The Ninth Circuit Court of Appeals recently resolved two issues fundamental to officially designating “critical habitat” for species protected under the federal Endangered Species Act. Upholding the U.S. Fish and Wildlife Service’s designation of critical habitat for the Mexican Spotted Owl in Arizona Cattle Growers’ Ass’n v. Salazar, the Court ruled in favor of the Service on (1) how to distinguish occupied from unoccupied habitat and (2) how to analyze the economic impacts of a designation of critical habitat. In doing so, the Court seemingly has eased the regulatory hurdles for designating critical habitat and afforded the Service considerable discretion in how to do so. It may, though, have complicated the process in unexpected ways as well.

The Endangered Species Act authorizes the Service to list species as threatened or endangered “solely on the basis of the best scientific and commercial data available” and without reference to the economic effects of that decision. The Act also directs the Service to designate “critical habitat” for each such species, including “[1] the specific areas within the geographical area occupied by the species, at the time it is listed… on which are found those physical and biological features… essential to the conservation of the species and… which may require special management considerations [and] [2] specific areas outside the geographical area occupied by the species at the time it is listed… upon a determination by the [Service] that such areas are essential for the conservation of the species.” The Service must make the designation “on the basis of the best scientific data available and after taking into consideration the economic impact… of specifying any particular area as critical habitat.”

The Act generally protects listed species and their habitat by, first, prohibiting any person from “taking” listed species without authorization and, second, calling on federal agencies to ensure that any actions they authorize, fund, or carry out are not likely to “jeopardize” the continued existence of any listed species or result in the “destruction or adverse modification” of critical habitat.

The Service listed the Mexican Spotted Owl as threatened in 1993 and designated about 8.6 million acres as its critical habitat in 2004. The Arizona Cattle Growers’ Association sued, contending that in designating critical habitat (1) the Service improperly treated some areas as “occupied” in order to relieve it of the need to determine such areas were essential to the conservation of the owl and (2) the Service improperly treated the economic impacts of listing the owl as part of the existing “baseline” and thus did not count them as impacts of the critical habitat designation as well. The district court upheld the Service’s decision, and the Association appealed.

The Ninth Circuit affirmed. Recognizing that the Act imposes a “more onerous procedure on the designation of unoccupied areas” by requiring the Service to show such areas are essential for the conservation of the species, the Court ruled that the Service permissibly interpreted the term “occupied” in this context to include areas “where the owl was likely to be present.” This inquiry, the Court noted, has two components. The first, uncertainty, “is a factor when the [Service] has reason to believe that owls are present in a given area, but lacks conclusive proof of their presence.” The second, frequency, “is a factor when owls are shown to have only an intermittent presence in a given area.” Because the Act necessitates characterizing areas in one of two ways—occupied or unoccupied—when nature presents a spectrum, the Court viewed its task to be determining the scope of the Service’s authority “to categorize as ‘occupied’ areas that may not fit neatly into either pigeonhole.”

Noting the Act requires the Service to designate critical habitat using the “best scientific and commercial data available,” the Court reasoned the Service can act in the face of uncertainty as long as it avoids acting on pure speculation or contrary to the evidence.

Turning to frequency, the Court found that the statutory term “occupied” does not have an unambiguous plain meaning and decided it should defer to the Service’s interpretation at least insofar as it is persuasive. The Court ruled that the Service properly rejected as too narrow the Association’s interpretation of “occupied” to mean areas in which owls “reside” because that would exclude some areas likely to be used for foraging and would make little sense with respect to nonterritorial, mobile, or migratory species. Ruling that the Service “has authority to designate as ‘occupied’ areas that the owl uses with sufficient regularity that it is likely to be present during any reasonable span of time,” the Court found the Service’s interpretation to be “sensible” in light of the many factors relevant to determining occupancy.

The Court cautioned, though, that “[i]t is possible for the [Service] to go too far.” “Most obvious,” said the Court, “is that the agency may not determine that areas unused by owls are occupied merely because those areas are suitable for future occupancy.” That, the Court reasoned, would ignore the Act’s distinction between occupied and unoccupied areas.

With respect to the economic analysis, the Court upheld the Service’s “baseline” approach in which “any economic impacts of protecting the owl that will occur regardless of the critical habitat designation—in particular the burdens imposed by listing the owl—are treated as part of the regulatory ‘baseline’ and are not factored into the economic analysis of the effects of the critical habitat designation.” The Court rejected an earlier decision of the Tenth Circuit holding the baseline approach impermissible because it renders economic analysis virtually meaningless since the agency commonly attributes all of the economic impacts to the listing and, thus, not to the critical habitat designation. The Tenth Circuit endorsed a “co-extensive” approach that considers any economic burden that designating an area would cause, even if the same burden is already imposed as a result of a species’ listing. The Ninth Circuit concluded that the baseline approach is “more logical,” since “[t]he very notion of conducting a cost/benefit analysis is undercut by incorporating in that analysis costs that will exist regardless of the decision made.”

The Court’s decision eases the Service’s task in designating critical habitat by allowing the Service to more readily characterize areas as “occupied” and thereby minimize the occasions in which it must follow the more onerous procedure of showing unoccupied areas to be “essential to the conservation of the species” and by allowing the Service to analyze the economic impacts of a designation using the “baseline” approach under which it commonly finds few such impacts.

In at least one respect, the decision could lead to more complexity in the Service’s analysis of economic impacts. It is sometimes assumed, as a general proposition, that destruction or modification of “occupied” habitat is likely to “take” the animals occupying that habitat (and, thus, the economic impacts of protecting the habitat result from the listing of the species, not the designation of its critical habitat). That assumption, though, is not always warranted, since only certain types of habitat modification—those that actually kill or injure a member of a listed species—effect a prohibited “take.” To the extent that the Service, when designating critical habitat, broadly treats as “occupied” areas that could be modified without taking any members of a listed species, it has no basis to assume that the economic impacts of protecting such areas result from the listing rather than the critical habitat designation. The possible need to distinguish different types of “occupied” areas and the assumptions appropriate to them in the economic analysis may pose a challenge in future designations of critical habitat.

David Ivester
Briscoe Ivester & Bazel LLP
155 Sansome Street, 7th Floor
San Francisco, CA 94104
Telephone: (415) 402-2700
Fax: (415) 398-5630

Disclaimer: In our Newsletters and Bulletins, Briscoe Ivester & Bazel LLP intends to present general information to the public and does not intend to provide legal advice pertaining to a particular situation.


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