U.S. Fish And Wildlife Service to Revise Regulatory Standard for Actions Affecting Critical Habitat Under the Endangered Species Act

The U.S. Fish and Wildlife Service (the Service) has begun to revise regulations that deal with perhaps the most contentious provision of the Endangered Species Act (ESA) – the standard for actions that may impact habitat critical for the recovery of species listed under the ESA. On December 9, 2004, the U.S. Fish and Wildlife Service sent a memorandum to its regional directors requiring staff to apply a new framework for how the Service analyzes such impacts in actions authorized by other federal agencies. The guidance was issued in response to several court decisions that the Service’s standard for determining whether proposed federal agency actions are likely to result in the “adverse modification” of designated critical habitat under Section 7 of the Endangered Species Act was contrary to law. In setting aside numerous “biological opinions” issued by the Service, these courts held that the Service’s regulation would result in the Service failing to give adequate protection to areas designated as critical for the “conservation” of the species. How the Service determines what actions result in “adverse modification” has major implications for how the Service analyzes the potential impacts of projects authorized or funded by the federal government under the ESA Section 7 consultation process. The guidance is designed to serve as an interim measure while the Service proceeds with a proposed rulemaking in 2005 that addresses the various court rulings.

The Importance of the “Adverse Modification” Rule

The adverse modification definition has significance for both Section 4 and Section 7 of the Endangered Species Act. Section 4 of the ESA directs the Service to determine by formal rule whether any species is “endangered” or “threatened.” 16 U.S.C. § 1533(a)(1). When the Service lists a species as endangered or threatened, it must concurrently “designate any habitat of such species which is then considered to be critical habitat.” Id. § 1533(a)(3)(A). Basically, “critical habitat” is occupied habitat that has certain physical characteristics requiring “special management considerations or protection” and unoccupied habitat that is “essential for the conservation of the species.” Id. § 1532(5)(A). The Service must designate critical habitat “on the basis of the best scientific data available” and must consider the “economic impact, and any other relevant impact, of specifying any particular area as critical habitat.” Id. § 1533(b)(2). Areas can be excluded if the Service determines that the economic impact outweighs the benefits of designation. With 1,264 species listed as endangered or threatened (518 animals, 746 plants) and thousands more awaiting consideration, the Service has designated critical habitat for 472 species. Despite such a low percentage of designations (and with more on the way due to litigation), millions of acres of public and private property have been designated as critical habitat.

Section 7 requires all federal agencies to consult with the Service to ensure that any action authorized, funded, or carried out by any agency is not likely to jeopardize “the continued existence of” an endangered or threatened species and not result in the “destruction or adverse modification” of the designated critical habitat of the listed species. Id. § 1536(a)(2). These consultations are known as Section 7 consultations. The action agency typically makes a written request to the Service, 50 C.F.R. § 402.14(c), and, after formal consultation, the process concludes with the consulting agency issuing a biological opinion as to how the project “affects the species or its critical habitat.” 16 U.S.C. § 1536(b)(3)(A). If the Service determines that the project will jeopardize the continued existence of the species or destroy or “adversely modify” its critical habitat, then the Service must provide “reasonable and prudent” alternative actions the federal agency can take to avoid such impact. Id. § 1536 (b)(3)(A); 50 C.F.R. § 402.14.

The Service defines adverse modification as “a direct or indirect alteration that appreciably diminishes the value of critical habitat for both the survival and recovery of a listed species.” 50 C.F.R. § 402.02. Courts in the Fifth, Tenth and Ninth Circuits have held that this definition was improper. For example, in the Ninth Circuit, an environmental group asserted that this definition “sets the bar too high, because the adverse modification threshold is not triggered by a proposed action until there is an appreciable diminishment of the value of critical habitat for both survival and recovery” and that it “reads the recovery goal out of the adverse modification inquiry.” Gifford Pinchot Task Force v. USFWS, 378 F.3d 1059, 1069 (9th Cir. 2004).

The decisions of the Fifth and Ninth Circuits were recently followed by the federal court in the District of Columbia striking down the critical habitat designation for wintering piping plovers along the outer banks of North Carolina in a challenge brought by Dare and Hyde County and a coalition of business and recreational users of the Cape Hatteras National Seashore. See Cape Hatteras Access Preservation Alliance [CHAPA] v. U.S. Dept. of the Interior, 03-217 RCL (Nov. 1, 2004 D.D.C.). The Court noted that the Service’s definition taints the process of designating critical habitat by causing the Service to underestimate the number of Section 7 consultations triggered by the designation, and thus, to undercount the economic impact of the designation. In addition, the Court held that the Service’s decision exempting the critical habitat designation from National Environmental Policy Act (NEPA) review was improper. Holland & Knight environmental attorneys represented plaintiffs in the CHAPA case.

Thus, the practical effect of these decisions is that critical habitat is given heightened importance due to its role in recovering the species, not just protecting against extinction. This matters both when habitat is designated as critical (or excluded due to economic impacts) under Section 4 and later on when the Service examines projects that impact that habitat under Section 7 (which is potentially triggered by any project with a federal nexus).

The Guidance

The guidance memorandum is a reaction to the Service’s spate of losses against challenges to both biological opinions and critical habitat designations alike. The guidance admits that the regulation is improper and instructs the Service staff in undertaking Section 7 consultations to focus on how the activity being analyzed will affect the “habitat qualities essential to the conservation of the species.” In so doing, staff must not look solely at “survival,” but must focus on how the critical habitat unit will lead to the species “recovery.” In addition, biological opinions must examine “how that will influence the function and conservation role of the affected critical habitat unit(s).” This could lead the Service to reopen consultations that relied on the improper definition.

Conclusion

The guidance (and the rule that will soon follow) represents a significant change in how the Service will examine the impact of federal actions on critical habitat. The value of property for recovery of a species is a higher standard that is likely to lead to more restrictions on the scope of activities requiring federal approval. Given the amount of land that is designated as critical habitat and the number of species for which critical habitat has yet to be designated, this has the potential to impact a vast number of land use activities ranging from private real estate development to public infrastructure projects.