Regulators reject bid for coastal mega-development

By Anne C. Mulkern | 09/08/2016 01:10 PM EDT

The California Coastal Commission yesterday rejected a developer’s bid to build a major real estate project on one of the last large swaths of open land south of Los Angeles.

The agency in a 9-1 vote shot down the proposed Banning Ranch development in Orange County’s Newport Beach, saying there were too many unanswered questions. Several commissioners said they could support building at the site but couldn’t bridge the gulf between what investors wanted and what commission staff recommended.

Banning Ranch provides habitat to species that include the coastal California gnatcatcher, burrowing owl and San Diego fairy shrimp, and there are wetlands and vernal pools. The site contains active and closed oil wells, winding dirt roads, rock piles and land with panoramic ocean views. It sits above the Pacific Coast Highway on one side.

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Investors had wanted to transform the land into an enclave replete with 895 houses, 45,100 square feet of retail, a hotel and a smaller hostel sitting on about 62 acres. They proposed cleaning up and preserving another 316 acres as open space that featured walking trails and biking areas.

"This is a project that we have to get right. We can’t get just good enough on this one," said Commissioner Mary Shallenberger. "It is the only intact coastal bluff ecosystem left in Southern California," other than one in nearby Huntington Beach. "It is the largest concentration of threatened and endangered species in all of Orange County."

Native American groups told the commission there are ancient burial sites and other sacred places on the land, Shallenberger noted. "So there is a lot riding on this. … And if we don’t have it right, things will be lost forever."

The vote followed a more-than-11-hour hearing in a packed room, where people stood in the back, along aisles and in an overflow area outside. Some carried green signs that said "Save Banning Ranch." One woman sitting in the front row frequently held up a stuffed owl.

The agency’s interim Executive Director Jack Ainsworth early in the day characterized the stakes as huge.

"Your decision on this permit application is one of the most important decisions that this commission has faced in our 40-year history, and I don’t believe that’s hyperbole," Ainsworth said. "It is critically important that we get it right because we may not get a second chance here, and significant coastal resources are at stake."

The California Coastal Commission is a powerful agency that oversees the bulk of land-use planning in 15 counties that touch the coast. It enforces the state’s Coastal Act, a tough protection law. Some observers have pointed to Banning Ranch as a test that could reveal whether the commission would be taking a more pro-development bent after ousting its executive director, Charles Lester, in February.

The Banning Ranch site is owned jointly by Aera Energy LLC — subsidiary of Exxon Mobil Corp. and Shell Oil Co. — and the investment firm Cherokee Newport Beach LLC. Those companies and the Brooks Street real estate firm are partnering as Newport Banning Ranch LLC (NBR) to develop the site. They didn’t immediately say what they planned to do next.

"We’re deeply disappointed in tonight’s outcome," said Adam Alberti, spokesman for NBR. "It’s a sad day for those who support cleaning, restoring and opening Newport Banning Ranch to the public."

Commissioner Roberto Uranga was the sole vote in favor of the staff proposal, which recommended allowing development but on just 19.7 acres. He said he wanted to see the site opened to the public. It’s currently behind a locked gate.

"This project, for me, was one that opened up a blighted area that has no value other than to the inhabitants that live there," he said, referencing the animal species. "But nobody gets to enjoy it."

Protecting the owl

The commission has considered the issue for almost a year. In October, commission staff recommended rejecting the proposal, which was larger at that point. Commissioners postponed a vote and advised the developer to produce a smaller plan more likely to comply with the Coastal Act. In May, commission staff advised allowing the project to proceed on 55 acres. The developer asked for a delay to rework its proposal.

But a staff report that came out last week said the May recommendation had a major flaw. Wintering burrows for the burrowing owl had been designated as environmentally sensitive habitat areas, but the burrowing owl foraging habitat was not identified as such. Biologists said that without foraging areas, the owls wouldn’t find food.

One owl expert who had written to the commission said that based on everything known about the creature and its habitats, implementing either the developer’s plan or the staff alternative from May "would certainly lead to extirpation of the burrowing owl" from the region, said Jonna Engel, a commission staff ecologist.

