By David C. Smith and Jennifer Lynch

The federal Endangered Species Act (ESA or the Act) has not escaped the Trump administration’s mandate for regulatory streamlining and consolidation. Beyond voluntary actions by the administration, the U.S. Supreme Court fostered additional regulatory reforms. Though garnering relatively little attention, these adopted and proposed regulatory reforms impact some of the most crucial operative provisions of the Act.

Environmental Organizations and States Challenge ESA ‘Regulatory Reform’—Calls for Injunction Rejected

In August 2019, the Trump administration finalized and adopted three packages of significant regulatory reforms. The reforms apply only prospectively and will not alter any designations of species already listed under the ESA.

Although the reforms are numerous, they fall into three general categories: 1) Interagency cooperation under Section 7 of the ESA; 2) Listing of species and designation of criterial habitat under Section 4 of the ESA; and 3) Treatment of species listed as “threatened,” as opposed to “endangered,” under the ESA.

The U.S. Fish and Wildlife Service (FWS) and the National Marine Fisheries Service (NMFS) (together: the Services) are responsible for administering the ESA and promulgating its regulations.

Predictably, the reforms are now the subject of multiple lawsuits. The first, Center for Biological Diversity v. Bernhardt, was brought by a coalition of environmental groups that includes the Center for Biological Diversity, Sierra Club, and the Natural Resources Defense Council. The second, State of California v. Bernhardt, was brought by 17 states, the District of Columbia, and New York City. The third, Animal Defense Fund v. U.S. Department of Interior et al., was brought by a single environmental plaintiff. Each suit was brought in the U.S. District Court for the Northern District of California, and all aim to block implementation of what they term “the Interagency Consultation Rule,” “the Listing Rule,” and “the 4(d) Rule.”

Challenges to the Section 7 Interagency Consultation Rule

Section 7 prohibits any federal agency from funding or taking an action causing the “destruction or adverse modification” of the given species’ designated “critical habitat.” Prior to the reforms, “destruction or adverse modification” was defined as:

. . .a direct or indirect alteration that appreciably diminishes the value of critical habitat for the conservation of a listed species. . . .[including alterations] that alter the physical or biological features essential to the conservation of a species. . . .

The reforms clarify that adverse modifications are considered at the scale of the entire critical habitat designation. As such, even if a project would cause adverse effects to a portion of a designated critical habitat, such effects would not meet the definition of “destruction or adverse modification” unless they went so far as to reduce the overall value of the critical habitat.

The suits argue this change will limit the circumstances under which a federal agency action would be deemed to destroy or adversely modify designated critical habitat in a way that is contrary to the text, purposes, and conservation mandate of the ESA.

Challenges to the Section 4 Listing Rule

Section 4 provides the process and standards for listing species for protection, designation of their protected habitat, and eventual delisting. Under the statutory terms of the ESA, economics are not a factor to be considered in making listing determinations. Section 4 also requires the Services to, at the time a species is listed, designate such species’ “critical habitat,” defined as areas “essential to the conservation of the species.” The ESA provides for the Services to include both “occupied” and “unoccupied” acreage in the designation within specific parameters.

The reforms strike the phrase “without reference to possible economic or other impacts of such determination” from the ESA’s implementing regulations. In addition, they limit the circumstances under which a species can be listed, change the factors to be considered when delisting a species, and limit the circumstances under which unoccupied habitat may be designated as critical habitat.

As with the Interagency Consultation Rule challenges, the suits claim that the Listing Rule reforms violate express provisions of the ESA, as well as its conservation purposes and mandate.

Challenges to the Section 4(d) Rule

Section 4 also identifies two categories of listed species: “threatened” and “endangered.” An “endangered species” is one “in danger of extinction throughout all or a significant portion of its range.” A “threatened” species is one “likely to become an endangered species within the foreseeable future.” Under the statute, only species designated as “endangered” are subject to the protective prohibitions against “take” of a species established in Section 9. NMFS has observed that differentiation in its implementation of the ESA, applying the “take” prohibition only to species listed as “endangered.” The FWS, however, adopted a blanket rule affording identical protections to species designated as “threatened” as to those designated as “endangered.” The reforms repeal that blanket rule.

The suits allege that the 4(d) Rule removal of the blanket extension of Section 9 protections to threatened species is a “radical departure” from the FWS’ longstanding practice, as well as claim this change violates the text of the ESA and its conservation purposes and mandate.

National Environmental Policy Act Challenges

The suits also allege violations of the National Environmental Policy Act (NEPA), which requires preparation of an Environmental Impact Statement (EIS) analyzing and disclosing the environmental consequences of any “major federal action significantly affecting the quality of the human environment.” These include the adoption of the new or revised regulations, unless such adoption qualifies for an “exclusion” to the general rule requiring an EIS.

