The 1978 Amendments to the Endangered Species Act: Evaluating the New Exemption Process Under § 7

One of the most tortured pieces of environmental legislation produced in the last session of the 95th Congress¹ was a set of amendments to the Endangered Species Act (ESA).² The intent of the amendments was to moderate the Act's strict § 7 prohibition against any federal action which threatens the survival of an endangered species of animal or plant. To accomplish this goal, Congress established an elaborate two-tiered mechanism in which conflicts between the preservation of a protected species and economic and political factors favoring the project can be reconciled.

In the short time since the amendments were enacted, three developments have occurred whch furnish revealing demonstrations of the new process. In the first, the Tennessee Valley Authority's (TVA's) Tellico Dam project was denied an exemption and thus forced to bow to the endangered snail darter. It appears, however, that the decision was based more on an economic analysis of the project than a concern for the fish. Second, the Rural Electrification Administration-sponsored Grayrocks Dam in Wyoming, which would destroy the critical habitat of the endangered whooping crane in Nebraska, was exempted on condition that specific mitigation measures be adopted to protect the species. Finally, when the Environmental Protection Agency (EPA) denied a permit necessary for construction of an oil refinery and terminal in Eastport, Maine because of its potentially calamitous impact on the endangered northern bald eagle, the private company seeking permission to build the facility applied for an exemption from § 7, an application which is still pending. These three cases provide an indication as to whether the statutory changes disemboweled the Act's strong substantive mandate to protect endangered species or whether they simply introduced an acceptable degree of flexibility into the statutory scheme.

Litigation Under § 7

As enacted in 1973, § 7 of the Endangered Species Act required all federal agencies to consult with the Secretary of the Interior, acting through the Fish and Wildlife Service (FWS), regarding the impact of their activities on endangered and threatened species in order to "insure that actions authorized, funded, or carried out by them do not jeopardize the continued existence" of any endangered or threatened species or result in the destruction or modification of such species' critical habitat.³ Although formal regulations implementing § 7 were long in coming,⁴ the provision created few problems for federal agencies and led to only three lawsuits seeking to halt federal projects for violation of § 7. In two of those cases, the particular project was ultimately allowed to proceed either because the court decided, contrary to the opinion of FWS, that the species was not in danger of extinction⁵ [9 ELR 10032] or because the project was modified to avoid harm to the species.⁶

It was plaintiffs' success in the third lawsuit, a challenge to TVA's Tellico Dam, however, which prompted the 1978 amendments. In Tennessee Valley Authority v. Hill,⁷ the United States Supreme Court decided last term that since completion of the dam would destroy the snail darter's critical habitat and thus doom the fish, § 7 would not allow the project to be finished. The decision confirmed that § 7 turned solely on a biological determination of effect on a species and could block any federal action which threatens a protected species, regardless of the economic consequences.

The 1978 Amendments

After protracted and bitter wrangling, Congress finally settled on a compromise amendment that allows case-by-case exemptions from the strict mandate of § 7 by a newly created cabinet-level Endangered Species Committee. The requirement for initial consultation between a federal agency and the Department of the Interior concerning possible endangered species impacts was retained but in a much more structured form than under the 1973 Act. After consultation begins, neither the federal agency nor a private party that requires federal approval to proceed with an action may "make any irreversible or irretrievable commitment of resources" which will foreclose project alternatives that are consistent with preservation of the species.⁸ At the end of the consultation process, the Secretary must issue an opinion detailing how the proposed action would affect the species in question and suggesting "reasonable and prudent" alternatives to avoid jeopardizing the species or its habitat.⁹ If the Secretary's opinion indicates that the agency action will jeopardize a species, either the federal agency, the governor of the state in which the action would occur, or a permit or license applicant can apply to the Secretary for an exemption from § 7(a).¹⁰

An exemption application is first considered by a three-person review board¹¹ which must determine:

(1) whether an irresolvable conflict exists [between completion of the proposed project and preservation of the species or its critical habitat] and

(2) whether such exemption applicant has —

(A) carried out its consultation responsibilities as described in [§ 7(a)] in good faith and made a reasonable and responsible effort to develop and fairly consider modifications or reasonable and prudent alternatives to the proposed agency action which will avoid jeopardizing the continued existence of an endangered or threatened species or result in the adverse modification or destruction of a critical habitat;

