Ninth Circuit Adds to Landowners’ Woes with Another Endangered Species Act Litigation Loss

sturgeonGuest Commentary

By Rachael Stein, a summer law clerk at Washington Legal Foundation who is entering her third year at the University of Georgia School of Law this fall.

The U.S. Court of Appeals for the Ninth Circuit recently decided that the National Marine Fisheries Service (NMFS) need not perform a thorough balancing of the costs and benefits of an Endangered Species Act (ESA) critical habitat designation, and its decision not to exclude certain areas is judicially unreviewable. The ruling directly impacts over 12,000 square miles of waters, shorelines, and land areas of California, Oregon, and Washington. Its broader impact, however, will be much greater. NMFS and other agencies implementing the ESA, as well as the activists that sue under the law, will feel emboldened to take an even more aggressive approach, to the detriment of property owners, builders, and the entire development industry.

In 2006, NMFS added the southern distinct population segment of green sturgeon to the list of threatened and endangered species under the Endangered Species Act (ESA). The agency then designated all “high conservation value” areas as critical habitat for the fish, excluding only those areas that NMFS deemed vital to national security and that impacted tribal relations.

Two organizations whose members would suffer economically from NFMS’s decision challenged the critical habitat designation. The plaintiffs argued that NMFS failed to balance the benefits of a critical habitat designation in the high conservation value areas against the economic costs of such a designation, and did not justify its decision not to exclude certain areas. A federal district court rejected the plaintiffs’ arguments, and Ninth Circuit affirmed the decision in Building Industry Association of the Bay Area v. United States Department of Commerce.

In an opinion authored by Judge Barrington Parker, a Second Circuit judge sitting by designation, the three-judge panel held: 1) NMFS did “consider” the economic impact of a critical habitat designation; 2) NMFS does not have to conduct a cost-benefit analysis after it considers economic impact; and 3) the decision not to exclude certain land from a critical habitat designation is not judicially reviewable.

Section 4(b)(2) of the ESA states:

The Secretary shall designate critical habitat … on the basis of the best scientific data available and after taking into consideration the economic impact, the impact on national security, and any other relevant impact, of specifying any particular area as critical habitat. The Secretary may exclude any area from critical habitat if he determines that the benefits of such exclusion outweigh the benefits of specifying such area as part of the critical habitat, unless he determines, based on the best scientific and commercial data available, that the failure to designate such area as critical habitat will result in the extinction of the species concerned.

The court found that the word “shall” applies only to the first sentence, which dictates that NMFS must “tak[e] into consideration the economic impact.” Judge Parker reasoned, though, that the law does not prescribe a method for considering economic impact. Thus, the type of cost-benefit assessment the plaintiffs demanded was only one option, which NMFS was permitted to decline. The court, citing Skidmore v. Swift & Co., deferred to an Interior Department legal opinion that interpreted that language of the ESA as imposing no specific economic impact methodology.

On the question of NMFS’s decision not to exclude certain areas from the critical habitat designation, the court focused on the term “may” rather than “shall.” Consequently, it held that ESA § 4(b)(2) grants the agency full discretion to act. That discretion is so complete, according to the court, that the agency’s exclusion decisions cannot be questioned through judicial review. The plaintiffs’ argument to the contrary, Judge Parker wrote, was “foreclosed by our decision in Bear Valley.” He was referencing Bear Valley Mutual Water Company v. Jewell, a case decided by the very same panel of judges chosen to review Building Industry Association (and also authored by the same Judge Parker) just two weeks earlier, on June 25.

Building Industry Association embraces and advances an absolutist perception of the ESA, long dominant in the Ninth Circuit, that the law protects species regardless of the actual environmental benefits or the human costs. To justify habitat designation under the court’s reasoning, NMFS need only go through the motions of commissioning a minimal economic impact study, glance through it briefly, and then file it away for use only if litigation ensues. In other words, the mere existence of economic impact data is enough to satisfy the ESA.

Such an outcome is contrary to the statute, which in the very same section requires that economic impact be considered and then references the weighing of benefits and burdens as the method to be used in deciding on exclusions from critical habitat. In addition, the court’s holdings in Bear Valley and Building Industry Association on decisions to not exclude areas from habitat designation are directly at odds with long-standing Supreme Court precedents that strongly dictate in favor of agency action being reviewable.

The Ninth’s Circuit’s decision in Building Industry Association will encourage regulators and activists to impose more restrictive property regulations without fear of judicial consequences. At a time when California already faces substantial difficulties from natural causes, such as water shortages and forest fires, such oppressive regulations present a potent threat to property owners and developers.

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