Prior to adopting the reforms, no EIS was prepared, the suits claim, in violation of NEPA.

Federal Defendants’ Motions to Dismiss

In February 2020, the federal defendants filed motions to dismiss in each of the three suits. Each argued that the plaintiffs lack standing and the claims are not ripe for judicial review, on grounds none of the suits showed how any plaintiffs would be specifically and imminently injured by the reforms, given that the reforms apply only prospectively, and no protections currently applying to any species would be changed.

In May 2020, the District Court agreed with defendants as to the two suits brought by environmental group petitioners, finding that these suits failed to show how at least one identified member of the organizations would suffer harm, or, in the alternative, how the reforms would cause the organizations to divert more resources. However, in dismissing the suits the court granted petitioners the opportunity to amend and refile. Amended complaints in both lawsuits have since been filed. It remains to be seen if these revised complaints will withstand another motion to dismiss, if the defendants choose to file one.

The District Court disagreed with the defendants as to the suit brought by government agency plaintiffs. Finding the allegations of risk of harm to the government agency plaintiffs’ natural resources and economic interests sufficient to afford standing, and finding the claims constitutionally ripe, the court declined to dismiss the suit, and it will proceed to the merits.

What Qualifies as “Habitat,” Above and Beyond Statutory “Critical Habitat” for Purposes of the ESA?

As discussed above, the ESA defines “critical habitat” and requires that, usually, it be designated concurrent with a decision to list a species for protection under the Act. The U.S. Supreme Court recently noted, however, that “critical habitat” must necessarily be a subset of a larger category of “habitat” for a given species. While “critical habitat” has a relatively narrow definition as those areas “essential to the conservation of the species,” “habitat,” in general, must necessarily be broader but must also must have some limitations. Congress failed to provide a definition of “habitat” in the ESA, and the Court called on the lower court or, more appropriately, the Services to craft one.

The issue arose in the widely watched case of Weyerhaeuser Co. v. United States Fish & Wildlife Service, 139 S.Ct. 361 (2018). The species at issue was the dusky gopher frog. Historically, the frog existed throughout coastal Alabama, Louisiana, and Mississippi. But at the time of listing, the frog was known to exist only in one pond in southern Mississippi.

The proposed designation of critical habitat for the frog included so-called “Unit 1,” a 1,500-acre area in Louisiana owned by Plaintiff Weyerhaeuser. Logging practices, among other things in the area including Unit 1, had left the physical and biological attributes incapable of supporting the frog. Nonetheless, the FWS designated the area as critical habitat stating that it could be converted to supportable habitat and finding it essential to the conservation of the frog.

The case garnered national attention. Critics stated that with sufficient resources (e.g., infinite amounts of land and money), almost any area could be made to be habitat for almost any species. They argued that the ESA did not require or even allow regulatory mandates requiring private parties to engage in such extraordinary measures to comply with the Act.

Chief Justice Roberts authored the opinion of the Court. Starting from the legal premise that “[a]n area is eligible for designation as critical habitat under [the ESA] only if it is habitat for the species,” Roberts noted that Congress failed to define “habitat.” Accordingly, the Court remanded the matter for consideration of what is and is not “habitat” from which the subset of statutory “critical habitat” may be designated.

While Weyerhaeuser and the FWS ultimately settled their dispute, the Services subsequently defined “habitat” in a new rulemaking. The Services explain their approach to the proposed definition as follows:

Under the text and logic of the statute, the definition of ‘habitat’ must inherently be broader than the statutory definition of ‘critical habitat.’ To give effect to all of section 3(5)(A), the definition of ‘habitat’ we propose is broad enough to include both occupied critical habitat and unoccupied critical habitat, because the statute defines ‘critical habitat’ to include both occupied and unoccupied areas.

The Services proffered two proposed definitions on which they sought public comment:

The physical places that individuals of a species depend upon to carry out one or more life processes. Habitat includes areas with existing attributes that have the capacity to support individuals of the species.

Alternatively, the physical places that individuals of a species use to carry out one or more life processes. Habitat includes areas where individuals of the species do not presently exist but have the capacity to support such individuals, only where the necessary attributes to support the species presently exist.

While conceptually broad enough to include both occupied and unoccupied habitat (as they must be within the statue’s inclusion of both), the emphasis on “existing” and “presently exist” is inescapable. Both proposed versions of the rule reject the notion of extraordinary measures to create or re-establish absent habitat attributes.

The Services further elaborated on their rationale behind the proposed definitions:

We solicit comment on these definitions, in particular on whether ‘‘depend upon’’ in the proposed definition sufficiently differentiates areas that could be considered habitat, or whether ‘‘use’’ better describes the relationship between a species and its habitat. We also solicit comment on the second sentence of the alternative definition. Though it is similar to the second sentence of the proposed definition, it expressly limits unoccupied habitat for a species to areas ‘‘where the necessary attributes to support the species presently exist,’’ and explicitly excludes areas that have no present capacity to support individuals of the species. We invite comment on whether either definition is too broad or too narrow or is otherwise proper or improper, and on whether other formulations of a definition of ‘‘habitat’’ would be preferable to either of the two definitions, including formulations that incorporate various aspects of these two definitions.