(B) conducted any biological assessment required of it…; and

If all of the findings are in the affirmative, the review board then submits a report to the Endangered Species Committee discussing:

(A) the availability of reasonable and prudent alternatives to the agency action, and the nature and extent of the benefits of the agency action and of alternative courses of action consistent with conserving the species or the critical habitat;

(B) a summary of the evidence concerning whether or not the agency action is in the public interest and is of national or regional significance;

Exemption by the Committee

The Endangered Species Committee is composed of six heads of federal agencies¹⁴ plus an individual, appointed by the President, from each affected state. The Committee is authorized to take evidence and testimony in public meetings and may grant an exemption from § 7(a), by a vote of at least five members, if it determines that:

(i) there are no reasonable and prudent alternatives to the agency action;

(ii) the benefits of such action clearly outweigh the benefits of alternative courses of action consistent with conserving the species or its critical habitat, and such action is in the public interest; and

(iii) the action is of regional or national significance….¹⁵

In connection with any grant of an exemption, the Committee must require the adoption of "such reasonable mitigation and enhancement measures, including, but not limited to, live propagation, transplantation, and habitat acquisition and improvement, as are necessary and appropriate to minimize the adverse effects of the agency action" upon the species or its critical habitat.¹⁶

Review board determinations that an irresolvable conflict does not exist or that the exemption applicant has not met any of the three conditions are expressly designated final agency actions¹⁷ for purposes of the Administrative Procedure Act, as are all final determinations by the Endangered Species Committee.¹⁸ Jurisdiction [9 ELR 10033] to review the latter is expressly provided in the federal courts of appeals.¹⁹

Tellico and the Snail Darter

As befitting the catalytic role played by the Tellico controversy in prompting the 1978 amendments to the Endangered Species Act, Congress inserted a special provision dealing with it into the amendments. The measure directs that the cabinet-level Committee, without the involvement of the review board, consider whether the Tellico project and the proposed Grayrocks Dam should be exempted from § 7(a) of the Act.²⁰ These determinations were to be made on the basis of only the first two of the three criteria otherwise applicable to the Committee's exemption decisions.²¹ If no decision were made within 90 days after the amendments were enacted, the two projects were to be exempted automatically.

When the Committee set about deciding whether the Tellico project should be exempted, it considered only two basic alternatives: (1) completion of the dam and reservoir as originally planned or (2) conversion of the project to establish a free-flowing river with possibilities for agriculture, forestry, recreation, and industrial development.²² The Committee concluded that implementation of the "river development" alternative was feasible and prudent because it would make productive use of a significant portion of the $100 million federal investment in the project while preserving the critical habitat of the snail darter. This finding satisfied the first criterion of the Committee's inquiry. As to the second, the Committee decided that "it is not possible to find that the benefits of completing the Tellico project clearly outweigh the benefits of alternatives consistent with conserving the snail darter." The exemption was thus denied by a unanimous vote of the Committee on January 23, 1979.²³

Senator Baker (R-Tenn.), one of the principal authors of the 1978 amendments, immediately introduced legislation to abolish the Committee and to exempt the Tellico project from the provisions of § 7.²⁴ Because of the bitterness generated in the battle over the amendments last year and the general consensus in Congress that the final product was a fair compromise, there is likely to be little support for this proposal to stir up the same passions all over again.²⁵ Instead, the result is widely expected to be that the TVA, Tellico's sponsor, will adopt the recommended free-flowing river alternative.

Grayrocks and the Whooping Crane

As originally planned, the Grayrocks Dam project would have reduced the stream flow of the Platte River sufficiently to destroy the critical habitat of the endangered whooping crane. Last fall, the State of Nebraska and five environmental groups won an injunction halting construction on Grayrocks, in large part because the federal agencies involved in issuing permits and guaranteeing financing for the project failed to comply with the consultation requirements of § 7 regarding the threat to the whooping crane.²⁶ The following December, the parties to the litigation hammered out a settlement, which was not approved by the Eighth Circuit Court of Appeals until February 1979,²⁷ aimed at preserving the crane's habitat by limiting the dam's total water demand from the Platte River. The agreement also provided for the establishment of a $7.5 million trust fund for the maintenance and enhancement of the crane's habitat along the river.

