The U.S. Fish and Wildlife Service (FWS) continues its push to finalize pending rules before the new administration takes office next year. Following a publication of a final rule defining “habitat” under the Endangered Species Act (ESA) earlier this week, today the agency published a final rule establishing the agency’s process for excluding certain lands from critical habitat designations.

The FWS proposed the rule in September 2020 in response to the Supreme Court’s opinion in Weyerhaeuser Co. v. U.S. FWS, 139 S.Ct. 361 (2018). In that case, which focused on the designation of critical habitat for the dusky gopher frog, the Supreme Court held that the FWS’ decision to exclude areas from critical habitat, although discretionary, is reviewable in court under the arbitrary and capricious standard.

Section 4(b)(2) of the ESA requires that when designating critical habitat, agencies take into account several considerations, including the economic impact, the impact on national security, and any other relevant impacts. The final rule, which mirrors the proposed rule, provides a non-exhaustive list of impacts that can be considered economic: the economy of a particular area, productivity, jobs, opportunity costs arising from critical habitat designation, or possible benefits and transfers, such as outdoor recreation and ecosystem services. In addition, the rule also provides a non-exhaustive list of “other relevant impacts.” They include impacts to tribes, states, and local governments, public health and safety, community interests, the environment (increased risk of wildfire, pest and invasive species management, etc.), federal lands, and conservation plans, agreements, or partnerships.

Under this ESA provision, areas may be excluded from critical habitat designation if the benefits of exclusion outweigh the benefits of inclusion for that area (as long as excluding it will not result in the extinction of the species). The final rule provides that an exclusion analysis can be conducted if requested during the public comment period on the critical habitat designation or by the agency based on the potential impacts of the designation.

Once the exclusion analysis takes place, the final rule explains how the available information will be assessed. With respect to evaluating impacts that fall within the agency’s scope of expertise, such as species biology, the FWS’ judgment will control. With respect to evaluating impacts that fall outside of the agency’s expertise, the experts’ judgment will control. While the agency declined to provide a detailed process for determining who is an expert or a list of entities with presumed expertise, the agency indicated it will use its best professional judgment to evaluate all information critically before incorporating it into any exclusion analysis.

In addition, the FWS reiterated its plans to exclude areas governed by Section 10 Incidental Take Permits, habitat conservation plans, or candidate conservation agreements with assurances, explaining that these tools “have been working well.” While these tools would not lead to automatic exclusion, the FWS will consider them on a case-by-case basis and anticipates consistently excluding areas subject to such agreements.

Although the final rule provides helpful guidance as to how exclusion determinations will be made, the agency retains broad discretion both in determining the weight to be given to information received and the degree of impact expected from a designation. Given the broad language in the rule and the subjective analysis it allows, both the rule and resulting exclusions from critical habitat designations are likely to be challenged. The rule becomes effective on January 19, 2021, and will only apply to the FWS’ critical habitat designations initiated after that date.