Five years ago, developer Brent Gaulke was ready to start construction on a project to transform the Old Spaghetti Factory restaurant in Hollywood into a sleek condo and office tower.

But then a Hollywood neighborhood group filed suit under the California Environmental Quality Act. It took Gaulke’s firm, Gerding Edlen Development Co. LLC in Portland, Ore., almost three years to win the case. But by then, the exhausted firm had defaulted on its real estate loan and had to walk away. CIM Group took over the project in 2011 and construction began recently.

Gaulke, now working in San Francisco, places a good deal of the blame for the debacle on the state’s environmental law.

“CEQA was absolutely a factor,” Gaulke said.

This case is a cause celebre among local business groups seeking to reform CEQA, the state’s major environmental law. The groups say the law stifles development and job creation, and makes projects more expensive. They acknowledge that some challenges might be legitimate, but believe others are simply a means for competitors to kill projects or for opponents to extract greenmail-like payoffs.

Now, sensing the best opportunity in years, the Los Angeles Area Chamber of Commerce is heading a coalition for reform of the law, along with the Silicon Valley Leadership Group.

“We don’t agree with the use of CEQA as the justification for filing lawsuits that don’t deal directly with environmental issues and that serve to delay and drive up costs for projects,” said L.A. chamber Chief Executive Gary Toebben.

What’s new this year: Business groups have the support of Gov. Jerry Brown, who called for CEQA reform during his State of the State address last month. What’s more, Darrell Steinberg, D-Sacramento, president of the state Senate, has declared CEQA reform his top priority of 2013.

But there’s another new wrinkle this year: The state’s construction and building trade unions have begun opposing changes to CEQA. With other unions and environmental groups already opposed, this sets up a big battle in the Legislature this summer.

These groups say there is little evidence that CEQA is delaying projects and that reforming the act will harm the health and quality of life of residents in the state.

“We have not seen large cases of litigation that resulted in lengthy delays,” said Robbie Hunter, president of the state Building and Construction Trades Council, which recently joined the opposition to CEQA reform. “What we have seen is that through CEQA, the project proposers come back with better projects.”

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