The 1978 amendments to the ESA not only provided for special early consideration by the Committee of Grayrocks but also directed that the project's "operation or design" be modified, in accordance with a biological opinion of the FWS, in order to avoid jeopardizing the crane or the character of its habitat.²⁸ The legislative history of the amendments indicates that if the conflict between the parties were resolved prior to the Committee's decision on Grayrocks, the settlement would fulfill the mandate of the amendments.²⁹

The Committee's decision to grant an exemption for the Grayrocks project, therefore, was a foregone conclusion. Although technically the conflict could not be resolved until the court accepted the settlement agreement, the Committee was able to grant the exemption from § 7 unanimously on January 23, 1979, with the caveat that the conditions of the settlement agreement, which the Committee found to be "reasonable mitigation and enhancement measures" that were "necessary and appropriate to minimize the adverse effects of the project on the whooping crane or its critical habitat," be followed.³⁰

[9 ELR 10034]

Pittston and the Eagles

In order for the Pittston Co. to build a 250,000 barrelper-day oil refinery and marine terminal near Eastport on the northern Maine coast, it needs, among other authorizations,³¹ a national pollutant discharge elimination system (NPDES) permit from EPA.³² The $700 million facility would receive crude oil from supertankers, refine it into fuel products, and reship it via barges and smaller tankers to ports in the northeastern United States. Although its final environmental impact statement (FEIS) predicted that it would issue the NPDES permit, EPA warned that the permit might still be denied if the risk of environmental harm at the site were appreciably greater than the risk presented at other reasonably available alternative sites, or the quality and scarcity of the resources at risk are such that no significant threat to their impairment should be incurred.³³ In the FEIS, EPA concluded that no other site was environmentally preferable and that although siting the complex in Eastport threatened a number of environmental resources, they were neither so unusual nor so scarce as to justify denial of the permit.

The FEIS noted that the northern bald eagle, which was only recently added to the endangered species list,³⁴ had been observed in the area, but it found no direct threat to the species from the proposed refinery. Several months later, however, EPA and the FWS entered into consultation pursuant to § 7 of the Endangered Species Act regarding the northern bald eagle. The outcome was a conclusion by FWS that the Eastport project was likely to jeopardize the continued existence of the eagle.³⁵ The threat to the species consisted of increased air pollution, further development stimulated by the refinery construction, and impacts on the eagle's food chain from oil spills. FWS recommended several alternative locations for the facility, but it did not consider possible mitigation measures at the Eastport site.

As a result of this new information, EPA denied Pittston's NPDES permit application in January 1979, relying on the Endangered Species Act. Since the refinery would jeopardize the northern bald eagle, EPA concluded that the permit simply could not be granted because of § 7.³⁶

Pittston's Application for Exemption

On January 26, 1979, Pittston applied to the Department of the Interior for an exemption according to the newly established procedures. At this stage in the proceeding, Pittston is arguing that there is no irresolvable conflict³⁷ between construction of the refinery and preservation of the bald eagle on the basis of its own scientific evidence countering the evidence relied upon by the FWS. The company also contends that mitigation measures will be adopted to prevent any significant adverse effect on the species.

By its argument, Pittston appears to be challenging both the FWS conclusion that the project would jeopardize the eagle upon which the EPA permit denial was based and, by implication, the adequacy of the consultation process through which FWS reached its decision. Under § 7, consultation is limited to the federal agency sponsoring the action and FWS. Even though there is no requirement that a private applicant for a federal permit be included in the consultation, a nonfederal "representative" may be authorized to participate.³⁸ Furthermore, while FWS may recommend modifications to the activity to enhance the protection of a listed species,³⁹ it has no obligation to do so.

Should the review board find no irresolvable conflict, however, the possibility of an exemption from the Act would be eliminated. The amended statute provides that a review board determination that there is an irresolvable conflict is a prerequisite to Committee consideration of an exemption application. Thus, Pittston is trying to find a forum for its views, an opportunity which it claims it was denied in the EPA-FWS consultation process. Although such a finding would make Pittston ineligible for an exemption, the company could attempt to use the review board's determination in either an administrative⁴⁰ or a judicial⁴¹ challenge to EPA's denial of the NPDES permit, which was based solely on FWS's [9 ELR 10035] conclusion that the project is incompatible with preservation of the species.