The Services went on to garner comment as follows:

While we have intentionally refrained from using within this proposed regulatory definition of ‘‘habitat’’ terms of art from other definitions in the Act to avoid potential confusion, including the phrase ‘‘physical or biological features’’ from the definition of ‘‘critical habitat,’’ we propose ‘‘existing attributes’’ to include, but not be limited to, such ‘‘physical or biological features.’’ We invite comment on this issue, including whether the words ‘‘existing attributes’’ are appropriate to include and whether they warrant further clarification or change or should be differently or further defined or explained.

Addressing specific components of any definition of “habitat,” the Services included “food, water, cover, or space that individuals of a species depend upon to carry out one or more of their life processes.” And habitats may only be applicable or of use to the species at some times of the year and not others, for example, seasonally used breeding areas or feeding areas.

As to the process for identifying a species’ habitat relative to this rulemaking, the Services were clear that they do not mean to create or establish a new and additional regulatory step in the designation process. Rather:

. . .[w]e expect that in the vast majority of cases that would be unnecessary, in light of the specific criteria of the statutory definition of ‘critical habitat’ . . . . Specifically, we interpret the statutory definition of ‘critical habitat,’ as it applies to occupied habitat, to inherently verify that an area meeting that definition is ‘habitat.’

The Services went on to state, for areas not presently occupied by the species:

In those fewer cases where unoccupied habitat is at issue, we would consider any questions raised as to whether the area is ‘‘habitat’’ in the context of the new regulatory requirements at § 424.12(b)(2) and document the determination whether the area is habitat. In this way, the proposed regulatory definition of ‘‘habitat’’ would not impose any additional procedural steps or change in how we designate critical habitat, but would instead serve as a regulatory standard to help ensure that unoccupied areas that we designate as critical habitat are ‘‘habitat’’ for the species and are defensible as such. With the addition of the regulatory definition of ‘‘habitat,’’ the process of designating critical habitat will remain efficient by limiting the need to evaluate whether an area is ‘‘habitat’’ to only those cases where genuine questions exist.

As with the regulatory enactments discussed above, application of a definition of “habitat” will be prospective only and will not be applied to any existing listings or critical habitat designations. The public comment period for the proposed rulemaking closed on September 4, 2020.

The Services’ Discretion to Exclude Qualifying Areas from Designated Critical Habitat

In Weyerhaeuser, the Supreme Court gave the Services an additional departure from seemingly long-settled ESA jurisprudence. For a law recognized as the most potentially sweeping and proscriptive in terms of limiting property rights, the ESA also includes one of the most nearly boundless provisions for exercise of administrative discretion.

The topic here, again, is the designation of critical habitat. It is clear that in requiring the designation of critical habitat, Congress was allowing potentially dire and constraining restrictions relative to a given piece of property. Accordingly, Congress included a bit of an escape clause. As to any area qualifying as “critical habitat” under the Act, whether occupied or unoccupied, the respective Secretaries of the Services were vested with the discretion to exclude given areas from the designation based upon specified considerations. The Act’s only limitation on the discretion to exclude is if such exclusion would result in the “extinction” of the species. This extraordinary authority is referred to as “4(b)(2) discretion.”

In several instances, private property owners sued the Service for the failure of the Secretary to exercise their 4(b)(2) discretion to exclude a given area. Uniformly, however, the courts held that the Secretaries’ discretion under § 4(b)(2) was so unbounded in the statute that a Secretary’s decision not to exercise it was not even subject to judicial review.

In Weyerhaeuser, the Supreme Court rejected that principle. While it recognized the remarkable discretion inherent in § 4(b)(2), the High Court said such discretion was not subject to arbitrary or capricious refusal to even consider an exclusion in violation of the Administrative Procedures Act. Accordingly, in the interests of transparency, consistency, and predictability, the FWS circulated for public comment a proposed rule that would define the process by which the FWS would consider proposed 4(b)(2) exclusions of critical habitat. NMFS did not join in this proposed rulemaking, electing instead to continue its consideration under existing policies and regulations. The proposed rule circulated stated:

We, the U.S. Fish and Wildlife Service (FWS), propose to amend portions of our regulations that implement section 4 of the Endangered Species Act of 1973, as amended (Act). The proposed revisions set forth a process for excluding areas of critical habitat under section 4(b)(2) of the Act, which mandates our consideration of the impacts of designating critical habitat and permits exclusions of particular areas following a discretionary exclusion analysis. We want to articulate clearly when and how FWS will undertake an exclusion analysis, including identifying a nonexhaustive list of categories of potential impacts for FWS to consider.

