Effect of Endangered Species Act Listing on the Oil and Gas Industry and the CCAA Option

Posted on April 30, 2012 by Donald Shandy

The oil and gas industry has lately been at the center of the debate over the scope and reach of the Endangered Species Act (“ESA”).  (See, for example, an August 2011 blog by Pamela Giblin).  Creative approaches will be needed to insulate against potential liability. 

When the U.S. District Court for the District of Columbia approved two settlements in multidistrict ESA litigation (MDL No. 2165) on September 9, 2011, the U.S. Fish and Wildlife Service (“FWS”) committed to, among other things, review over 250 candidate species and determine whether to issue a proposed listing rule or to issue a finding that listing is not warranted by the end of fiscal year 2016.  Among those first on the list to be decided are species located in areas of significant oil and gas development and potentially impacted by oil and gas operations.  For example, the Dunes Sagebrush Lizard (also known as the Sand Dune Lizard), a candidate species under the ESA, is known to exist in the energy-rich Permian Basin.

Once a species is listed as endangered or threatened, protective measures apply to the species and its habitat under Section 9 of the ESA.  The ESA prohibits the possession, sale, import, and/or export of endangered species, as well as the “take” of a listed wildlife species by a private or public entity.  Section 3 of the ESA defines the term “take” broadly to mean “harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct.”  Even activities that are not designed or intended to harm a species, but that could do so indirectly, such as servicing a well, can constitute a take prohibited by the ESA. The ESA subjects any person who violates the statute or its implementing regulations to an array of civil and criminal sanctions.

A decision on whether or not to list the Sand Dune Lizard is due in June 2012.  Thus, oil and gas companies operating in areas of lizard habitat, or where other candidate species may exist, need to be thinking proactively about the impacts of a listing.  Some of the tools available to operators can be utilized in advance of listing and can provide important protections and assurances if the species is ultimately listed.  One significant opportunity for an oil and gas company to potentially insulate itself from ESA liability is a conservation agreement. 

Specifically, a Candidate Conservation Agreement with Assurances (“CCAA”) is an agreement, whereby non-federal property owners commit to implement voluntary conservation measures for a candidate species, and in return receive regulatory assurances that additional conservation measures will not be required and additional land, water, or resource use restrictions will not be imposed should the species become listed in the future.  Furthermore, the proactive conservation efforts performed through CCAAs may remove or reduce perceived threats to the covered species, so that FWS could determine that listing the species under the ESA is unnecessary. 

For example, CCAAs have been developed for the Sand Dune Lizard in Texas and New Mexico, and the Lesser Prairie Chicken in New Mexico.  Since assurances under these agreements are only available to operators and land owners who enroll before a species is listed, time is of the essence for projects or operations that may harm candidate species currently under evaluation, particularly the Sand Dune Lizard. 

For oil and gas operators who fail to take any action, the listing of a candidate species affected by development as threatened or endangered could immediately bring their operations to a halt.  FWS estimates that it could take as long as a year or more for an operator to obtain its own individual “take” permit.  Thus, whether or not these species become listed is certainly something to keep an eye on for oil and gas operators and their counsel.

BLM’s Balancing Act: Agency Extends Increased Pre-Listing Protection to Species, Raising Questions for Mineral Leaseholders

Posted on February 15, 2012 by Pamela Giblin

Recent actions taken by the Bureau of Land Management (BLM) to protect species on BLM-managed lands, before those species have been listed under the Endangered Species Act (ESA), raise questions about the evolution of BLM’s role in species protection and the impact this evolved role may have on minerals leasing and development on BLM-managed lands. 

BLM is charged, under the Federal Land Policy and Management Act of 1976, with developing Land Use Plans that make its public land and resources available under the principle of multiple-use, but at the same time, conserving special status species and their habitats.  The agency’s actions with respect to two species, the Greater Sage-Grouse and the Dunes Sagebrush Lizard, are indicative of BLM’s trajectory in how it intends to balance its roles as species-protector and minerals-manager on public lands.

