Last week, in a decision that surprised many, a federal court in Texas overturned the U.S. Fish & Wildlife Service’s (Service) decision last year to list the lesser prairie chicken (LEPC) as “threatened” under the federal Endangered Species Act (ESA).  Permian Basin Petroleum Assoc’n et al., v. U.S. Dep’t. of Interior, No. 7:14-cv-00050-RAJ (W.D. Tex. Sept. 1, 2015). This article provides an analysis of the immediate effects of the court’s order for energy project developers throughout the species’ range across the Great Plains and the Southwest, and potential implications of the court’s decision for future listing decisions on other candidate species. As explained below, those implications could be quite significant.

Background

On April 14, 2014, the Service published a final rule in which it listed the LEPC as a threatened species under the ESA. In conjunction with the listing decision, the Service also issued a special take rule under section 4(d) of the ESA. The 4(d) rule provided that take of LEPC was authorized when undertaken by participants enrolled in and complying with the Lesser Prairie Chicken Range-Wide Conservation Plan (the Range-Wide Plan). See our April 17, 2014 QuickStudy for a more detailed explanation of the Service’s listing decision, the 4(d) rule, and the Range-Wide Plan.

The Service’s listing decision was promptly challenged in several lawsuits, including one brought in the Western District of Texas by the Permian Basin Petroleum Association (“PBPA”) and several New Mexico counties. The plaintiffs in the PBPA case argued that the Service had not appropriately considered the effect of the Range-Wide Plan on the LEPC, and that had it done so, it would have concluded that a listing was not warranted. This litigation led to last week’s federal court decision in which the court vacated the Service’s listing decision, holding that the Service’s decision had been arbitrary and capricious and not consistent with its own policies.

Why the Court Overturned the Listing

The PBPA case focused on whether the Service had properly interpreted and applied its Policy for Evaluation of Conservation Efforts When Making Listing Decisions (PECE) to the Range-Wide Plan. The Service adopted the PECE in 2003 to require, and provide a framework for, the Service to evaluate formalized conservation efforts not yet fully implemented or too recent to have yet demonstrated their effectiveness. 

The court found that the Service failed to property apply the PECE to its evaluation of the Range-Wide Plan, and that that failure resulted in material error. The court had several problems with the Service’s analysis, but two key concerns stand out among them. The first involved a critical assumption made by the Service in its PECE analysis – that industry would have no further incentive and would be unlikely to participate in the Range-Wide Plan if the LEPC were not listed. The court found that the Service provided no substantive basis for this assumption, and that it tainted the Service’s entire PECE analysis. The second concern involved an added requirement that the Service applied to its PECE analysis – that the Range-Wide Plan must have eliminated one or more threats to the species at the time of the listing determination, such that the species no longer meets the definition of threatened or endangered, in order to avert a listing. Based primarily on these two concerns, the court held that the Service’s listing determination was arbitrary and capricious and issued an order vacating the Service’s final rule and listing decision.

What the Decision Means for Energy Developers

The immediate implication of the court’s action is that the LEPC is no longer a listed species. Accordingly, incidental (or intentional) take of LEPC is not prohibited by federal law. Before proceeding with any development plans that might result in incidental take of LEPC, however, there are several things that developers should consider.

First, developers should consider whether the LEPC is listed in their relevant state. Many states have their own endangered species laws, and many of those call for automatic listing of any species listed by the federal government. It is not clear whether the vacatur of a federal listing automatically vacates the state’s listing as well. The species may continue to be listed under the relevant state law until affirmatively de-listed, and incidental take may continue to be prohibited outside of an approved program such as the Range-Wide Plan. This determination needs to be made on a state-by-state basis.

Second, there are a number of procedural possibilities that could affect the scope and viability of the court’s order. The Service may ask the court to stay its ruling pending appeal – an unlikely result since the court chose to vacate the Service’s final rule rather than remand it to the Service for reconsideration. More likely, a stay of the ruling would need to be obtained from the Fifth Circuit. It would be unusual for the Fifth Circuit to issue a stay, but to have any hope of obtaining one, the Service would need to request it in very short order (likely within weeks or a month) since the justification for a stay is the imminent harm that would result if the order is allowed to go into effect. A prolonged delay would seriously undermine the credibility of such an argument.

Whether or not a stay is issued, it is highly likely that the Service will appeal the court’s order and its vacatur of the listing, for two reasons. A great deal of effort has gone into development and implementation of the Range-Wide Plan and the Service is invested in the success of the Plan. But perhaps more importantly, the court afforded the Service’s determination very little deference, and the Service and the Department of Justice may feel compelled to appeal to prevent that standard of review from being applied in future cases. The federal government has 60 days to file an appeal, so that decision will come relatively quickly.

Potentially complicating the effectiveness of the court’s order and any appeal thereof is the fact that three other cases challenging the listing of the LEPC are pending in other federal courts, some arguing the species should not have been listed and some arguing that it should have been listed as endangered. Those cases are very unlikely to be decided before the end of the Service’s 60 day period to file an appeal. However, it is possible that those courts may rule the cases before them to be moot in light of the decision from the Western District of Texas. That may depend upon whether this court’s decision is viewed as having nationwide effect, which is widely understood to be the case. Even so, and depending upon the unique issues raised in the other cases, those other courts may allow the pending cases to continue. That could result in conflicting decisions on similar or dissimilar grounds, potentially setting up a very messy and complicated bit of litigation that could take years to play out.

As mentioned above, it is widely understood that the court’s order vacating the listing is effective nationwide, but the law on that issue is not as clear as it may first appear. The Service may take a cue from the EPA and U.S. Army Corps of Engineers’ response to the recent injunction against enforcement of the new “Waters of the U.S.” rule issued by a federal court in North Dakota, and seek to limit the applicability of this order to the Western District of Texas and the New Mexico counties that are parties to the case. However, the Waters of the U.S. case involves an injunction against enforcement rather than the vacatur of the underlying rule, so it is not a direct corollary. Attempting to limit the applicability of this order would certainly be a novel strategy by the Service with questionable validity, and one that could result in further judicial rebuke. As of this writing, the Service has not indicated its intent to pursue such a strategy.

Assuming the court’s decision is not reversed through any of the above legal mechanisms, the Service may simply proceed to reevaluate the species for listing. While that process would take time, it is a very realistic possibility. Therefore, any developers that have been considering enrollment in the Range-Wide Plan for projects currently under development may be wise to proceed with that enrollment. If not, they may find themselves at the back of the line if and when the LEPC is re-listed, and forced to delay impact activities until both the enrollment process is completed and WAFWA has obtained sufficient offset units to mitigate for the projected impacts. The more developers that forego or delay enrollment pending appeal or a re-listing, the greater the chance of an offset unit-induced bottleneck. In the worst case, the result could be significant delays before a project may commence construction or operations, depending upon the nature of the activities involved. 

Implications for the Future

Aside from the immediate concerns regarding the effect of the LEPC listing being vacated, the court’s decision in this case also has a number of significant potential implications for future listing decisions (including the greater sage grouse decision due at the end of this month) and the Service’s approach to species conservation generally. We have prepared a more detailed analysis of those implications that we will be happy to provide upon request, or you may contact us to discuss how this decision affects your business specifically.