Good morning Mr. Chairman and Members. My name is Craig Douglas, and I am a lawyer from Austin, Texas. I appreciate the opportunity to be here today with you, Judge Manson, and the other panelists to discuss critical habitat in a forum where we are all interested in finding solutions that work for the species—and the people that live amongst them.

1. Introduction

Very briefly, a little bit about what I do and the people my firm represents so you will understand my perspective on this panel. My firm represents clients in several states relating to the environmental regulation of land use, and one of our areas of expertise is the Endangered Species Act. Our clients are engaged in a wide variety of endeavors, including: traditional land development; agriculture; public water and power agencies; local governments; large transportation projects; mining, and energy exploration and delivery. On the regulatory and compliance side, we represent these groups in connection with habitat conservation plan permits under section 10 of the Act, interagency consultations under section 7 of the Act, creating mitigation alternatives and solutions and working out conservation agreements. On the litigation side, we’ve worn several hats as well—we’ve sued the Fish and Wildlife Service; we’ve been sued by environmental organizations, and in a new twist lately, we’ve even intervened in lawsuits on the side of the Fish and Wildlife service when they’ve been sued by interest groups on matters of concern to our clients. Presently, my firm represents a coalition of 17 agricultural and ranching associations and water supply agencies from four states that are challenging the designation of critical habitat for the Arkansas River shiner in Oklahoma, Texas, New Mexico, and Kansas. That case is currently pending in Federal District Court in New Mexico.

If there is a theme to our practice, it is that you can be an advocate for economic development and the protection of endangered species, and that you can be a strong advocate for conservation and property rights. That is what we try to bring to the table.

2. Support for ESA Reform

In the last few years, I’ve dealt with no other environmental issue that has spawned as much litigation as critical habitat under the ESA. I will not tread on the same ground that was ably covered by Judge Manson, but I must say this. To me, this is a very simple proposition: when you think about all of the things that we could be doing to protect and foster the recovery of endangered wildlife, and then you consider all of the time, energy, and money that we are spending down at the courthouse arguing over critical habitat, it is clear that the critical habitat component of the ESA is broken.

There are two things you can do here: Ether the law can be changed, or the regulatory focus can be refined within the confines of existing law. As for the former, we believe in the ESA, but we also believe that it needs reform, and critical habitat, in my view, is the best place to start. There was a proposal in the 106th Congress to change the role of critical habitat by shifting the focus from the regulatory component of the Act to the recovery planning component, and I believe that proposal merits further exploration. As I recall, the initiative to redefine the role of critical habitat under the ESA in this manner began under the Clinton Administration and was advanced by Secretary Babbitt, whose administration recognized that critical habitat was not resulting in any net value added to the recovery of endangered species. Under Secretary Norton, Judge Manson and Director Williams, we believe that the Fish and Wildlife Service is doing the best it can given the constraints imposed by the agency’s manpower and resources, and the limited amount of flexibility afforded by the law. As Judge Manson testified earlier, they are actively engaged in trying to find solutions to this crisis, and I think that the regulated community is ready to work with them, and all interested parties, to help Congress with ESA reform.

Until reform is achieved, however, efforts to resolve this crisis are going to be limited by the parameters of current law. That is not to say that there are no options, some of which I am about to describe to you, but let me emphasize that ultimately, the cycle of litigation and the related drain on the Service’s resources can only be remedied by statutory rather than regulatory reform.

3. Debate Sharpened by New Mexico Cattle Growers and Sierra Club

In 2001, the Courts of Appeals in the Fifth and Tenth circuits handed down the two decisions that are framing today’s debate about the role of critical habitat and how it is to be designated and implemented under existing law. In the Sierra Club case out of the Fifth Circuit, the court ruled that the Service’s regulatory interpretation of what it means to destroy or adversely modify critical habitat was inconsistent with the ESA insofar that it was linked to both the survival and recovery of a species. The court found that the statutory definition of critical habitat was grounded in the defined concept of conservation and recovery, which was much broader than mere survival. The Sierra Club case has been interpreted in some quarters to mean that critical habitat, as defined by the statute, is potentially a much more potent regulatory tool than it has been under the Service’s interpretation of the law. Of course, we believe that the experience of the last several years has shown that critical habitat is already a powerful tool, albeit one whose regulatory and economic cost far outweighs the benefit to the species.