The critical consideration at the heart of § 4(b)(2) is whether the benefits of excluding a given area outweigh the benefit of inclusion, provided, again, that such exclusion would not result in the extinction of the species. While the “benefit of inclusion” is measured universally in terms of the conservation benefit to the species of including the area, the bases on which an exclusion may be justified are numerous.

The proposed rule is largely divided into two parts. The first addresses the Secretary’s decision whether to even consider an exclusion from the critical habitat designation. The second defines the considerations and processes by which any consideration of an exclusion should be carried out.

Proposed paragraph (c)(1) reiterates that the Secretary has discretion whether to enter into an exclusion analysis under § 4(b)(2) of the Act. Proposed paragraph (c)(2) describes the two circumstances in which FWS will conduct an exclusion analysis for a particular area: Either 1) when a proponent of excluding the area has presented credible information in support of the request; or 2) where such information has not been presented, when the Secretary exercises his or her discretion to evaluate any particular area for potential exclusion.

The Services went on to state:

We have not previously articulated our general approach to determining whether to exercise the discretion afforded under the statute to undertake the optional weighing process under the second sentence of 4(b)(2) of the Act. Although the Policy identified specific factors to consider if a discretionary exclusion analysis is conducted, it stopped short of articulating more generally how we approach the determination to undertake that analysis. We now propose to describe specifically what ‘‘other relevant impacts’’ may include and articulate how we approach determining whether we will undertake the discretionary exclusion analysis. We therefore propose paragraph (b) as set forth in the rule portion of this document.

Consistent with the first sentence of section 4(b)(2), proposed paragraph (b) sets out a mandatory requirement that FWS consider the economic impact, impact on national security, and any other relevant impacts prior to designating an area as part of a critical habitat designation. These economic impacts may include, for example, the economy of a particular area, productivity, and creation or elimination of jobs, opportunity costs potentially arising from critical habitat designation, and potential benefits from a potential designation such as outdoor recreation or ecosystem services. The proposed regulations would provide categories of ‘‘other relevant impacts’’ that we may consider, including: Public health and safety; community interests; and the environment (such as increased risk of wildfire or pest and invasive species management). This list is not an exhaustive list of the types of impacts that may be relevant in a particular case; rather, it provides additional clarity by identifying some additional types of impacts that may be relevant. Our discussion of proposed new paragraph (d), below, describes specific considerations related to tribes, states, and local governments; national security; conservation plans, agreements, or partnerships; and federal lands.

At the crux of the determination whether to even entertain consideration of an exclusion from a critical habitat designation is the notion of “credible information.” For purposes of these procedures, the proposed rule defines “credible information” as:

. . .information that constitutes a reasonably reliable indication regarding the existence of a meaningful economic or other relevant impact supporting a benefit of exclusion for a particular area.

Conclusion and Implications

For the most part, the propose rule is not at all a radical departure from longstanding practice of the FWS. Rather, in light of the Supreme Court’s ruling in Weyerhaeser, it seems the FWS hopes a codified procedure with greater transparency will help ensure the courts’ ongoing deference to the Secretary’s exertion of the broad 4(b)(2) discretion.

There is one notable exception. Historically, the FWS uniformly refused to consider a 4(b)(2) exclusion for any designation on federally owned land. This proposed rule expressly rejects that previous standard practice. Referencing private parties’ use of federal lands, other regulatory protections on federal lands, and regulatory and economic burdens, the proposed rule makes clear that consideration of a 4(b)(2) exclusion of critical habitat will not be prohibited merely by virtue of the fact that it involves federally owned land.

As with all enactments discussed in this article, application of this proposed procedure applies prospectively only. The public comment period on this proposed rulemaking closed on October 8, 2020.

The lack of attention to these adopted and proposed regulatory enactments is striking given their sweeping scope and potential impacts on ESA implementation in the field. But as is always the case with tinkering with any aspect of the ESA, all will be subjected to judicial scrutiny, not to mention potential reversal with any change in Administration.

David C. Smith is a partner with Manatt, Phelps & Phillips practicing out of the firm’s San Francisco and Orange County offices. Mr. Smith’s practice includes entitlement and regulatory compliance at all jurisdictional levels from local agencies to the federal government. His expertise includes the Endangered Species Act, the Clean Water Act, the Clean Air Act, the California Environmental Quality Act, the National Environmental Policy Act, climate change, and other regulatory regimes throughout California.

Jennifer Lynch is an associate with Manatt, Phelps & Phillips based in Orange County. She counsels and defends both public agencies and private developers regarding complex state and federal environmental and land use laws, with a special emphasis on the California Environmental Quality Act.