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Modifier/noun phrase will try to modify the nearest noun.
In Example 2, that is used to connect two clauses:

Each clause can be broken into independent sentences. 1. Many geologists fear. 2. California may become too unstable.
California is the nearest noun.

In Example 3, 'That' is used as a Complement to a Noun ( can do the same for Adjective too)
But the rule applies, that the modifier modifies the nearest noun.

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