If the review board were to find that the conflict is not irresolvable, this would obviate the need to consider the adequacy of the consultation process pursuant to § 7(g)(5)(A). The board's review of the consultation process is limited by the statute to whether the exemption applicant fulfilled its responsibilities. Because the applicant in this instance is a private party, however, it has no responsibility, nor even a right, to participate in the consultation process. The review board may decide to disregard this statutory limitation and evaluate the consultation that took place between EPA and the FWS, even though neither party is formally before the review board. The review board may have the option of avoiding this conundrum by staying the exemption proceedings and suggesting that Pittston, EPA, and FWS meet and, in effect, carry out a consultation on the impact of the refinery on the bald eagle population,⁴² as Pittston has suggested. This would accomplish the purpose implicit in the requirement for a determination by the review board that the exemption applicant has made a reasonable and responsible effort in the consultation process "to develop and fairly consider modifications or reasonable and prudent alternatives to the proposed agency action which will avoid jeopardizing the continued existence of an endangered or threatened species or result in the adverse modification or destruction of a critical habitat."⁴³

Another of the review board's options is to determine that there is an irresolvable conflict. In such a case, its report to the Committee must discuss "appropriate reasonable mitigation and enhancement measures which should be considered by the Committee." Pittston's offer to adopt specific measures to minimize the refinery's impact on the bald eagles already seems to have this in view.

Conclusion

In his remarks upon signing the Endangered Species Act Amendments, President Carter said:

… I believe that this new exemption process is not necessary…. In the past, the Act has worked well without this exemption process, because all agencies have made efforts to resolve conflicts and where necessary, to pursue alternate courses of action…. Destruction of the life of an endangered or threatened species should never be undertaken lightly, no matter how insignificant the species may appear today.

I am asking that the Committee members be exceedingly cautious in considering exemptions….⁴⁴

The Committee's decisions on the Tellico and Grayrocks projects indicate that it has heeded this admonition. Unfortunately, the Committee's decisions on Tellico and Grayrocks do not give much guidance as to the weight that potential extinction of an endangered species will carrry when placed on the balance with economic considerations in future exemption decisions. The Grayrocks result was foreordained by the settlement of the litigation in that case. The Tellico project was found economically unjustifiable when placed under scrutiny. Thus, while in each case it was the threat to an endangered species that forced the ultimate review, preservation of the species was not the deciding factor. The Pittston controversy, in addition to providing some guidance on how a non-federal exemption applicant should proceed, may provide a clear illustration of how the Committee will strike a balance between economic factors⁴⁵ and endangered species preservation and whether it can succeed in reconciling development interests with the national policy of protecting endangered species.⁴⁶

The 1978 amendments were intended to retool the ESA to produce a process which goes beyond a mere analysis of biological factors to include a weighing of economic and political interests. The outcome of the Pittston controversy, the first full test case under the new provisions, will furnish the basis for an evaluation of the success of that effort. The Act is due for reauthorization this year, and several bills have already been introduced to revise the exemption process. It is difficult to predict much of a future for these proposals, however, because they appear to express only a scattered unhappiness with the way the Act has affected a particular project rather than a widespread feeling that the tribulations of 1978 resulted in anything less than an acceptable and workable improvement to a basically sound law.

1. See Comment, 95th Congress, 2d Session: Emphasis on Resource Protection, 8 ELR 10221, 10223 (1978).

2. 16 U.S.C. §§ 1531-1543, as amended by Pub. L. No. 95-632, 92 Stat. 3751 (Nov. 10, 1978), ELR STAT. & REG. 41825.

3. 87 Stat. 892.

4. Although the ESA was enacted in 1973, regulations implementing § 7 did not become final until January 4, 1978. 50 C.F.R. pt. 402, 43 Fed. Reg. 870 (Jan. 4, 1978).

