Recent Endangered Species Issues Affecting California Real Estate

Published in the California Real Estate Journal 

Real estate development and endangered species have always been a volatile mix in California.  One key factor routinely identified as causing the decline of almost every threatened or endangered species is the loss, destruction or adverse modification of that species' habitat.  Accordingly, one bedrock principle of the federal and California endangered species legal regimes is the protection and enhancement of species habitat.  Unfortunately, property development is often difficult to reconcile with habitat protection at particular sites.

Thus, there continue to be serious conflicts between endangered species and California property development.  Some issues resonate throughout California, such as the salmon and steelhead issues that dramatically affect water availability and project development near watercourses.  However, a long list of other localized species, such as the California tiger salamander on the Santa Rosa Plain, the Morro shoulderband snail in western San Luis Obispo County and the Delhi Sands flower-loving fly in the Colton/Rialto area, are the focus of prominent development issues in their unique habitat niches throughout the State.

New endangered species developments and decisions in the last six months will significantly impact California real estate.  The high-profile national and California species trends that have developed recently - including the continuing decline of many endangered species, the incremental impacts of global climate change, and the evolving endangered species regulatory framework - are continuing to have dramatic effects on California property development.

The most significant recent issues are:

• Although there have been some national success stories (such as the bald eagle's recovery), many threatened and endangered species continue to decline in number. As a result, federal and state fish and wildlife agencies are continuously adding (or being forced to add) new species to the protected list. For example, in September 2008, a California appellate court directed the California Fish & Game Commission to proceed further with potential listing of the California tiger salamander as a state endangered species (it is already federally listed). This decision may help precipitate a more aggressive effort by the State to add and protect species under the California Endangered Species Act.
• The federal wildlife agencies are designating more California private and public land as "critical habitat" for endangered species. For example, after reversals in direction caused by litigation and alleged political interference, the U.S. Fish and Wildlife Service proposed in September 2008 to designate 1.3 million more acres of land throughout California as critical habitat for the California red-legged frog. These increasingly common and expansive designations have serious property development ramifications because federal law prohibits or regulates the destruction or adverse modification of critical habitat in many situations. Thus, a current or prospective landowner should always determine whether a property is covered by critical habitat designations.
• The endangered species arena is also being revolutionized by new climate change developments. In May 2008, under court pressure, the Service took the landmark step of adding the polar bear to the threatened species list, not because it currently meets endangerment criteria, but because it is expected to become threatened soon due to global climate change. A landslide of conflicting legal claims has resulted from the polar bear listing (industry groups are challenging it and environmentalists believe it does not go far enough) and everyone is wrestling with the challenge of incorporating long-term climate change into species protection law. Nonetheless, this listing probably signals the beginning of earlier and more proactive government efforts to list and protect species on climate change grounds.
• Property development is also being increasingly impacted by the crucial intersection between water availability and protected fish species. The recent collapse of West Coast salmon runs, and the resulting shutdown of the salmon fishing season in California this year, has focused renewed attention on the importance of preserving sufficient water flows for these fish. Some property developments plan to draw water, directly or indirectly, from the same streams or underflow that support these fish. The State Water Resources Control Board (which issues permits to appropriate California surface waters) is working on new policies to preserve stream flows for protected fish and recent court decisions emphasize that the law requires effective stream flow protections. These trends will inevitably tighten the existing competition for limited water, particularly as climate change reduces the overall water supply.
• One tool for reconciling protection of endangered species with property development, on both the federal and state levels, has been government issuance of "incidental take permits" that allow projects to proceed if they are supported by an acceptable habitat conservation plan that avoids, minimizes and/or mitigates impacts on protected species. An important incentive for landowners to participate in these programs consists of "no surprises" protections, which are basically government assurances that, even if new information or species discoveries occur after issuance of the permit, the landowner will generally (with limited exceptions) not be required to take any further actions to protect the species. This program, embedded by regulation in federal law, is relatively successful.

However, in a July 2008 decision, the California Supreme Court decided that the California Department of Fish & Game (DFG) is not authorized to include significant "no surprises" assurances in state incidental take permits.  It found that, unlike the federal provisions, the state provisions are not specifically authorized by state law or regulations.  The immediate effect of this decision is that a landowner may not be able to obtain the level of State regulatory assurances it needs relating to endangered species.  Some commentators predict that the California Legislature and/or DFG may attempt to restore the protections of this approach. 

• Finally, on December 11, 2008, the Bush administration adopted "streamlined" agency rules that are supposedly designed to make it easier to navigate the federal species permitting scheme. However, these rules are politically controversial, were immediately challenged in court, and could be suspended or revised by the Obama administration. Accordingly, it is unclear whether and for how long these rules will actually be operative.

In short, a steady stream of recent endangered species developments will have very important impacts on the use of California real property.