A December 27, BLM-issued internal Instruction Memorandum (IM) provides interim management policies and procedures to protect the Greater Sage-Grouse on BLM-managed lands in the Western United States with the expressed goal of potentially avoiding an ESA listing.  The Greater-Sage Grouse is currently not protected under the ESA, its listing having been designated as “warranted but precluded” by the U.S. Fish and Wildlife Service (FWS) in March 2010.  The “warranted but precluded” listing decision concluded that existing regulatory mechanisms in the BLM’s Land Use Plans were inadequate to protect the species, which is found in up to 47 million acres of BLM-managed land. 

The December IM makes it clear the new guidelines apply to both proposed and existing leases.  The IM does recognize holders of existing mineral leases do have valid rights entitling them to certain development activities, but the guidance also indicates BLM will attempt to provide maximum protection to the Sage-Grouse within the bounds of those leases.  For example, for fluid mineral leases, the IM states BLM may issue written orders requiring “reasonably protective measures consistent with the lease terms.”  Further, when an existing leaseholder requires a new permit for minerals development, BLM plans to impose “reasonable” conditions in the permits that are likely to be more protective than the stipulations and restrictions currently identified in approved Land Use Plans.

BLM expressed a similar stance in the development of resource management plans in New Mexico to address the Dunes Sagebrush Lizard.  In that instance, BLM noted "holders of existing oil and gas leases have valid rights for development of their leases" but asserted in responses to public comment that BLM "can withhold approval of prospective well locations on existing leases" or address candidate species through existing lease stipulations. 

With FWS experiencing increasing backlogs in addressing ESA listing petitions, it seems likely there will be many more species that, like the Greater Sage-Grouse and the Dunes Sagebrush Lizard, are found to need habitat protection but cannot be allotted resources by FWS to do so.  If BLM continues to step in and afford protections on the level it has in the case of these two species, effects on minerals leasing in BLM-managed lands could be far reaching.  Minerals leaseholders on BLM lands should keep an eye on how far BLM ultimately stretches the bounds of existing mineral leases to protect the Greater Sage Grouse and Dunes Sagebrush Lizard, because BLM’s approach to these species may be indicative of a trend that will apply to many more species in the future.
     

Draft Policy Would Limit Reach of Endangered Species Act

Posted on January 4, 2012 by Linda Bullen

On December 8, 2011, the Obama administration released a draft policy interpreting a key phrase in the Endangered Species Act (the "Act") that determines when species qualify for protection under the Act.  The Act defines an endangered species as any species “in danger of extinction in all or a significant of portion of its range.” The phrase “significant portion of range” is important, because it means that species need not be at risk of extinction globally to receive protection. The policy proposed on December 8 sharply limits the reach of this phrase by both defining “significant” to mean only where the species currently exists, not its historic range and by defining significant to mean that loss of the species from that portion of range would threaten the survival of the species as a whole.

The proposed policy has resulted in an outcry of opposition from environmental groups.  For example, the Center for Biological Diversity argues that under the proposed policy, "a species could be absolutely gone or close to vanishing almost everywhere it’s always lived — but not qualify for protection because it can still be called secure on one tiny patch of land."  “The policy absolutely undermines the spirit of the Endangered Species Act and will be a recipe for extinction of our native wildlife if it’s finalized - a loophole that’s really a black hole. It will allow for massive species decline and habitat destruction.”

Whooping Crane ESA Litigation

Posted on December 26, 2011 by Molly Cagle

Lawyers trying The Aransas Project vs. Bryan Shaw, Chairman of the Texas Commission on Environmental Quality, et al. Civ. Action No. 2:10-cv-00075, Southern District of Texas, Corpus Christi Division, are wrapping up their second week of trial in Judge Janis Graham Jack’s court in Corpus Christi, Texas.  It looks like they will be spending at least a part of next week in trial as well.

For those who are interested in citizen suit Endangered Species Act cases, or the interface of the ESA and the administration of water rights, the case is a must watch.  Plus, unlike many Texas ESA matters which are focused on obscure and unattractive bugs and salamanders, this one involves the mighty and beautiful whooping crane. 