The owl is a state "species of special concern" and is extremely rare along the Southern California coast, said Terry Welsh, president of the Banning Ranch Conservancy, which opposed developing the site. The Fish and Wildlife Service calls the species a bird of conservation concern.

The Sierra Club, the Center for Biological Diversity, the California League of Conservation Voters, the Natural Resources Defense Council, Greenpeace and other environmental groups fought the development. Some local residents also objected, saying it would exacerbate traffic and air pollution. Native American tribe representatives said they had not been properly consulted. Into the evening, dozens of residents stood in line to step up to the microphone and tell the commission they opposed the project. Many said they’d taken off work to attend.

The Newport Beach mayor, a councilman, and representatives from a local chamber of commerce and building association backed the development. Many others clad in blue T-shirts that said "Clean, Restore, Open, Newport Banning Ranch" stood in line to say they endorsed the effort. A Los Angeles Times reporter tweeted that an Aera Energy spokesperson had said about 40 of those people had been bused in from Bakersfield. Several residents who weren’t wearing the blue shirts also said they supported the project.

Robyn Vettraino, executive director of Newport Banning Land Trust, which would care for preserved space at the site if it were built, said the public space would afford learning opportunities for student groups. The developers created the Newport Banning Land Trust.

Hints of a lawsuit

The developers and their allies during the hearing decried commission staff’s recommendation as too extreme. An attorney for the developer hinted there could be legal ramifications.

"The staff recommendation simply goes too far," said Steven Kaufmann, attorney for the developers. "It recommends a series of extremes that are unsubstantiated and go way beyond Coastal Act requirements."

He said those could result in a "taking of the property," a legal term that references the Fifth Amendment, which says government cannot take a property for public use without fair compensation. A letter submitted to the commission yesterday morning made a similar claim.

"The Project, as now proposed, is fully consistent with the Chapter 3 policies of the Coastal Act. By contrast, there are serious problems with the Staff Recommendation," the letter said. "A regulation of property that ‘goes too far’ may effect a taking of that property … and that frankly would be the consequence if the Staff Recommendation were adopted here."

That letter was partly what prompted Shallenberger to say NBR and commission staff were unlikely to find a compromise. The letter included attachments with corrections and clarifications to the staff report and other documents.

"The developer has made it clear that they do not accept the staff’s recommendation," Shallenberger said. "And they’ve made it clear with a 55-page document, which we got this morning, which has been underlined, red-lined, how they would like this to be, taking staff language and crossing out and adding."

The developer said the 19.7 acres allotted by commission staff wouldn’t be enough to complete a project large enough to provide the $75 million to $100 million that would be needed to create and then leave open the 316 acres that would be for public use. Without that funding, the site will stay behind the locked gate for likely many years, said Michael Mohler, senior project manager for NBR.

"It’s a highly degraded oil site with great potential," Mohler told the commission earlier in the day. "We’re proposing to restore the entire site … for all species, including man."

NBR officials had also said in reality they’d have to build housing and other parts of the project on less than 19.7 acres because of other conditions commission staff wanted to impose. But Alex Helperin, a commission lawyer, said those conditions were only in response to work NBR wanted to undertake.

Commission staff members who spoke yesterday listed all the ways the proposed project could damage environmental and cultural resources. The Coastal Act bars new commercial or residential developments from creating "significant adverse effects" — individually or cumulatively — on coastal resources, said ecologist Engel.

The NBR proposal would affect purple needlegrass — a native species — along with habitat of the burrowing owl and California gnatcatcher, Engel said.

The housing and commercial development "would have direct impacts on habitat and would impact habitat connectivity," Engel said. "As such, the development is inconsistent with the natural protection policies of the Coastal Act."

Mohler said there was a "dearth of comparative scientific analysis from our side included in the staff report, that we feel strongly would justify a different conclusion." He said NBR’s plan would provide for the burrowing owl and other species.

Commission Vice Chairwoman Dayna Bochco, however, said the staff recommendation "is amazingly supported by science. I looked at all the papers you attached," she told staff members. "On the whole, the substantial evidence goes with staff on this one."

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