On February 11, 2016, the U.S. Fish and Wildlife Service and the National Oceanic and Atmospheric Administration’s National Marine Fisheries Service jointly published final regulations and a final policy addressing critical habitat under the Endangered Species Act.  The final rules and policy will broadly impact all aspects of ESA implementation, including jeopardy findings and the development of species conservation plans.  Ultimately, private activities will be subject to increased scrutiny by federal agencies, and obtaining permits and other approvals will be more costly and time-consuming.

Impacts of the final rules and policy are likely to include the following:

• Critical habitat designations are likely to be more frequent, more robust, and broader in geographic scope, including areas that listed species may have periodically used in the past or may potentially use in the future.
• An increase in critical habitat designations means an increased likelihood that development activities will occur in or near designated critical habitat—and therefore be subject to ESA restrictions.
• The expanded definition of “destruction or adverse modification” of critical habitat includes not only the alteration of the physical or biological features essential to the conservation of a species, but also alterations that delay the development of those features, even if the features do not yet exist in the area designated as critical habitat.  Consequently, activities occurring in designated areas are more susceptible to a finding of destruction or adverse modification of critical habitat, which may trigger severe ESA restrictions. 
• Raising the bar to avoid adverse modification of critical habitat findings to require meeting a recovery standard, rather than merely avoiding the risk of extinction, means that a lesser degree of impact (or greater degree of mitigation) will be necessary to avoid ESA prohibitions when critical habitat is involved.
• Requiring that adverse modification apply to the entire designated area, not just the locally affected area, will limit to some degree the potential for restrictions on development activities in a particular area within a larger critical habitat designation.

The rules and policy finalize the draft proposals published by the agencies in May 2014.  See 79 Fed. Reg. 27,060 (May 12, 2014); 79 Fed. Reg. 27,066 (May 12, 2014); 79 Fed. Reg. 27,052 (May 12, 2014).  The Services made several revisions to the rules and policy based on comments they received on the proposed rules and policy, yet left many issues unresolved.  A more in-depth look at the key components of the final rules and policy follows.

“Destruction or Adverse Modification”

The Services have amended the definition of “destruction or adverse modification” under Section 7(a)(2) of the ESA for the stated purpose of formalizing agency guidance issued after the Fifth and Ninth Circuits invalidated an earlier version of the definition.  See Sierra Club v. U.S. Fish & Wildlife Serv., 245 F.3d 434 (5th Cir. 2001), and Gifford Pinchot Task Force v. U.S. Fish and Wildlife Serv., 378 F.3d 1059 (9th Cir. 2004).

The Services state in the final rule that the revised definition clarifies the Services’ intent yet “do[es] not alter the overall meaning of the proposed definition.”  81 Fed. Reg. 7214, at 7226 (Feb. 11, 2016).  In practice, however, the revised definition now permits a finding of destruction or adverse modification even in areas that do not contain physical or biological features essential to the conservation of a species.  The final rule thus broadens the definition “to encompass all potential types of alterations if they reduce the value of the habitat for conservation.”  Id. at 7219.

Moreover, the final rules do not allow adequate consideration of the “net effects” of conservation activities outside of the area of designated critical habitat, stating that such activities “should not be considered when evaluating effects to critical habitat.”  Id. at 7222.  The absence of an appropriate “net effects” analysis could serve as a disincentive to mitigation efforts.

Critical Habitat Designations

The Services have amended the regulatory definitions, procedures and criteria for designating critical habitat under Section 4 of the ESA.  81 Fed. Reg. 7414 (Feb. 11, 2016).  The most noteworthy—and the most controversial—definitional changes are the addition of two new definitions for “geographical area occupied by the species” and “physical or biological features.”  The Services note that these terms are referenced in the statutory definition of “critical habitat” at Section 3(5)(A)(i) and (ii) of the ESA but are not defined in the ESA or regulations.  Id. at 7429, 7430.  As defined, “geographical area occupied by the species” is broad and can include areas occupied by the species after the species is listed, as well as areas that are “used only periodically or temporarily by a listed species during some portion of its life history.”  Id.

Under the final rule, “to the maximum extent prudent and determinable,” the agencies will finalize critical habitat designations concurrently with the issuance of proposed and final listing rules.  Id. at 7439.  The rule identifies specific situations in which a designation of critical habitat is not prudent but states that only in “rare circumstances” will a designation of critical habitat not be prudent or determinable.  Id. at 7432.  Despite the Services’ claim that the amended rule “do[es] not substantially change the manner in which critical habitat is designated,” id. at 7416, the rule represents a complete overhaul of the designation procedures and criteria.  Now the Services can designate not only areas within the geographical area occupied by the species at the time of listing but also specific areas outside the geographical area occupied by the species.  Id. at 7439.  The scale of the areas to be designated is left to the Services discretion.  This change is likely to significantly broaden designations of critical habitat.

Exclusions from Critical Habitat

The Services have issued a non-binding policy to address the agencies’ process for identifying exclusions from critical habitat under Section 4(b)(2) of the ESA.  81 Fed. Reg. 7226.  The policy explains that exclusion decisions are discretionary, that areas covered by conservation plans or agreements will be considered but not necessarily excluded, and that the focus of exclusions will be on non-federal lands.  Id. at 7247-48. 

The Services state that the purpose of the policy is to “provide greater predictability and transparency regarding how the Services generally consider exclusions under section 4(b)(2).”  Id. at 7227.  In practice, however, the lack of clear guidance on when exclusions will apply could result in inconsistent applications of the policy and confusion among the regulated community.  Specifically, the absence of clear criteria for the exclusion of areas covered by conservation agreement with assurances, safe harbor agreements, habitat conservation plans or other initiatives may discourage these initiatives, or at least make such agreements more costly and time-consuming to achieve.

Conclusion

The final rules and policy represent a significant change in the implementation of the processes and criteria for critical habitat designations and adverse modification findings.  Although one of the stated purposes of the final rules and policy is to clarify these issues and provide greater predictability and transparency, the final rules and policy may in fact result in new issues and areas of controversy.  The likely effect is increased and broader critical habitat designations—an expectation that even the Services acknowledge and correlate with the impacts of global climate change on species habitat and range.  Id. at 7435.  Legal challenges to the rules and policy are likely, suggesting that the future of ESA implementation is anything but clear.

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