Plaintiffs’ case, noticed in December, 2009 and filed in March of 2010 (after a dry 2009 in Texas), claims that the TCEQ’s administration of water rights on the Guadalupe and San Antonio Rivers is causing a “take” of whooping cranes.  According to the Plaintiff’s, the whooping cranes need plenty of freshwater, wolfberries and blue crabs to make it through the winter at the Aransas Pass Wildlife Refuge.  They claim that the lack of freshwater flows to the bay adjacent to the Refuge, has caused whooping cranes to die either directly from starvation, or due to off-Refuge dangers after the whooping cranes leave the Refuge in search of food and water.  Because the administration of water rights on the Guadalupe and San Antonio rivers is managed by TCEQ strictly in accordance with the Texas Water Code, the lawsuit essentially attacks Texas’ current water rights regime.

Regardless of the facts alleged and defenses offered, Texas is currently in an extreme drought, expected to continue through the whooping crane’s wintering period at the Refuge.  Additionally, USFW has proposed to add a variety of mussels that habitat other Texas Rivers on the ESA. The outcome of the TAP case, the continuation of the current extreme drought and the action of USFW on listing new species in other Texas Rivers could lead to a wholesale attack on Texas’ water rights management in the near future.

Endangered Species Act Still a Complication for Energy Development

Posted on August 3, 2011 by Pamela Giblin

Since its inception and the early battles over the snail darter and the Tennessee Valley Authority’s Tellico Dam in the 1970s, the Endangered Species Act (ESA) has been substantially entangled with energy production in the United States. Energy development is no less ensnared today by the Act. Recent significant ESA activities affecting the energy sector include: proposed listing of the dunes sagebrush lizard, which is found in the middle of one of the most prolific oil and gas fields in the U.S.; a suit for injunction of a massive solar power development in the Mojave Desert; and a settlement proposal between the Department of Interior and conservation groups setting an aggressive timetable for future ESA listing decisions involving over 250 species. All of these could have wide repercussions on energy development for some time. This post provides the latest update on how the ESA is affecting the energy sector and outlines some ways that interested parties can play a part in the process.


Recent Listing Proposals and Litigation Affecting the Energy Industry

A number of conservation organizations have filed petitions with the U.S. Fish & Wildlife Service (Service or FWS) to “list” species as endangered or threatened throughout the U.S. When the Service has delayed making listing determinations, conservation organizations have followed up with litigation against the Service.

On July 12, 2011, the Center for Biological Diversity (CBD) announced that it was dropping its opposition to a comprehensive settlement agreement between the Department of Interior and WildEarth Guardians encompassing 13 listing suits filed by WildEarth Guardians and consolidated in the D.C. District Court. The settlement would establish work plans and timelines for the FWS to take key steps in the ESA process on over 250 species. The goal is to make listing decisions by 2016 for all species identified on FWS’s current “candidate list”. The listing of several species covered by the settlement agreement - including the greater sage grouse, the spot-tailed earless lizard, the lesser prairie chicken, and mollusks - could have major effects on the energy industry. The settlement agreement has not been finalized, due in part to a pending motion to intervene by a hunting group. But even the prospect of a set timetable for the listing of certain species has created difficulties for energy development.


The potential listing of species like the greater sage grouse is problematic for alternative energy and the oil and gas sector because they can be found in a number of areas where upstream oil and gas activities and alternative energy projects now exist or are planned. One such area is the energy prolific Powder River Basin area of Wyoming. Sage grouse are also found in Colorado, and in a 2008 rulemaking the Colorado Oil and Gas Conservation Commission proposed a number of provisions that were designed to protect the sage grouse and other sensitive species such as the mule deer, including restrictions on oil and gas well development in "sensitive wildlife habitat". In addition, those provisions gave the Colorado Division of Wildlife a prominent role in the Application for Permit to Drill process. The provisions were actively opposed by industry and became the source of controversy during the rulemaking process.


