Appeal from the United States District Court for the Eastern District of California. Garland E. Burrell, District Judge, Presiding. D.C. No. 2:08-cv-01316-GEB-CMK.
The opinion of the court was delivered by: O'scannlain, Circuit Judge
Argued and Submitted February 11, 2010 -- San Francisco, California.
Before: Diarmuid F. O'Scannlain, Stephen S. Trott and Richard A. Paez, Circuit Judges.
We must decide whether the decisions of two federal agencies approving the construction of a business park on protected wetlands in California were arbitrary and capricious.
We begin by setting forth the relevant framework of the two federal statutes at the center of this appeal: the Clean Water Act ("CWA"), 33 U.S.C. § 1251 et seq., and the Endangered Species Act ("ESA"), 16 U.S.C. § 1531 et seq.
Congress enacted the CWA to "restore and maintain the chemical, physical, and biological integrity of the Nation's waters." 33 U.S.C. § 1251(a). "Under §§ 301 and 502 of the Act, 33 U.S.C. §§ 1311 and 1362, any discharge of dredged or fill materials into 'navigable waters'-defined as the 'waters of the United States'-is forbidden unless authorized by a permit issued by the [U.S. Army] Corps of Engineers pursuant to § 404, 33 U.S.C. § 1344." United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 123 (1985). The Supreme Court has upheld as reasonable the Corps' interpretation of the CWA "to require permits for the discharge of fill material into wetlands adjacent to the 'waters of the United States.' " Id. at 139; see also Rapanos v. United States, 547 U.S. 715, 742 (2006) (plurality opinion) ("[O]nly those wet-lands with a continuous surface connection to bodies that are 'waters of the United States' in their own right, so that there is no clear demarcation between 'waters' and wetlands, are 'adjacent to' such waters and covered by the Act.").
The Corps may issue a permit pursuant to section 404 of the CWA only if conditions set forth in regulations developed by the Corps and the Environmental Protection Agency ("EPA") are met. See 33 U.S.C. § 1344(b). These implementing regulations provide that "no discharge of dredged or fill material shall be permitted if there is a practicable alternative to the proposed discharge which would have less adverse impact on the aquatic ecosystem, so long as the alternative does not have other significant adverse environmental consequences." 40 C.F.R. § 230.10(a). Under the regulations, "[a]n alternative is practicable if it is available and capable of being done after taking into consideration cost, existing technology, and logistics in light of overall project purposes." Id. § 230.10(a)(2). If a proposed activity "does not require access or proximity to or siting within the special aquatic site in question to fulfill its basic purpose (i.e., is not 'water dependent'), practicable alternatives that do not involve special aquatic sites are presumed to be available, unless clearly demonstrated otherwise." Id. § 230.10(a)(3).
The ESA directs the Secretaries of Commerce and the Interior to determine whether any species is "endangered" or "threatened," 16 U.S.C. § 1533(a)(1), and to "designate any habitat of such species which is . . . considered to be critical habitat," id. § 1533(a)(3)(A)(i). Under the ESA, a species' "critical habitat" includes areas occupied by the species that are "essential to the conservation of the species" and that "may require special management considerations or protection." Id. § 1532(5)(A)(i). It also includes areas not occupied by the species that are nonetheless essential to the species' conservation. Id. § 1532(5)(A)(ii).
"Section 7 of the ESA prescribes the steps that federal agencies must take to ensure that their actions do not jeopardize endangered wildlife and flora." Nat'l Ass'n of Home Builders v. Defenders of Wildlife, 551 U.S. 644, 652 (2007). Section 7(a)(2) provides specifically that:
Each Federal agency shall, in consultation with and with the assistance of the Secretary [of Commerce or the Interior], insure that any action authorized, funded, or carried out by such agency . . . is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of habitat of such species which is determined by the Secretary . . . to be critical . . . . 16 U.S.C. § 1536(a)(2). The ESA requires the Secretary to provide at the conclusion of consultation "a written statement setting forth the Secretary's opinion, and a summary of the information on which the opinion is based, detailing how the agency action affects the species or its critical habitat." Id. § 1536(b)(3)(A); see 50 C.F.R. § 402.14(h).
With the relevant statutory and regulatory framework in mind, we turn now to the facts of this case.
After years of researching potential sites for economic development, the City of Redding, California, decided to construct a business park on a 678-acre site located on wetlands along Stillwater Creek, and started to draft an environmental impact statement ("EIS"). The proposed site contains critical habitat for several ESA-listed species under the jurisdiction of the Secretary of the Interior, including the threatened vernal pool fairy shrimp, the endangered vernal pool tadpole shrimp, and the threatened slender Orcutt grass. These ESA-listed species occupy the site's vernal pools-shallow depressions that fill with rainwater in the fall and winter and then dry up in the spring. Final Designation of Critical Habitat for Four Vernal Pool Crustaceans and Eleven Vernal Pool Plants in California and Southern Oregon, 70 Fed. Reg. 46,924, 46,925 (Aug. 11, 2005). Their critical habitat also consists of unoccupied upland areas that serve as important sources of nutrients in the vernal pool ecosystem. Id.
With an eye to satisfying the conditions of both the CWA and the ESA, the City issued a draft EIS regarding the proposed development of the so-called Stillwater Business Park in February 2005. The draft EIS served as a precursor to the City's eventual application for a section 404 permit, which the City was required to obtain because the proposed development would entail the discharge of dredged or fill material into protected wetlands. The document also served to address the effects of the proposed development on ESA-listed species, which the City was required to protect because the project would involve the expenditure of federal grant money.
Based on a comparison of over a dozen potential sites, the draft EIS concluded that the Stillwater site was the least environmentally damaging practicable alternative. In support of this conclusion, the draft EIS explained that the proposed Stillwater site was "responsive" to the basic purpose of the City's project: "to increase the activity of contributory economic sectors by constructing a business park within [the City's] sphere of influence capable of attracting and accommodating diverse business and industrial users." According to the draft EIS, accomplishing this purpose required a site large enough to accommodate at least one 100-acre parcel, and the proposed Stillwater site satisfied this requirement.
The draft EIS further explained that the proposed Stillwater site met various cost, technological, and logistical feasibility criteria. It stated, for example, that the proposed site was available for acquisition; that it did not "result in adverse social or economic effects on existing development"; that it was "capable of being ...