administrative review exercise. The rule states that the hearing board’s
“role” is “to determine whether the APCO’s interpretation of the applicable
legal requirements is fair and reasonable and consistent with other actions of
the APCO” and “to determine whether the agency’s interpretation of its duty
was reasonable,” while also incorporating the presumption of correctness,
commanding “deference” to the District’s decision, and providing that the
hearing board “may not readily substitute its judgment for that of the
District’s expertise.”
Valero places great reliance on the rule’s mention of “fair and
reasonable,” but that language does not support its expansive interpretation
21 Apart from a generalized string citation, Valero cites section 40807
in one sentence of its response to amicus briefing where it asserts, without
discussion or analysis: “The Code allows all air district hearing boards
discretion to carry out their statutory review authorities by adopting their
own rules for hearing administrative appeals of banking decisions and other
determinations by air district staff. See [Health & Saf. Code,] § 40807.”
27
of Rule 3.6. The rule expressly says the relevant question is whether the
APCO’s “interpretation of the applicable legal requirements of the law is “fair
and reasonable,” not whether applying that law is fair in the particular case.
This language does nothing more than reflect fundamental principles of
constitutional, statutory and regulatory construction, using terminology
regularly employed by both the United States Supreme Court and our
Supreme Court. (See, e.g., Thompson v. Oklahoma (1988) 487 U.S. 815, 821,
fn. 4 [constitutional provision should not be given “ ‘a crabbed interpretation
that robs [it] of its full, fair and reasonable meaning’ ”]; People v. Freeman
(1988) 46 Cal. 3d 419, 425 [statute will be construed in a manner that is
constitutional where it is capable of such meaning “ ‘by fair and reasonable
interpretation’ ”]; Walters v. Bank of America Natl. Trust & Savings Assn.
(1937) 9 Cal. 2d 46, 52 [statutes must be “reasonably and fairly
interpreted . . . so as to give effect, if possible, to the expressed intent of the
legislature”]; State Farm Mutual Automobile Ins. Co. v. Quackenbush (1999)
77 Cal. App. 4th 65, 79 [interpreting insurance regulations based on “a fair
reading of the regulations as a whole”].) Likewise, Rule 3.6’s directive to
consider whether the APCO’s interpretation of the law is “consistent with
other actions of the APCO” simply reflects one factor under the Yamaha
framework for assessing the amount of deference to give an agency’s
interpretation of law. The reviewing tribunal considers whether “the agency
‘has consistently maintained the interpretation in question, especially if [it] is
long-standing,’ ” because “ ‘[a] vacillating position . . . is entitled to no
deference.’ ” (Yamaha, supra, 19 Cal.4th at p. 13.)
We also find support for the air district parties’ construction of Rule 3.6
in the academic commentary. Both parties cite a law review article authored
by Santa Clara University Law Professor Kenneth Manaster, who served as
28
Chairman of this very hearing board for more than 10 years (1978-1989) and
represented Valero in this case. (Manaster, Fairness In The Air: California’s
Air Pollution Hearing Boards (2006) 24 UCLA J. Envtl. L. & Pol’y 1, 1, fn. *.)
Professor Manaster describes the standard of review governing air district
hearing boards in language that virtually mirrors the text of Rule 3.6, with
no mention of a duty to consider whether applying the law in any given case
would be “fair” but, on the contrary, making clear that a hearing board’s duty
is solely to ascertain whether district staff properly followed the law.
According to Professor Manaster: “[T]he inquiry . . . should be whether the
district staff has made a fair, reasonable interpretation of the applicable legal
requirements in its action . . . . The hearing board’s usual function should be
to determine whether the staff view in the permit dispute[22] falls within a
sensible application of the language and purpose of the pertinent regulations
or other requirements. [¶] This perspective is consistent with the traditional
legal presumption of the regularity and correctness of administrative action.