Recent litigation over the desert tortoise in California’s Mojave Desert shows how the ESA can affect planned developments even after initial ESA reviews show no adverse effects. On June 27, 2011, the conservation group Western Watersheds sought a preliminary injunction and temporary restraining order (TRO) to stop construction of a $1.4 billion solar power plant project. Western Watersheds argued that the project’s impacts on desert tortoises were underestimated during the Bureau of Land Management’s review and approval process. While the TRO was denied, a hearing on Western Watersheds’ motion for a preliminary injunction is set for August 1, 2011.


FWS’s December 2010 proposed listing of the dunes sagebrush lizard in New Mexico and Texas as endangered specifically identified oil and gas, wind and solar energy activities as a threat. This has motivated stakeholders to commence an innovative joint Candidate Conservation Agreement with Assurances (CCAA) and Habitat Conservation Plan (HCP) process to insulate these energy sectors from potential adverse effects resulting from a listing. The use of more “programmatic” CCAAs and HCPs tied to industry activities as opposed to specific properties has taken on increasing importance to the energy sector as it becomes common for listing petitions and proposals to single out industry as a threat to species.


Another example involves litigation brought in March 2010 by The Aransas Project against several officials at the Texas Commission on Environmental Quality (TCEQ). That lawsuit, which was filed in United States District Court for the Southern District of Texas, Corpus Christi Division, alleges that TCEQ is committing “takes” of endangered whooping cranes when it allocates water in the Guadalupe and San Antonio rivers and prevents sufficient flows from reaching Nueces Bay, where the whooping crane is found. To the extent that it seeks wide declaratory and injunctive relief, including relief against a state agency and curtailment of existing water rights, the suit could set a significant precedent for future ESA suits related to water rights and actions by state agencies.


Keeping Up with the Evolving ESA Landscape

As is evident from the description of these recent developments, there are a number of steps in the process of listing a species as endangered or threatened under the ESA. As such, there are also a number of opportunities – both formal and informal – for members of the energy industry to weigh in on this process before the Service reaches the point of actually adding a species to the endangered and threatened species list. In addition, there are opportunities to initiate or intervene in litigation involving FWS with respect to listing actions and other ESA determinations.


To help develop a comprehensive strategy to anticipate and respond to potential challenges posed by ESA and related regulatory activities, interested parties should:

  • Survey Potential State and Federal Species and Habitat Listings
  • Survey Pending and Threatened FWS Litigation
  • Keep Abreast of New and Creative Uses of the ESA and Similar Statutes by Environmental Groups; and
  • Assess Risk to Operations and Evaluate Need for Possible Comments on Listings, Intervention in Litigation, or Subsequent Monitoring of Key Listing Decisions and Litigation.

By closely following the constantly evolving ESA landscape and taking advantage of strategic opportunities to influence the listing process and get involved in ESA litigation, the energy such parties can seek to influence the outcome of a process that can significantly impact the ability of companies to engage in energy production.

Eleventh Circuit Wades into the Everglades on ESA Issues, Miccosukee Tribe v. United States, No. 08-10799

Posted on May 21, 2009 by Patricia Barmeyer

The Eleventh Circuit has waded, again, into the ongoing debates over restoration of the Everglades. In addressing yet another lawsuit filed by the Miccosukee Tribe, the Court largely upheld the Fish & Wildlife Service’s delicate balance between the competing and inconsistent habitat needs of the Cape Sable seaside sparrow and the Everglade Snail kite, both endangered species. The seaside sparrow needs stable low water levels below a certain water control structure; the kite’s habitat is destroyed by the resulting rising water levels in the impoundment. The FWS issued a biological opinion allowing the Corps of Engineers to operate the structure to avoid extinction of the sparrow and to conduct an incidental take of the kite. While largely affirming the agency, the Eleventh Circuit reversed on the issue of the trigger that would require initiation of consultation under Section 7 and, along the way, made new law in this circuit on several important issues.

