On Friday, February 5, 2016, the U.S. Fish and Wildlife Service and the National Marine Fisheries Service (Services) announced long-anticipated revisions to their critical habitat regulations and policy under the Endangered Species Act (ESA), issuing two joint, interrelated final rules and a final policy. The Services issued a final rule that amends the regulations governing Section 7 consultation under the ESA to revise the definition of “destruction or adverse modification” of critical habitat. Additionally the Services finalized the rule that amends the regulations governing the designation of critical habitat under Section 4 of the ESA, as well as a final policy regarding exclusions from critical habitat under Section 4(b)(2). The Services assert that the two rules and policy will provide “a clearer, more consistent and predictable process for designating critical habitat.”

Rule on Definition of Destruction or Adverse Modification. In their first rule, the Services revised the regulatory definition of “destruction or adverse modification” of critical habitat, a definition that is integral to the implementation of the ESA. The Services were required to modify the definition of “destruction or adverse modification” based on court decisions finding the current definition invalid. The Services did make some changes to the language in the proposed rule in response to comments, eliminating the terms “conservation value” and “life history needs,” for example, terms that are not defined elsewhere to avoid confusion. The final definition reads:

Destruction or adverse modification means a direct or indirect alternation that appreciably diminishes the value of critical habitat for conservation of listed species. Such alternations may include, but are not limited to, those that alter the physical or biological features essential to the conservation of a species or preclude or significantly delay development of such features.

These changes eliminate some uncertainty and the Services clarified that the definition of “destruction or adverse modification” is a prohibitory standard and is not intended to create an affirmative conservation requirement or a mandate for recovery. However, the Services reiterated that the focus of the definition is on “the role that critical habitat plays for the conservation of listed species and acknowledges that the development of physical and biological features may be necessary to enable the critical habitat to support the species’ recovery.” The Services also assert that their determination of “destruction or adverse modification” is based not only on the current status of the critical habitat but also must include the forward-looking aspect in the analysis to further support the conservation of the species. Thus, although the Services state that the new rule definition does not alter its Section 7(a)(2) consultation process from their current practice, the focus on future development of habitat to support species conservation is a departure from past agency practice. The Services have indicated that they intend to exercise their discretion in designating critical habitat that does not presently have the essential physical and biological features, but there is the potential of the habitat to naturally develop the features over time.

Rule on Critical Habitat Designation. In their second rule, the Services amended several regulatory provisions governing critical habitat designations so as to substantially expand the Services’ ability to designate large habitat areas based upon vague and discretionary principles. For example, the Services (1) added a definition of “physical or biological features” that “clarifies” that the features may be dynamic or ephemeral habitat characteristics, (2) deleted the term “primary constituent element” (PCE), and (3) acknowledged a likelihood that the agencies will increasingly use their discretion to designate areas outside of a species range that is unoccupied by finding that those areas are essential to the species conservation and recovery. The elimination of PCEs from the critical habitat designation process and the Services’ statement that physical and biological features do not need to be present at the time of designation are particularly troubling. PCEs have been an important regulatory framework and departing from decades of agency practice and well-established case law will only serve to foster uncertainty and subsequent litigation without corresponding benefits to the conservation of the species or its critical habitat.

Policy on Exclusions from Critical Habitat. The Services issued concurrently with the two final rules a policy regarding exclusions from critical habitat. Section 4(b)(2) of the ESA allows the Services to “exclude any area from critical habitat if [they] determine[] that the benefits of such exclusion outweigh the benefits of specifying such area as part of the critical habitat, unless [they] determine[], 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.” 16 USC § 1533(b)(2). The final policy is intended to provide predictability and transparency regarding how the Services consider exclusions under Section 4(b)(2) of the ESA. Specifically, the policy sets forth the Service’s position regarding the treatment of partnerships and conservation plans permitted under Section 10 of the ESA and the Services’ consideration of the agreements with respect to their critical habitat exclusion analysis. In their final policy, the Services confirmed their commitment to exercise their discretion and always consider areas covered by a permitted Candidate Conservation Agreements with Assurances (CCAA), Safe Harbor Agreement (SHA) and Habitat Conservation Plans (HCPs). To ensure exclusion from critical habitat designation, however, (1) the permittee must be in compliance with the terms of the agreement, (2) the species for which critical habitat is being designated must be a covered species, and (3) the agreement must address the species’ habitat needs. The Services explicit commitment to always evaluate CCAAs, SHAs and HCPs and to generally exclude these areas on that basis is encouraging and signals the Services’ support for the private partnerships and energy commitments in developing these types of agreements.

Looking Ahead. Given the Services’ new rules and policy on critical habitat designation, more attention will be required to ensure that critical habitat designations will be based upon the best available science. With the substantial uncertainty involved in predicting the impacts of climate change on species’ habitat, more attention will be focused on the designation of critical habitat and development of recovery plans to support the designation as well as to provide sufficient information for the analysis in a Section 7 consultation. The strategic course that clients may decide upon to address the uncertainties from the new critical habitat rules will vary depending upon both the procedural posture and facts of a specific consultation, including: the nature and length of the proposed action, the species at issue, the effects of the action, the conservation benefits, and whether or not there is a recovery. The Services assert that these rules and policy will provide a more consistent and predictable process but in fact it is likely that there will be more litigation as already evidenced by the various reactions to the Services’ final rules. It is also very likely that there will be inconsistent approaches across the Services’ regions as they attempt to implement the “forward-looking” aspects of the rule and in particular related to climate change. The true impacts of these rules will be determined through individual critical habitat designations and Section 7 consultations on a case-by-case basis.