No Surprises Assurances Under The Endangered Species Act In Jeopardy After Federal Court Ruling

On December 11, 2003, the District Court for the District of Columbia struck down an important component of the "no surprises" protections contained in two interrelated regulations implementing the Endangered Species Act ("ESA"). This decision threatens to undermine assurances provided to landowners who have prepared habitat conservation plans under the regulations.

The controversial "no surprises" protections provide important assurances to entities negotiating Habitat Conservation Plans ("HCPs") with the Fish & Wildlife Service and the National Marine Fisheries Service (collectively "the Services") that limit resource and monetary commitments for projects in exchange for implementing comprehensive HCPs. Absent such assurances, landowners, both private and public, fear never-ending regulatory entanglements on the potential endangered species impacts of their projects. This decision signals the potential removal of important warranties afforded habitat conservation participants since the "no surprises" policy was first adopted in 1994.

Under the ESA, project proponents must obtain an Incidental Take Permit before undertaking activities that may harm threatened or endangered species or their habitat. An Incidental Take Permit may be secured through preparation of an HCP, an often exhaustive assessment of the project's potential species-related impacts which incorporates measures to minimize and mitigate those impacts. The "no surprises" protections assure project proponents that, once an HCP is prepared and species monitoring and mitigation are established, the Services will not later impose additional requirements, even if environmental conditions change over time. Many believe this provision is the linchpin for successful implementation of HCPs, by providing regulatory certainty to project proponents in exchange for tangible commitments to habitat protection.

However, in Spirit of the Sage Council v. Norton, a coalition of environmental organizations and Native American tribes challenged the "no surprises" rule and the corresponding Permit Revocation Rule, a 1999 regulation that essentially codifies and extends "no surprises" protections by making an Incidental Take Permit irrevocable unless a species is in danger of becoming extinct. Plaintiffs asserted that the "no surprises" guarantee undermines the protective mission of the ESA and that the rules were promulgated without the appropriate public notice and comment under the Administrative Procedure Act ("APA").

In an opinion that admonishes the Services for "flagrant violations" of rulemaking protocols, federal District Court Judge Emmet Sullivan concluded that both rules were implemented in violation of the APA. He invalidated the Permit Revocation Rule but did not invalidate the underlying "no surprises" rule per se. Instead, he remanded both rules to the Services for reevaluation because the "no surprises" rule was inextricably "intertwined" with the Permit Revocation Rule. The decision did not address Plaintiffs' substantive challenges to the "no surprises" rule.

As a result, the Permit Revocation Rule has been nullified, while the "no surprises" rule appears to be in effect until the Services can reevaluate the Permit Revocation Rule. Because the court's decision rests on procedural grounds, the Services could reissue both rules using the appropriate notice and comment rulemaking protocols, although a reissued rule will undoubtedly spawn further court challenges. It is also possible that the rule will be altered during the public comment process or by the current Administration, which did not author either rule. It remains to be seen whether the Services will appeal the decision.

The "no surprises" protections in the ESA regulations have been a critical incentive for landowners to draft HCPs and apply for Incidental Take Permits that contain important measures to protect endangered species. Indeed, the protections have been a key part of grand-scale species conservation plans that have been negotiated by cities, counties, developers and other stakeholders over many years. This decision indicates that the rules' survival may be in jeopardy, pending further administrative and legal proceedings. The eventual results could have a far-reaching impact on the future of voluntary private efforts to protect endangered species.

The Environmental Law Department of Farella Braun + Martel LLP is among the largest and most experienced in the nation, with attorneys specializing in all areas of environmental compliance counseling, regulatory representation and litigation, including representation of developers, landowners and other private and public-entity clients concerning ESA issues and proceedings.

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