This presumption means that the burden of proof in a permit dispute should
be on the party challenging the district staff’s action or finding. It also means
that the hearing board should not lightly disagree with the staff’s
determinations. A hearing board in permit cases is operating analogously to
the role of an appellate court reviewing administrative agency action. This is
in contrast to the board’s function in variance or abatement cases, where the
better analogy is the work of trial courts determining matters in the first
instance. In short, the hearing board should not substitute its judgment in
permit cases for that of the expert, full-time staff of the APCD. [¶] This does
not mean, of course, that this oversight and review function of the hearing
22 The author characterizes ERC banking applications as a type of
“permit dispute.” (See Manaster, 24 UCLA J. Envtl. L. & Pol’y, at p. 79.)
29
board should be forfeited through automatic, uninformed deference to the
staff.” (Manaster, 24 UCLA J. Envtl. L. & Pol’y at pp. 80–81, italics added,
fns. omitted.) Professor Manaster’s views are at odds with Valero’s assertion
that the hearing board is not “like any reviewing tribunal” subject to
“ ‘familiar judicial principles’ ” that “apply to reviewing courts evaluating
agency interpretations,” and Valero’s view that Rule 3.6 does not “limit[] the
Board to a regulatory interpretation exercise to determine whether the APCO
properly effectuated the intent of the Board of Directors in adopting the
regulations.”
Finally, both the air district parties and the amici caution that
upholding the expansive construction of Rule 3.6 that Valero urges would
cause great regulatory uncertainty. As the California Air Resources Board
puts it, “If hearing boards, exercising independent judgment, could reverse an
APCO’s action, even after determining that the APCO applied a reasonable
legal construction in conformance with procedural requirements, they could
functionally repeal or amend air districts’ technical permit regulations on a
case-by-case basis. That is not the role of hearing boards, which do not enact
substantive regulations and are not charged to enforce them.[23] A broad
expansion of the hearing board’s scope of review, sought by Valero and
sanctioned by the Superior Court, would destabilize public health controls by
frustrating the public rulemaking process and engendering regulatory
uncertainty.” Such an approach would threaten to decrease transparency in
decision-making, it tells us, decrease the ability of third parties to rely on
APCO decisions, and ultimately impede the California Air Resources Board
23 As we have discussed, it is the air district’s governing board, acting
in a quasi-legislative capacity, that adopts substantive rules and regulations.
(See p. 3, ante.)
30
itself from fulfilling its statutory mandate to coordinate statewide pollution
control activities.
Administrative review depends no less on proper adherence to the law
than does judicial review. Courts cannot refuse to follow the law “ ‘simply
because we disagree with the wisdom of the law or because we believe that
there is a fairer method for dealing with the problem.’ ” (San Diego County
Water Authority v. Metropolitan Water Dist. (2004) 117 Cal. App. 4th 13, 28.)
As this court has recognized, proper interpretation of the law might produce
results that are “uneven, perhaps even unfair,” but that does not empower
courts to declare the result unlawful. (Service Employees Internat. Union,
Local 1000 v. Brown (2011) 197 Cal. App. 4th 252, 275.) “The wisdom and
expediency of the choices made by the political branches are not subject to
judicial recalibration.” (Ibid.) The same is true of the hearing board carrying
out its statutory mandate to review whether the APCO’s decision was
“properly refused” under regulations duly promulgated by the air district.
That said, the hearing board did consider Valero’s “fairness” evidence,
and addressed it in a context that was appropriate, namely, in evaluating
Valero’s equitable estoppel claim. (Lentz v. McMahon (1989) 49 Cal. 3d 393,
402-404 [largely factual claims of estoppel should be heard first in
administrative hearing despite absence of specific statutory authorization for
such defense].) As the parties recognized in their pre-hearing briefs,
equitable estoppel is an established doctrine with well-defined elements,
including intentional or negligent inducement of reliance and actual reliance.
The APCO disputed both of these elements, and as we have already
discussed, the hearing board rejected Valero’s estoppel argument on several
grounds, in effect finding no acts or statements by APCO that were intended
to or negligently caused Valero’s reliance. In the first cause of action in its
31
writ petition, Valero did not challenge the hearing board’s factual
determinations, and the issue of whether those findings have the requisite
support therefore is not before us. In any event, we reject the trial court’s
suggestion that the hearing board chose not to consider Valero’s evidence at
all and its conclusion that the hearing board should have determined
whether that evidence violated some nebulous concept of fairness untethered
from equitable estoppel.
