Ninth Circuit Upholds Decisions of Corps and FWS in Approving Construction of Business Park on Protected Wetlands

In Butte Environmental Council v. U. S. Army Corps of Engineers (9th Cir. September 1, 2010, No. 09-16732) 607 F.3d 570, Butte Environmental Council (BEC), a nonprofit organization, challenged the Army Corps of Engineers’ decision to issue a section 404 permit pursuant to the Clean Water Act and the U.S. Fish and Wildlife Service’s biological opinion pursuant to Section 7 of the Endangered Species Act for a proposed business park to be constructed by the City of Redding. The district court granted summary judgment in favor of the agencies and the City and the Ninth Circuit upheld the district court’s decision.

The City’s proposed business park was located on a site (the Stillwater site) with wetlands that contained critical habitat for several species that were listed as endangered or threatened under the ESA. The development would entail discharge of dredged or fill material into protected wetlands, which required a Section 404 permit from the Corps. Upon review, the Corps, accepting that the overall project purpose was to construct a medium to large-sized regional business park, agreed that the City needed a single, contiguous site, concluded that the proposed Stillwater site was the least environmentally damaging practicable alternative (LEDPA), and issued the permit.

The BEC challenged this approval, contending the Corps’ decision was arbitrary and capricious for a number of reasons, none of which the court found persuasive. First, BEC argued that the Corps failed to apply the proper presumption under 40 C.F.R. §230.10(a)(3), that where a proposed activity was not water dependent, “practicable alternatives that do not involve special aquatic sites are presumed to be available, unless clearly demonstrated otherwise.” Here, the Corps acknowledged that the proposed project was not water dependent and then expressly concluded that, based on review of over a dozen alternative sites and consistent with CWA’s implementing regulations, the City “clearly demonstrated that there are no practicable alternative sites available.”

Second, the court found the Corps’ decision to issue a 404 permit was not inconsistent with the Corps’ earlier criticism of the draft EIS for the project. In its draft EIS, the City analyzed and compared a number of potential sites and concluded that the Stillwater site was the LEDPA that satisfied both the project’s purpose and the feasibility criteria. Upon review of the draft EIS, the Corps questioned the City’s determination that the Stillwater site was the LEDPA. In response, the City prepared a supplemental draft EIS in which the City agreed, among other things, to reduce the water impact of the proposed Stillwater site’s footprint, as well as its impact on ESA-listed species, to set aside a large portion of the total site as permanent open space and to include a plan for both on- and off-site compensatory mitigation of the project’s impact on aquatic resources. Based on the foregoing, the court remarked that the Corps’ ultimate decision as to the LEDPA was not a reversal, as claimed by BEC, but the culmination of years of investigations, meetings and reports. Agencies are entitled to change their minds, and the court had no trouble discerning the path of the Corps’ reasoning over several years of give-and-take with the City.

Third, BEC claimed that the Corps failed to make an “independent determination” of the project’s purpose or the size of the parcels needed. The court noted that rather than just accepting the City’s stated purpose for the project, the Corps, in its comments on the draft EIS, was initially skeptical that the City needed so large a site and questioned the City’s rejection of a non-contiguous parcel alternative as impractical. The City’s supplemental EIS, however, clarified why, in light of the project’s purpose, a minimum size parcel was necessary, and the Corps was obliged to consider the City’s purpose where it was genuine and legitimate.

Fourth, the court found that the BEC’s challenge to a rejected alternative on the basis of the cost of acquiring the site failed because the Corps did not consider acquisition cost when evaluating the site. Rather, the Corps determined this particular alternative site was not contiguous with property already owned by the City, the topography and geology of the alternative site was not conducive to the proposed development’s purposes, and the amount of property available for development was too little to achieve the project’s overall purpose. The Corps also believed the cost of infrastructure would be substantially greater with respect to the alternative site as opposed to other sites.

Finally, the court found there was no indication that the Corps’ granting of the permit on the condition that the City develop compensatory mitigation plans was meant to be in place of the City’s responsibility to adopt the LEDPA, as opposed to an additional obligation.

BEC also challenged, as arbitrary and capricious, the FWS’s biological opinion that the Stillwater project would not result in the adverse modification or destruction of critical habitat. BEC claimed the FWS applied a definition of “adverse modification” that improperly failed to take into account the “recovery needs” of the affected species as required under Gifford Pinchot Task Force v. U.S. Fish & Wildlife Services (9th Cir. 2004) 378 F.3d 1059. The court noted, however, that the biological opinion expressly stated the FWS relied on the Gifford Pinchot definition, and nothing in the biological opinion suggested that it ignored the value of critical habitat to the recovery of the affected species.

The court also rejected BEC’s claim that FWS’s finding of no adverse modification conflicted with its determination that critical habitat would be destroyed. The court found Gifford Pinchot had not altered the regulatory rule that an adverse modification occurs only where there is a direct or indirect alteration that appreciably diminishes the value of critical habitat. Thus, a small percentage of each affected species’ critical habitat could be destroyed without appreciable diminution in the value of the species’ overall critical habitat. The court declined to second-guess FWS, given that there was no evidence that some localized risk was improperly hidden by use of large-scale analysis, as claimed by BEC.

Finally, the court ruled that neither the ESA nor its implementing regulations required FWS to calculate a rate of loss. Rather, they required only that the FWS evaluate the “current status of the listed species or critical habitat,” “the effects of the action,” and the “cumulative effects on the listed species or critical habitat.” The court was satisfied that FWS had conducted such an analysis here and held the finding of no “adverse modification” was neither arbitrary nor capricious.