Late last month the Supreme Court of the United States kept alive private landowners’ challenge to a final rule that designated their land as “critical habitat” for the endangered Dusky Gopher Frog. Weyerhaeuser Co. v. U.S. Fish & Wildlife Serv., No. 17-71, 2018 WL 6174253 at *6 (2018) (slip opn.). The U.S. Fish and Wildlife Service designated the 1544-acre parcel in Louisiana—known as “Unit 1”—after it found the site “essential for the conservation of the species.” Id. The District Court and Fifth Circuit Court of Appeals deferred to the Service’s conclusion and upheld the designation. Id. The Supreme Court vacated and remanded. Id. at *7–8, 10. Focusing on the text of the Endangered Species Act, the Court held that: (1) a proposed site must be “habitat” for an endangered species before the Service can designate it as “habitat that is critical,” and (2) federal courts should review for an abuse of discretion the Service’s decision not to exclude a site from designation. Id.

The Endangered Species Act

The U.S. Fish & Wildlife Service is one of two agencies charged with implementing the Endangered Species Act. Markle Interests, LLC v. U.S. Fish & Wildlife Serv., 848 F.3d 635, 637 (5th Cir. 2017) (Jones, J., dissenting from denial of rehearing en banc). When the Service lists a species as “endangered,” it must also “designate any habitat of such species which is then considered to be critical habitat.” 16 U.S.C. § 1533(a)(3)(A). “Critical habitat” is divided into “occupied critical habitat” and “unoccupied critical habitat.” The first category includes areas “occupied by the species” that contain “those physical or biological features . . . essential to the conservation of the species and . . . which may require special management considerations or protection.” Id. § 1532(5)(A)(i). The second category refers to unoccupied areas that the Service finds are “essential for the conservation of the species.” Id. § 1532(5)(A)(ii). Before designating a site as critical habitat under either category, the Service must consider “the economic impact, the impact on national security, and any other relevant impact” of the designation. Id. § 1533(b)(2). And it may choose to exclude an area if “the benefits of such exclusion outweigh the benefits” of designation. Id.

Once complete, a critical habitat designation does not directly impact private landowners. Instead, it limits federal action, requiring federal agencies to consult with the Service before authorizing, funding, or carrying out an action which could result in the “destruction or adverse modification” of critical habitat. Id. § 1536(a)(2). That consultation requirement means that agencies must consult with the Service before issuing federal permits for projects which could negatively impact critical habitat.

The Service Designates “Unit 1”

In 2001 the Service listed as an endangered species the Dusky Gopher Frog. Markle Interests, LLC v. Fish and Wildlife Serv., 40 F.Supp.3d 744, 751 (2014), reversed and vacated by Weyerhaeuser Co., 2018 WL 6174253. Although the frog was once found throughout coastal Alabama, Louisiana, and Mississippi, only about 100 adult frogs remain in the wild, and those are confined to four sites in southern Mississippi. Id. at 458. The Service’s critical habitat designation included those four occupied sites, each of which contains the three features that the Service found “essential to the conservation” of the frog and requiring special protection: ephemeral breeding ponds; upland open-canopy forest containing holes and burrows; and open canopy forest connecting the two. Weyerhaeuser Co., 2018 WL 6174253 at *4. But because the four sites are located near each other, they are vulnerable to extreme weather events and disease outbreaks. Id. To protect against that risk, the Service also designated Unit 1 as unoccupied habitat.

Unit 1 was home to “the last known population of dusky gopher frogs outside of Mississippi.” Id. But no one has seen the frog in Unit 1 since 1965, and in its current state—devoid of open-canopy forests—the site lacks one of the features that the Service found essential in its occupied habitat designation. Id. Despite those facts, the Service concluded that Unit 1’s distance from existing populations and the presence of five high quality ephemeral ponds, made the site “essential to the conservation of the species.” Id.

After deciding that Unit 1 meets the statutory definition of “critical habitat,” the Service commissioned a report on the probable economic impact of designation. Id. at *5. That report noted that future development at the site may require federal permitting, which would trigger the Endangered Species Act’s federal consultation requirement. Id. And if that consultation requirement is triggered, then the designation could cost private landowners up to $33.9 million in lost development opportunities. Id. The Service concluded that those “potential costs were not ‘disproportionate’ to the conservation benefits of designation,” and chose not to exclude Unit 1 from the critical habitat designation. Id.