First, the court rejected the tribe’s argument, often advanced by conservation groups in ESA litigation, that the ESA requires that FWS “give the benefit of the doubt to the species.” The court held that this language, taken from a conference committee report, does not mean that the FWS is required to issue a jeopardy opinion if the evidence is evenly balanced between likely jeopardy and likely no jeopardy. Rather, the Eleventh Circuit explained, the language was intended to prevent FWS from shirking its consultation duties by relying on scientific uncertainty, but did not require any substantive result. The court held that “the need to give a species the benefit of the doubt cannot stand alone as a challenge to a biological opinion.”

 

Second, the court held that the FWS Consultation Handbook, which is not a formal rule, is nevertheless entitled to Chevron deference because it was adopted after notice and comment, citing Nw. Ecosystem Alliance v. United States Fish & Wildlife Service, 475 F.3d 1136, 1142-43 (9th Cir. 2007).

Third, the court rejected the argument that negative impacts on a species’ critical habitat must be permanent to amount to “adverse modification” under the ESA. Writing for the court, Judge Carnes noted: “It is not enough that the habitat will recover in the future if there is a serious risk that when that future arrives the species will be history.”

Finally, the Eleventh Circuit invalidated the incidental take statement because it used a habitat indicator -- specific water levels-- as a proxy to establish the trigger that would require the agency to reinitiate the Section 7 consultation process. The court held that the FWS’ use of a habitat indicator as a proxy, as provided for in the Consultation Handbook, fails Chevron step one, based on its conclusion that the legislative history of the ESA clearly indicates Congressional intent that actual population data must be used as the trigger for re-consultation, unless the agency demonstrates that it is impracticable to do so. Further, even if the agency can demonstrate the need to use a habitat proxy, the habitat proxy trigger must be addressed to the specific habitat needs of the species.

This decision, reviewing the FWS’ attempt to manage challenging species protection problems and breaking new ground on ESA legal issues, is sure to be much-cited and widely debated.

SALMON WARS IN THE PACIFIC NORTHWEST

Posted on November 24, 2008 by Kevin Beaton

Each year thousands of salmon and steelhead protected under the Endangered Species Act (“ESA”) migrate up and down the Columbia River and its tributaries and into the Pacific Ocean as part of the species’ cycle of life. Seemingly, each year armies of lawyers migrate to federal court to argue whether the federal government is carrying out its obligations to protect these species under the ESA. “As part of the modern cycle of life in the Columbia River system, each year brings litigation to the federal courts of the Northwest over the operation of the Federal Columbia River System (“FRCPS”) and, in particular, the effects of system operation on the anadromous salmon and steelhead protected by the Endangered Species Act.” National Wildlife Federation v. National Marine Fisheries Service, 422 F.3d 782 (9th Cir. 2005).

            2008 is no exception as the National Wildlife Federation, the state of Oregon and the Nez Perce Tribe have again filed a lawsuit in the United States District Court of Oregon against the federal government for allegedly failing to carry out their obligations under the ESA in the operation of the FRCPS. The precipitating event for the 2008 lawsuit, is a 2008 Biological Opinion authored by NOAA Fisheries pursuant to Section 7 of the ESA opining that if the action agencies, the U.S. Army Corps of Engineers (“COE”) and U.S. Bureau of Reclamation (“BOR”) carry out a comprehensive reasonable and prudent alternative (“RPA”) then jeopardy to the listed species and adverse modification to critical habitat will be avoided.

 

The portion of the FRCPS that is at issue in the 2008 litigation is a series of fourteen (14) federal hydropower dams authorized by Congress on the Columbia and Lower Snake Rivers which are operated by the COE and BOR. Congress has directed that the dams are for multiple uses including providing power to the Northwest, irrigation, transportation, recreation, flood control and protection of fish. The stakes are high in the litigation, if some of the dams are substantially modified, or breached as some Plaintiffs are advocating, industries, rate-payers and communities reliant upon the multiple uses of the FRCPS will be significantly affected. Thirteen separate salmon and steelhead species that live out a portion of their life cycle in the Columbia River and its tributaries have been listed as endangered or threatened under the ESA.

