By Robert J. Uram and Ella Foley-Gannon

On March 14, 2006, in Center For Biological Diversity v. Bureau of Land Management, et al., 2006 WL 662735 (N.D. Cal.), the United States District Court for the Northern District of California concluded that the U.S. Fish and Wildlife Service (the “Service”) improperly ignored the recovery goal of critical habitat in finding that there were no additional regulatory benefits to be gained by designating critical habitat in areas that were ultimately excluded. Additionally, the Court concluded the Service improperly considered economic impacts of critical habitat designation that are coextensive with restrictions resulting from the listing of milk-vetch in excluding significant areas from the final critical habitat designation.

The Court’s decision in Center for Biological Diversity raises significant issues regarding many recent decisions by the Service to exclude areas from critical habitat designations based on economic considerations. Several other District Courts in California have reached different conclusions, and this issue has not yet been addressed by the Ninth Circuit.  It is anticipated that the decision may encourage those seeking to challenge new exclusions.

Plaintiffs were several environmental organizations (“Plaintiffs”) which alleged the Bureau of Land Management (“BLM”) and the Service failed to adequately protect two species listed under the Endangered Species Act (“ESA”), one of which was the Peirson’s milk-vetch. Plaintiffs alleged that the species were particularly threatened by off-highway vehicle recreational use in the Imperial Sand Dunes Recreation Area (the “Dunes”) and that the management plan proposed for the Dunes did not provide sufficient protection to ensure the continued existence of the species. Specifically, Plaintiffs argued that the Service’s final critical habitat rule suffered from several “substantive deficiencies”, including the Service’s failure to consider the regulatory benefits of critical habitat designation and to properly analyze the economic costs associated with critical habitat.

On August 4, 2004, the Service published the final critical habitat designation for the milk-vetch. The final rule designated approximately 21,836 acres as critical habitat for the milk-vetch and excluded almost 30,500 acres from final designation after concluding based on its economic analysis that the benefits of inclusion were outweighed by the benefits of exclusion, and that extinction of the species would not occur as a result of the exclusion. Specifically, the Service concluded that the regulatory benefits of inclusion of particular areas of the Dunes as critical habitat for the milk-vetch were minimal. However, the final rule notes that all of the proposed critical habitat areas that were excluded were currently occupied by the milk-vetch.

As a matter of background, the Court stated, “[a] critical habitat designation provides a means to “recover” a listed species and remove it form the endangered species list” (quoting Gifford Pinchot Task Force v. U.S. Fish and Wildlife Serv., 378 F.3d 1059 (9th Cir. 2004). Concurrent with listing a species as endangered, the Service is required to designate critical habitat for the species based on the best scientific data available and taking into consideration the economic impact on national security and other relevant impacts. The ESA allows the Service to exclude areas from critical habitat if the Service determines the benefits of such exclusion exceed the benefits of designating the area as critical habitat, unless exclusion will result in the extinction of the particular species.

In concluding that the Service improperly ignored the recovery goal of critical habitat by finding there were not additional regulatory benefits to be gained by designating critical habitat in areas ultimately excluded, the Court relied on the reasoning in the Ninth Circuit’s decision in Gifford. The court in Gifford concluded that the ESA was enacted not only to prevent extinction of a species, but to allow a species to recover to a point where it may be delisted. The ESA states that critical habitat includes “the specific areas occupied by the species which are essential to the conservation of the species” and the “specific areas outside the geographical area occupied by the species … that are essential for the conservation of the species.” The Gifford court found that by these definitions, clearly, Congress intended that conservation and survival be two different goals of the ESA and the purpose of establishing critical habitat is for the government to carve out territory essential for the species’ recovery, not only for its survival.

Furthermore, in concluding that the final rule by the Service was flawed because it relied on an incorrect economic analysis which both overstated the economic costs associated with critical habitat designation and understated the economic benefits of such designation, the Court found that the Service’s consideration of coextensive “administrative and project modification costs” attributable to the listing of the milk-vetch was improper in connection with its decision to exclude critical habitat. The parties disputed whether the Service can make a critical habitat exclusion determination “based upon economic impacts of the critical habitat designation that are coextensive restrictions resulting from the milk-vetch’s status as a listed species, or whether the service is limited to consideration of incremental costs solely attributable to critical habitat designation.”

Following the Tenth Circuit’s decision in New Mexico Cattle Growers Ass’n v. U.S. Fish and Wildlife Serv., 248 F.3d 1277 (10th Cir. 2001), the practice of the Service was to determine cost impacts of critical habitat designation based on the full cost of mitigation following the listing of a species. However, the Court was not persuaded by the reasoning of New Mexico Cattle Growers and agreed with the reasoning of Cape Hatteras Access Preservation Alliance v. U.S. Dep’t of the Interior, 344 F.Supp.2d 108 (D.D.C. 2004), which held that the baseline approach was consistent with the ESA and it was a reasonable method for assessing the actual costs of a particular habitat designation. The Cape Hatteras court stated, the Service “must not allow the costs below the baseline to influence its decision to designate or not designate areas of critical habitat.”

The Court’s decision in Center for Biological Diversity raises significant issues regarding many recent decisions by the Service to exclude areas from critical habitat designations based on economic considerations.  As with the critical habitat designation at issue in this case, the Service has repeatedly relied on New Mexico Cattle Grower’s as setting the standard for their evaluation of economic issues and considered the economic impacts associated with both the listing of a species and the designation of its critical habitat.  Under Center for Biological Diversity, only the added impacts of critical habitat designation could be considered.  Several other District Courts in California have reached different conclusions, and this issue has not yet been addressed by the Ninth Circuit.  It is anticipated that this decision may encourage those seeking to challenge new exclusions.

For more information please contact Robert Uram and Ella Foley-Gannon.  Robert J. Uram is a partner in the Real Estate, Land Use and Environmental Practice Group in the firm’s San Francisco office.  Ella Foley-Gannon is a Partner in Land Use and Natural Resource Practice Group in the firm’s San Francisco Office.