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.



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