The case that has been receiving most of the attention (by virtue of the fact that it has been driving a great deal of the critical habitat litigation in recent months) is the New Mexico Cattle Growers decision out of the Tenth Circuit. In that case, the court found that the Service’s process of designating critical habitat was fundamentally flawed. Section 4(b)(2) of the ESA, which governs the designation of critical habitat, contains a “balancing test,” whereby the Service is required to base its determination on the best scientific data available, and take into consideration the economic impact, and any other relevant impact, of specifying any particular area as critical habitat. The statute further provides that the Service may exclude any area from critical habitat if it determines that the benefits of such exclusion outweigh the benefits of specifying any such area as critical habitat, unless it is determined that the failure to designate such area as critical habitat will result in the extinction of the species. The cattle growers challenged the Service’s use of a so-called “baseline approach” to analyzing economic impacts, which attributed virtually all economic impacts associated with any ESA regulation to the listing of the species itself as threatened or endangered, which almost always resulted in a finding that the designation of critical habitat had no economic consequences at all. The Tenth Circuit found that Congress intended for economic considerations to be a fundamental part of the critical habitat equation, and any formula that reduced those factors to insignificance was contrary to the plain meaning of the statute.

4. Focus on the “Essential” Aspect of Critical Habitat

There are aspects of both of these cases (primarily the Cattle Growers case) that can be used to shift the regulatory focus of critical habitat in a way that might bring it more into line with what Congress originally intended when it adopted the ESA—which is a tool to regulate impacts on specific areas that are truly essential to the conservation of the species. Essential. That’s a key word in the statutory definition of critical habitat that seems to get lost in the shuffle. The ESA defines critical habitat as those areas that are truly “essential to the conservation of the species.” The Sierra Club case pointed up the difference between the concepts of conservation and recovery on the one hand and mere survival on the other. I believe that either the Administration through its interpretation and application of the statute, or Congress through reform, can seize the moment and retake some measure of control over the critical habitat crisis by restoring the focus of critical habitat designation and regulation by giving meaning to the word “essential’ in the definition of critical habitat. For the time being, the means to do this is available through the section 4(b)(2) balancing test that was resuscitated by the New Mexico Cattle Growers case.

5. Using the Balancing Test

In defining critical habitat, I believe that Congress used the word “essential” for a reason. Critical habitat is not defined as “all the land and water that could conceivably be used in an effort to ensure the conservation of the species.” The word “essential” carries with it a “but for” connotation -- if these lands are not designated, conservation will not be possible. For several years, however, my clients have been faced with critical habitat designations that did not seem to take the concept of “essential” into account. It is my belief that prior to the Cattle Growers decision, there was no procedural governor on the designation process that forced the Service to focus on the “essential” aspect of critical habitat. For example, the critical habitat designation for the Arkansas River shiner was done at a time when the Service was not performing its legal obligation to fully consider the “economic impact and any other relevant impact” of designating critical habitat. This led, in our view, to the designation of 1,150 river miles and nearly 90,000 acres of adjacent riparian zone across four states that was ill considered and not justifiable under the law. The same can be said of another situation faced by many of our clients in southern Arizona. There, a large portion of a critical habitat designation in the thousands of acres for a pygmy owl was centered on an area northwest of Tucson that, on the one hand, was one of the most desirable areas in the state for development, and on the other hand, was perhaps the least valuable area of the owl’s habitat in terms of its recovery. In both of these cases, the costs of designation—in terms of potentially lost economic development opportunities; reduced property values; clouded entitlements; effects on existing operations; and property and water rights—far outweighs the benefits to the species in a majority of the areas covered by the respective designations.

Just this week, however, the Administration provided an example of how a faithful application of the balancing test can work. There are nine species of cave-dwelling invertebrate bugs (most of which wouldn’t cover a fingernail) that apparently exist almost entirely within the confines of Bexar County, Texas (in the San Antonio area, near the Texas Hill Country). All nine species of bugs were listed as endangered under the ESA, and critical habitat was subsequently proposed by the Service as a result of a lawsuit that prompted them to do so. The original proposed critical habitat designation covered almost 9,500 acres. After the proposal came out, the Service made a concerted effort to consider not just the potential economic impacts of the proposal, but also considered many things that I believe fall within the catch-all “all other relevant factors” prescribed by the statute, including the conservation efforts and benefits of the state and local governments and numerous private parties. The Service also paid careful attention to the comments submitted by affected landowners and species advocates alike. The process gave the Service the opportunity to stop and really think about “given the needs of the species and the impacts to these people, what do we really need here—what is essential.” The end result, which was published in the Federal Register on Tuesday, was a critical habitat designation that encompasses, in total, about 1,500 acres. The balancing test can work.