5. Sierra Club v. Froehlke, 543 F.2d 1289, 6 ELR 20488 (8th Cir. 1976).

6. National Wildlife Fed'n v. Coleman, 529 F.2d 359, 6 ELR 20344 (5th Cir.), cert. denied sub nom., Boteler v. National Wildlife Fed'n, 429 U.S. 979 (1976).

7. 437 U.S. 153, 8 ELR 20513 (1978).

8. Section 7(d), 16 U.S.C. § 1536(d), ELR STAT. & REG. 41830.

9. Section 7(b), 16 U.S.C. § 1536(b), ELR STAT. & REG. 41830.

10. Regulations governing the ESA exemption process have been proposed. 44 Fed. Reg. 7777 (Feb. 17, 1979).

11. One member of the review board is appointed by the Secretary of the Interior, one is appointed by the President from the state in which the action is or will be carried out, and the third member is an administrative law judge.

12. Section 7(g)(5), 16 U.S.C. § 1536(g)(5), ELR STAT. & REG. 41831.

13. Section 7(g)(7), 16 U.S.C. § 1536(g)(7), ELR STAT. & REG. 41831.

14. The Secretary of the Interior is chairman of the Committee. The other federal members are the Secretaries of Agriculture and the Army, the Chairman of the Council of Economic Advisors, and the Administrators of the Environmental Protection Agency and the National Oceanic and Atmospheric Administration.

15. Section 7(h)(1)(A), 16 U.S.C. §1536(h)(1)(A), ELR STAT. & REG. 41831.

16. Section 7(h)(1)(B), 16 U.S.C. § 1536(h)(1)(B), ELR STAT. & REG. 41832.

17. Section 7(g)(5), 16 U.S.C. § 1536(g)(5), ELR STAT. & REG. 41831.

18. Section 7(h)(1), 16 U.S.C. § 1536(h)(1), ELR STAT. & REG. 41831.

19. Section 7(n), 16 U.S.C. § 1536(n), ELR STAT. & REG. 41832.

20. Section 10(i), 16 U.S.C. § 1539(i), ELR STAT. & REG. 41832:3.

21. The two relevant criteria are (1) that there be no reasonable and prudent alternatives which preserve the species and (2) that the benefits of the action "clearly outweigh" the benefits of alternative courses of action consistent with conserving the species or its critical habitat, and the action is in the public interest. Consideration of the third criterion, whether the action is of regional or national significance, was deemed unnecessary by the conference committee because of "the obvious regional significance of both of the projects." H. REP. NO. 1804, 95th Cong., 2d Sess. 25 (1978).

22. See Office of Policy Analysis, Dep't of the Interior, Tellico Dam and Reservoir: Staff Report to the Endangered Species Committee (Jan. 19, 1979).

23. Endangered Species Committee: Application for Exemption for Tellico Dam and Reservoir (Feb. 7, 1979).

24. S. 242, S. 243, 96th Cong., 1st Sess. (1979). Sen. Sasser (D-Tenn.) also introduced a bill to exempt Tellico. S. 298, 96th Cong., 1st Sess. (1979).

25. The conference committee report stated:

It is the strong sense of the committee that these are the last instances when any project should receive special consideration in the exemption process. To allow any further aberrations in this process would make meaningless the work of the Congress in fashioning an orderly exemption process….

H. REP. NO. 1804, 95th Cong., 2d Sess. 25 (1978).

26. Nebraska v. Rural Electrification Admin., 8 ELR 20789 (D. Neb. Oct. 2, 1978). Plaintiffs also succeeded on a count involving the National Environmental Policy Act. See Nebraska v. Ray, 8 ELR 20666 (D. Neb. July 21, 1978).

27. Nebraska v. Rural Electrification Admin., No. 78-1778 (8th Cir. Feb. 27, 1978).

28. Section 10(i)(2), 16 U.S.C. § 1539(i)(2), ELR STAT. & REG. 41832:3.

29. See H. REP. NO. 1804, 95th Cong., 2d Sess. 25 (1978).

30. Endangered Species Committee: Application for Exemption for Grayrocks Dam and Reservoir (Feb. 7, 1979). Additional official action may be required to implement the agreement. The Wildlife Management Institute recently noted that because of the peculiarities of Nebraska law regarding water rights, new state legislation may be needed to protect the plan established by the court settlement. 30 OUTDOOR NEWS BULL., NO. 3, at 1-3 (Feb. 9, 1979).