B. The Hearing Board Properly Applied Rule 3.6.
Although the principal focus of the parties’ briefing, as well as the
amicus briefing, is on the foregoing fairness issue, the superior court also
misconstrued the hearing board’s decision as more deferential than it in fact
was, and on appeal Valero does too. As the air district parties argue, the
hearing board did not solely consider whether the APCO’s interpretation of
the banking regulation was reasonable. Rather, it acknowledged and applied
the very standard that Rule 3.6 required: namely, “whether the APCO’s
interpretation of the applicable legal requirements in its action is fair and
reasonable and consistent with other actions of the APCO.” There is simply
no other way to read the board’s decision.24
First, the hearing board quoted Rule 3.6 and said that it had “applied
this standard in reaching its decision in this matter.” Next, it found that
24 Although both parties quote liberally from comments by individual
board members at the hearing, we review only the hearing board’s written
ruling. Oral comments or statements made during deliberations cannot be
used to impeach the board’s final decision. (See, e.g., Key v. Tyler (2019)
34 Cal. App. 5th 505, 539, fn.16 [court’s comments from the bench “were not
final findings and cannot impeach the court’s subsequent written ruling”];
Silverado Modjeska Recreation & Park Dist. v. County of Orange (2011)
197 Cal. App. 4th 282, 300-301 [“we disregard the trial court’s tentative ruling
and the comments the court made [at the hearing], and consider only the trial
court’s final order on the motion”].)
32
“[t]he APCO’s interpretation of Regulation 2-2-605.1, and its application of
that provision in this particular case, was fair and reasonable and consistent
with other actions of the APCO. The APCO’s interpretation of Regulation 2-
2-605.1 was reasonable, and the APCO applied this interpretation fairly and
consistently to Valero in the same manner as it has applied it to other
similarly-situated applicants seeking to bank emission reduction credits
under similar circumstances.” It then spent three pages explaining its
reasons, which were based upon: (1) the language of the
regulation, (2) its regulatory context, (3) evidence of the district’s regulatory
intent contained in a staff report issued when the regulation was adopted, (4)
a prior version of the regulation, and (5) the board’s factual finding that the
district had applied the regulation the same way to two similarly situated
applicants in the past. The board then concluded: “The Hearing Board
therefore finds that the APCO’s interpretation of Regulation 2-2-605.1, and
its application of Regulation 2-2-605.1 to Valero’s banking application in this
case, was fair, reasonable, and consistent with other actions of the APCO, for
all of the reasons outlined above.” (Italics added.)
C. Conclusion
Because the hearing board applied the correct standard of review, the
superior court erred in granting a writ of mandate on Valero’s first cause of
action. The air district parties also ask us to exercise our discretion to
dismiss the other two claims Valero asserted in its writ petition that the
superior court did not reach. But the air district parties have briefed these
issues in a conclusory manner that does not facilitate meaningful appellate
review, the superior court did not address these other claims which were
clearly mooted by its ruling on the first cause of action, and we believe it
should decide those causes of action in the first instance.
33
DISPOSITION
The judgment is reversed. Appellants shall recover their costs.
34
STEWART, J.
We concur.
KLINE, P.J.
RICHMAN, J.
Valero Refining Co. v. Hearing Bd. of the Bay Area Air Quality Management
Bd. (A151004)
35
Trial Court:San Francisco County Superior Court
Trial Judge: Hon. Harold E. Kahn
Counsel:
Brian C. Bunger, Alexander G. Crockett for Defendants and Appellants.
Xavier Becerra, Attorney General, Robert W. Byrne, Assistant Attorney
General, Annadel A. Almendras, Connie P. Sung, Ryan R. Hoffman, Deputy
Attorneys General for California Air Resources Board, as Amicus Curiae on
behalf of Defendants and Appellants.
Bayron Gilchrist, Barbara Baird, Mary J. Reichert for South Coast Air
Quality Management District, as Amicus Curiae on behalf of Defendants and
Appellants.
Pillsbury Winthrop Shaw Pittman, Ronald E. Van Buskirk, John T. Hansen,
Michael S. McDonough, Stacey C. Wright, for Plaintiff and Respondent.
36