November 01, 2015

Economic impacts in ESA critical habitat designations

Matthew J. Sanders and Alicia E. Thesing

On July 7, 2015, the Ninth Circuit issued a published decision in Building Industry Association of the Bay Area v. U.S. Department of Commerce. The decision upholds the designation of more than 13,000 square miles (8.6 million acres) of critical habitat for the federally threatened green sturgeon. The decision holds that, under section 4(b)(2) of the Endangered Species Act (ESA), the National Marine Fisheries Service (NMFS) has discretion about how it considers the economic impacts of designating critical habitat. The court also ruled that subsequent NMFS decisions not to carve out certain areas from previous designations are unreviewable. Finally, the court confirmed the long-standing rule that environmental review is not required for critical habitat designations under the National Environmental Policy Act (NEPA). The decision will give federal agencies more leeway in making critical habitat decisions.

The green sturgeon

The green sturgeon, an anadromous, prehistoric-looking fish, is found in bays, estuaries, and coastal rivers along the western coast of North America. The fish can weigh up to 350 pounds and live as long as 70 years. The population that lives in the Sacramento Bay Delta in northern California is called the Southern distinct population segment. It has suffered significant declines due to dams, habitat loss, poaching and bycatch, runoff from farms, and invasive clams. As a result, in 2006, NMFS listed the Southern population segment as threatened under the ESA.

NMFS’s critical habitat designation

In 2009, in the action underlying this case, NMFS designated 11,421 square miles of marine habitat, 897 square miles of estuary habitat, and hundreds of miles of riverine habitat in Washington, Oregon, and California as critical habitat for the Southern distinct population segment. “Critical habitat” includes those areas that are “essential” for the species’ conservation. 16 U.S.C. § 1532(5).

The Building Industry Association of the Bay Area and the Bay Planning Coalition, represented by the Pacific Legal Foundation, sued. They argued that, in designating critical habitat for the green sturgeon, NMFS failed to use the right methodology for considering economic impacts, ignored economic impacts for certain conservation areas, and failed to conduct NEPA review.

“Taking into consideration the economic impact”

Section 4(b)(2) of the ESA requires that NMFS (and its sister agency, the Fish & Wildlife Service) “designate critical habitat . . . 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.” 16 U.S.C. § 1533(b)(2). NMFS “may exclude any area from critical habitat if [it] determines that the benefits of exclusion outweigh the benefits of specifying such area as part of critical habitat,” unless doing so will cause the species to go extinct. Id.

The relationship between these two sentences formed the core of this case. The industry plaintiffs argued that the first sentence modified the second, such that NMFS had to evaluate whether the economic benefits of excluding an area from critical habitat designation outweighed the conservation benefits of including it. The district court and the Ninth Circuit disagreed, concluding instead that section 4(b)(2)’s two sentences were essentially separate mandates. That is, NMFS had to consider economic impacts when designating critical habitat (and had discretion about how to do that), “after” which NMFS could decide to exclude an area from designation so long as it concluded that the benefits of exclusion outweighed the benefits of inclusion. The Ninth Circuit held that “there is no specific methodology that an agency must employ when considering whether to exclude an area from critical habitat designation.”

No judicial review, no NEPA review

Giving NMFS even more discretion, the Ninth Circuit also held that NMFS’s decisions not to exclude areas from critical habitat designation under the “outweighing” provision of Section 4(b)(2) were unreviewable. The Administrative Procedure Act, the court explained, precludes judicial review of an agency action “committed to discretion by law.” A decision regarding whether to exclude otherwise essential habitat, the court concluded, is a “discretionary process” with no standards for review. To fully understand this portion of the Ninth Circuit’s decision, it is best to read a prior on-point decision by the same panel: Bear Valley Mutual Water Company v. Jewell.

The Ninth Circuit’s final holding—that NEPA does not apply to critical habitat designations—builds on a long line of circuit precedent reasoning that the ESA displaced NEPA for such designations; no NEPA review is required for actions that do not alter the physical environment; and critical habitat designations protect the environment from harm.

The bottom line

Read most broadly, the Ninth Circuit’s decision requires NMFS to consider economic impacts when deciding which areas constitute a species’ critical habitat. However, taking economic impacts into consideration does not require that NMFS evaluate whether the environmental benefits of a critical habitat designation outweigh the economic impacts. And then, at some later point, NMFS may exclude certain areas based on a discretionary balancing test. In reality, NMFS is likely to consider economic impacts throughout its decisionmaking process, and courts in the Ninth Circuit will now give substantial deference to the agency’s decisions about how to do that.

Moreover, when Building Industry Association and Bear Valley are read together, we see that specific decisions to exclude otherwise essential (and thus “critical”) habitat may or may not be reviewable in court. While a (likely environmental) plaintiff may challenge NMFS’s decision to exclude areas from critical habitat, a (likely industry) plaintiff may not challenge NMFS’s decision not to exclude areas from critical habitat. Instead, industry plaintiffs are left with more general “arbitrary and capricious” challenges to NMFS’s critical habitat designations.

Matthew J. Sanders and Alicia E. Thesing

Matthew J. Sanders and Alicia E. Thesing are clinical supervising attorneys and lecturers at the Environmental Law Clinic at Stanford Law School. Mr. Sanders is vice chair of the Section’s Public Land and Resources Committee and Government and Private Sector Innovation Committee and was formerly an appellate attorney in the Environment & Natural Resources Division at the U.S. Department of Justice. Ms. Thesing was formerly counsel for the cities of San Jose, Palo Alto, and Mountain View, California.