The Landowners’ Challenge the Designation

The landowners challenged the critical habitat designation in Federal District Court, contending that the Service’s decision violates the Administrative Procedure Act. Id. at *6. Focusing on the statutory definition of “critical habitat,” they reasoned that Unit 1 cannot be “essential for the conservation of the species” when the frog cannot survive there. Id. The landowners also argued that the Service abused its discretion when it refused to exclude Unit 1 from designation. They asserted that the Service miscalculated the benefits of designation, failed to account for significant costs, and inadequately weighed the benefits. Id.

The district court upheld the Service’s decision, and a panel of the Fifth Circuit, with one judge dissenting, affirmed. Id. The majority concluded that the agency was entitled to Chevron deference for its “essentiality determination,” and that the phrase “essential for the conservation of the species” does not include a habitability requirement. Markle Interests, 827 F.3d at 464–72. The circuit court then declined to review the Service’s decision not to exclude Unit 1 from designation. Id. at 474. Agreeing with every lower federal court to consider the issue, the Fifth Circuit held that the exclusion decision was committed to agency discretion by law and for that reason, was not open to judicial challenge. See id. The Fifth Circuit, six judges dissenting, denied rehearing en banc. Markle Interests, 848 F.3d 635 (mem.).

The Supreme Court Vacates and Remands

Chief Justice Roberts authored the 8-0 opinion of the Court (Justice Kavanaugh, who joined the Court after oral argument, took no part in the decision). On the designation issue, the Court, unlike the parties and the lower courts, did not mention Chevron or analyze whether the Service was entitled to deference for its interpretation of “essential for the conservation of the species.” It did not reach the definition of “critical habitat,” but instead looked to § 4(a)(3)(A)(i), which states that the Service must “designate any habitat of [an endangered] species which is then considered to be critical habitat.” 16 U.S.C. § 1533(a)(3)(A)(i); see Weyerhaeuser, 2018 WL 6174253 at *7 (looking to § 4(a)(3)(A)(i), “which the lower courts did not analyze”). That provision, the Court concluded, means that “[o]nly the ‘habitat’ of the endangered species is eligible for designation as critical habitat.” Weyerhaeuser, 2018 WL 6174253 at *7. In other words, “[e]ven if an area otherwise meets the statutory definition of unoccupied critical habitat” the Service cannot “designate the area as critical habitat unless it is also habitat for the species.” Id. Because the Fifth Circuit decided from the outset that “critical habitat” is not limited to areas that qualify as habitat, it did not have an opportunity to interpret the meaning of “habitat” or to analyze the agency’s findings on that issue. Id. The Court vacated the judgment and remanded for the lower court to decide those questions in the first instance. Id.

Next, the Court turned to the agency’s economic impact analysis and decision not to exclude Unit 1 from the critical habitat designation. Id. at 8. The Court concluded that the Service had not overcome the “basic presumption of judicial review” inherent in the Administrative Procedure Act. Id. Although the decision not to exclude a site from designation is discretionary, that discretion is limited by the requirement that the Service consider the economic and other impacts of designation. Id. at 9. And Supreme Court precedent shows that the “ultimate decision to designate or exclude which [the Service] arrives at after considering economic and other impacts, is reviewable ‘for abuse of discretion.’” Id. (quotation marks omitted). The Court vacated the judgment and remanded for the Court of Appeals to decide whether the Service abused its discretion when it weighed the benefits and chose not to exclude Unit 1.

On remand, the Fifth Circuit will have to decide the two questions left open by the Supreme Court: (1) the meaning of “habitat” and whether it includes sites where a species cannot currently survive, but which could be habitable with modification, and (2) whether the Service abused its discretion by finding the benefits of designation outweigh the benefits of exclusion. Regardless of the lower court’s conclusions on either issue, the Supreme Court’s opinion ­suggests that agency determinations could face a more probing eye from the judiciary in the future. In the Endangered Species Act context, Weyerhaeuser keeps open two potential challenges to future critical habitat designations. And more broadly, the unanimous decision, which makes no mention of Chevron, suggests the continued erosion of the Chevron doctrine of deference to agency interpretations.

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