31. Pittston must have a license from the Army Corps of Engineers for dredging and pier construction, pursuant to § 10 of the Rivers and Harbors Act of 1899, 33 U.S.C. § 403, ELR STAT. & REG. 41142, and a prevention of significant air quality deterioration permit, pursuant to §§ 160-169 of the Clean Air Act, 42 U.S.C. §§ 7470-7479, ELR STAT. & REG. 42233, which it received from EPA on August 18, 1978. Three permits from the Maine Board of Environmental Protection, dealing with waste discharge, air emissions, and wetlands construction have been issued. Finally, the Federal Aviation Administration must determine whether the City of Eastport can be released from its obligation to continue operation of the municipal airport because Pittston's facility would utilize portions of the present airport site.

32. See § 402 of the Federal Water Pollution Control Act, 33 U.S.C. § 1342, ELR STAT. & REG. 42141.

33. EPA, Region 1, Final EIS, Proposed Issuance of Federal Permits to the Pittston Co. (No. 80671F, June 22, 1978).

34. 43 Fed. Reg. 6230 (Feb. 14, 1978).

35. Letter from Howard Larsen, Regional Director, FWS, to William Adams, Regional Administrator, EPA (Dec. 21, 1978).

36. Letter from William Adams, Regional Administrator, EPA, and Leslie Carothers, Director, Enforcement Division, EPA, to A. F. Kaulakis, Vice President, the Pittston Co. (Jan. 15, 1979).

37. An "irresolvable conflict" is defined as:

… a set of circumstances under which, after consultation as required in section 7(a) of this Act, completion of such action would (A) jeopardize the continued existence of an endangered or threatened species, or (B) result in the adverse modification or destruction of a critical habitat.

16 U.S.C. § 1532(11), ELR STAT. & REG. 41826.

38. 50 C.F.R. § 402.04(d), 43 Fed. Reg. 875 (Jan. 4, 1978).

39. 50 C.F.R. § 402.04(e)(4), 43 Fed. Reg. 876 (Jan. 4, 1978).

40. EPA will hold an adjudicatory hearing on Pittston's appeal to overturn the agency decision.

41. In the event of a court challenge, EPA's decision would be measured against the arbitrary, capricious, or abuse of discretion standard of review. Sierra Club v. Froehlke, 543 F.2d 1289, 6 ELR 20448 (8th Cir. 1976).

42. There appears to be no legal bar to this option. The statute requires the review board to make its determinations within 60 days of its appointment "or within such longer time as is mutually agreed upon between the exemption applicant and the Secretary" of the Interior. Section 7(g)(5), 16 U.S.C. § 1536(g)(5), ELR STAT. & REG. 41831. Indeed, the § 7 regulations require that consultations be reinitiated if the "identified activity or program is subsequently modified." 50 C.F.R. § 402.04(h), 43 Fed. Reg. 876 (Jan. 4, 1978).

43. Section 7(g)(5)(A), 16 U.S.C. § 1536(g)(5)(A), ELR STAT. & REG. 41831. This language appears to make a substantive change in the § 7 consultation process by requiring that modifications and alternatives to the proposed project be considered. At present, the § 7 consultation regulations do not require such consideration.

44. Statement on Signing S. 2899 Into Law, Nov. 10, 1978, 14 WEEKLY COMP. OF PRES. DOC. 2002 (Nov. 13, 1978).

45. Congress intended that the benefits to be considered include but not be limited to economic and ecological benefits. Economic criteria would include those set forth in Exec. Order No. 12044, Improving Government Regulations, 43 Fed. Reg. 12661 (Mar. 24, 1978), as well as the following: the cost impact on consumers, business markets, and federal, state, and local governments; the effect on productivity of wage earners, businesses, and government; the effect on competition; the effect on supplies of important materials, products, and services; the effect on employment; and the effect on energy supply and demand. H. REP. NO. 1625, 95th Cong., 2d Sess. 22 (1978).

46. If the Committee does exempt the Pittston refinery, the most important outcome may be a quantification of how the benefits of that project "clearly outweigh" the benefits of pursuing an alternative that would conserve the species or its critical habitat.