            The federal government’s attempt to operate the FRCPS in compliance with ESA has been mired in litigation for some 15 years. The science and the law surrounding the FRCPS’ compliance with the ESA is complex. Like 2008, the precipitating event for past litigation has been a § 7 consultation between NOAA fisheries and the COE and BOR and a Biological Opinion (BiOp) and Incidental Take Statement. In recent litigation the federal government has not fared well. For example the 2000 BiOp found that the FRCPS operation did jeopardize certain listed species but that jeopardy could be avoided if off-site mitigation and hatchery initiatives were implemented. The court found the 2000 BiOp was invalid as NOAA could not rely upon off-site and non-federal actions that were not reasonably certain to occur as an RPA. See NWF v. NMFS, 254 F.Supp. 2d 1196 (D.Or 2003).

            The federal government tried again with a 2004 BiOP which found no jeopardy to listed species and no adverse modification to critical habitat. The 2004 BiOp was different from prior BiOps in so far as NOAA Fisheries attempted to segregate the effects of the existence of the 14 dams from the operation of the dams claiming that only the operation of the dams was discretionary and subject to Section 7 consultation. The lower Court struck down the 2004 BiOp on a variety of grounds finding that NOAA improperly separated the existence and operation of the dams in their § 7 consultation, NOAA did not properly take into consideration how the operation of the dams would affect recovery of the listed species and their critical habitat and that the actions relied upon were too uncertain to occur. The Ninth Circuit affirmed the lower Court decision in its entirety. See National Wildlife Federation v. National Marine Fisheries Service, 524 F.3d 917 (9th Cir. 2008). The Ninth Circuit did note that in considering the affect of the agency action on the potential recovery of the species in connection with a Section 7 consultation, NOAA Fisheries did not have to first develop a recovery plan consistent with the requirements of Section 4(f) of the ESA.

            While the appeal was pending before the Ninth Circuit, NOAA Fisheries under some prodding from the lower Court embarked upon an unprecedented collaboration with the four affected states (Washington, Oregon, Idaho and Montana) and eight Indian tribes to reach consensus on the appropriate methodologies to evaluate the effects of the FRCPS on listed species, operational modifications focusing on each of the listed species and hundreds of millions of dollars in funding commitments to the Tribes to carry out mitigation. In developing the 2008 BiOp and RPA, NOAA Fisheries also adopted a “trending to recovery standard” in order to fulfill the directive from the Court concerning the evaluation of survival and “recovery” in a Section 7 consultation. The 2008 BiOp finds that operation of the FRCPS for the next ten (10) years with implementation of the comprehensive RPA will avoid jeopardy to the thirteen species, avoid adverse modification to critical habitat and future recovery of the protected species will not be compromised by implementation of the RPA.

            The Plaintiffs quickly challenged the 2008 BiOp arguing it is legally and technically flawed and more of the same. The federal defendants, a trade association, three states (Washington, Idaho and Montana) and one Tribe argue that based on Court directives the 2008 BiOp got it right this time. The Defendants argue that Plaintiffs challenge is nothing more than a disagreement on the science and that the court should defer to NOAA Fisheries on these issues. Of interest to Clean Water Act attorneys, one of the Plaintiffs (“NWF”) argues that the incidental take statement (“ITS”) issued as part of the 2008 BiOp is equivalent to a “permit” under § 401 of the Clean Water Act and therefore requires water quality certification from the states. If the Plaintiff prevails on this novel theory, it means that potentially four states and three Tribes would need to issue a 401 certification that the ITS will comply with state and tribal water quality standards before the ITS would go into effect.

            A preliminary injunction and summary judgment hearings are set in January 2009. If the Court finds that the disputes surrounding 2008 BiOp are basically scientific disputes a recent Ninth Circuit case could be beneficial to the federal defendants. See, Lands Council v. McNair, 537 F.2d 981 (9th Cir. 2008). In Lands Council, the court noted that federal courts should defer to the scientific judgments of a federal agency when reviewing agency action under the Administrative Act Procedures. Stay tuned to the outcome of this litigation to see if the “cycle of life” of litigation in FRCPS continues or takes a breather to give the federal government, the states and tribes a breather to implement the 2008 BiOp.