Saturday, January 22, 2022
As readers of this blog will note, I recently concluded a five-part series on what I viewed as the “Top Ten” agricultural law and agricultural tax developments of 2021. There were many “happenings” in ag law and tax in 2021 which meant that there were still some significant developments that didn’t make the “Top Ten.” So far, those development that didn’t make the “Top Ten, but are still very significant as to their impact on the ag sector and those that represent farmers and ranchers involve, whether a bankruptcy trustee can retain the trustee’s fee in certain situations; improper set-up of an LLC that caused significant gifts to be recharacterized for tax purposes; and a case involving a huge estate planning mistake that cost the family a $2.5 million charitable deduction.
In today’s article I continue with another important development in agricultural law during 2021 that just wasn’t quite big enough to make the “Top Ten” list, but is still very significant – a change in the way “habitat” is defined for species listed as “endangered” under federal law.
A change is the way the feds define “habitat” for endangered species – it’s the topic of today’s post.
Background. The Endangered Species Act (ESA) establishes a regulatory framework for the protection and recovery of endangered and threatened species of plants, fish and wildlife. 16 U.S.C. § 1531 et seq (2002). The U.S. Fish and Wildlife Service (USFWS), within the Department of the Interior, is the lead administrative agency for most threatened or endangered species.
The ESA has the potential to restrict substantially agricultural activities because many of the protections provided for threatened and endangered species under the Act extend to individual members of the species when they are on private land. For example, in People for the Ethical Treatment of Property Owners v. United States Fish and Wildlife Service, 852 F.3d 990 (10th Cir. 2017), a USFWS rule concerning the “taking” of a Utah prairie dog on private property was upheld on basis that the Congress has the power to regulate purely local activities that are part of an economic class of activities that have a substantial economic effect on interstate commerce. Ts is because the court determined that the Commerce Clause authorized the regulation of noncommercial purely intrastate activity that is an essential part of a broader regulatory scheme. As such, the “take” regulation at issue was constitutional. The court noted that approximately 68 percent of ESA-protected species have habitats that do not cross state borders and, as such, the ESA could be severely undercut if the ESA only allowed protection to those species whose habitats were in multiple states.
The ESA prohibits individuals from “taking” a listed species. To take a species is to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect or attempt to engage in any such conduct with a listed species. When a species is listed as endangered or threatened, the Secretary of the Interior must consider whether to designate “critical habitat” for the species. Once a habitat designation is made, land use activities on private land designated as habitat can be severely restricted. Critical habitat must first be habitat. It must be an area that is essential for conservation of the species. See, e.g., Weyerhauser Co. v. United States Fish and Wildlife Service, 139 S.Ct. 361 (2018). But, it need not include the entire geographical range which the species could potentially occupy. That was federal government’s position until the U.S. Supreme Court in Weyerhauser determined otherwise. That decision was a major victory for farmers and ranchers and other private property owners because about half of the species listed as endangered or threatened have approximately 80 percent of their habitat on privately owned land.
Note: In late August of 2021 an appeal was filed in a case from New Mexico by ranchers on their assertion that USFWS acted in an arbitrary and capricious manner when it ignored the costs and benefits of designating critical habitat for the New Mexico Meadow Jumping Mouse. In 2016, the U.S. Fish and Wildlife Service issued a final rule designating critical habitat for the rodent across 14,000 acres and 170 miles of streams in Arizona, Colorado, and New Mexico. The USWFS asserted that the regulatory costs to the ranchers would not exceed $100 million, with $15 million of that cost imposed on grazing activities of the ranchers by regulating grazing activities. The disaffected ranchers claim that the cost is grossly underestimated and that their water rights would not be adequately protected under law by the actions of the USFWS. The trial court determined that the USFWS’ incremental effects approach to considering economic impacts was consistent with the ESA, and excluding compensation for impacts on water rights was proper as the claim was speculative. Northern New Mexico Stockman’s Association v. United States Fish and Wildlife Service, 494 F. Supp. 3d 850 (D. N.M. 2020). The U.S. Circuit Court of Appeals for the Tenth Circuit heard oral arguments in the case on appeal on January 21, 2022.
2019 regulations. In 2019, the USFWS published final rules entitled, “Endangered and Threatened Wildlife and Plants; Revision of the Regulations for Listing Species and Designating Critical Habitat.” 83 Fed. Reg. 35,193 (Aug. 12, 2019). The final rules clarified the procedures and criteria that are used to add or remove species from the endangered and threatened species lists and how their critical habitat is designated. The new rules also eliminate the rule that, by default, extended many prohibitions on endangered species to those species that only had threatened status. In addition, the final rules further defined the procedures for interagency cooperation.
Importantly, the 2019 final rules modified the ESA listing process, and allowed for economic impacts of the potential listing, delisting or reclassifying of a species to be accounted for. The findings of anticipated economic impact must be publicly disclosed. In addition, the Secretary was required to evaluate areas occupied by the species, with unoccupied areas only being considered “essential” where a critical habitat designation that is limited only to the geographical areas that a species occupies would be inadequate to ensure conservation of the species. In addition, for an unoccupied area to be designated as critical habitat, the Secretary had to determine that there is a reasonable certainty that the area will contribute to the conservation of the species and that the area contains one or more physical or biological features essential to the conservation of the species. Also, a “threatened” listing for a species was to be evaluated in accordance with whether the species is likely to become endangered in the “foreseeable future” (as long as a threat is probable).
2021 developments. Additional final rules were published in December of 2020 that became effective in mid-January of 2021. These rules modified the definition of “habitat” to make habitat designations less burdensome on private property owners, and clarifying when the USFWS may exclude certain areas from designation as critical habitat by confining the definition to simply the ecosystem that a species presently occupied rather than the historical range of the species. The final rules became effective January 19, 2021. 85 FR 8237 (eff. Jan. 19, 2021).
The very next day, the new White House Administration indicated that it would be reviewing the ESA rules pursuant to Executive Order 13990 (86 Fed. Reg. 7037, Jan. 20, 2021). On October 27, 2021, the USFWS published proposed rules that would rescind the Trump Administration’s critical habitat rule. 50 C.F.R. Part 17, RIN 1018-BD84 (Oct. 27, 2021). Prompted by the Administration, the USFWS then said it did not agree that areas must be excluded from designation when the costs exceed the benefits if it will not result in the extinction of a species. The USFWS now claims that it should retain discretion to make those decisions on excluded areas.
The issues involved with respect to the ESA and “habitat” designation are important to those agriculture and other private landowners that could be financially impacted by the new regulation. A new, expanded, definition of “critical habitat” would pose greater land use restrictions on private property, much of it farm and ranch land. That will likely lead to more court battles over the property regulation and whether a compensable taking has occurred.
I will continue the journey through other significant 2021 developments in ag law and tax next time.