Appendix — Environmental Protection Agency v. Defenders of Wildlife

Supreme Co S.

pre | eg Us

<SH 06-549 0cT 23 2006

No. OFFICE OF THE CLERK

In the Supreme Court of the Anited States

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY, PETITIONER

Vv.

DEFENDERS OF WILDLIFE, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

APPENDIX TO THE

PETITION FOR A WRIT OF CERTIORARI

PAUL D. CLEMENT

Solicitor General

Counsel of Record

SUE ELLEN WOOLDRIDGE

Assistant Attorney General

EDWIN S. KNEEDLER

Deputy Solicitor General

MALCOLM L. STEWART

Azsistant to the Solicitor

General

ANDREW C. MERGEN

DAVID C. SHILTON

Attorneys

ROGER R. MARELLA, JR.

Acting General Counsel

MICHAEL LEE

Attorney

Environmental Protection

Agency Department of Justice

Washington, D.C. 20460 Washington, D.C. 20580-0001

(202) 514-2217

TABLE OF CONTENTS

Page

Appendix A (court of appeals opinion,

NE FE Te ccc essevecesevcecesenecesees la

Appendix B (court of appeals order,

dated June 8, 2006) .........ccccccccccescccess 68a

Appendix C (EPA letter, dated Oct. 15, 2006) ...... 93a

Appendix D (Dep’t of Interior letter,

SR, SUE Kab ccdbccdssccsacescevees 103a

Appendix E (Dep’t of Commerce letter,

, ED dauvnecdsadtencsectesedees lila

Appendix F (statutory provisions) .............-. 117a

(1)

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Nos. 03-71439, 03-72894

DEFENDERS OF WILDLIFE; CENTER FOR BIOLOGICAL

DIVERSITY; CRAIG MILLER, PETITIONERS

v.

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY, RESPONDENT, NATIONAL ASSOCIATION OF

HOME BUILDERS; STATE OF ARIZONA; ARIZONA

CHAMBER OF COMMERCE, INTERVENERS DEFENDERS

OF WILDLIFE; CENTER FOR BIOLOGICAL DIVERSITY,

PLAINTIFFS-PETITIONERS

v.

ROBERT B. FLOWERS, CHIEF OF ENGINEERS AND

COMMANDER, U.S. ARMY CORPS OF ENGINEERS,

DEFENDANT-RESPONDENT, CHRISTINE TODD

WHITMAN, ADMINISTRATOR U.S. ENVIRONMENTAL

PROTECTION AGENCY, DEFENDANT-RESPONDENT

GALE NORTON; STEVEN WILLIAMS, DEFENDANTS-

RESPONDENTS, CONTINENTAL RESERVE II, LLC,

DEFENDANT-INTERVENOR/INTERVENOR,

HB LAND DEVELOPMENT COMPANY; STEPHEN A.

OWENS, STATE OF ARIZONA, EX-REL, DIRECTOR

ARIZONA DEPARTMENT OF ENVIRONMENTAL

QUALITY; GROSVENOR HOLDINGS; NATIONAL

ASSOCIATION OF HOME BUILDERS; HOMF BUILDERS

ASSOCIATION OF CENTRAL ARIZONA; SOUTHERN

ARIZONA HOME BUILDERS ASSOCIATION; SAGUARO

(la)

2a

RANCH INVESTMENTS LLC; SAGUARO RANCH

DEVELOPMENT CORPORATION, DEFENDANT-

INTERVENORS/INTERVENORS

Argued and Submitted: Nov. 1, 2004

Filed: Aug. 22, 2005

On Petition for Review of an Order of the Environ-

mental Protection Agency. EPA No. 67-Reg. 79629, No.

CV-02-01195-CKJ.

Before: REINHARDT, THOMPSON, and BERZON, Cir-

cuit Judges.

BERZON, Circuit Judge:

Under federal law, a state may take over the Clean Wa-

ter Act pollution permitting program in its state from

the federal Environmental Protection Agency (EPA) if

it applies to do so and meets the applicable standards.

This case concerns Arizona’s application to run the

Clean Water Act pollution permitting program in Ari-

zona. When deciding whether to transfer permitting

authority, the Fish and Wildlife Service (F WS) issued,

and the EPA relied on, a Biological Opinion premised on

the proposition that the EPA lacked the authority to

take into account the impact of that decision on endan-

gered species and their habitat.

The plaintiffs in this case challenge the EPA’s trans-

fer decision, particularly its reliance on the Biological

Opinion’s proposition regarding the EPA’s limited au-

thority. This case thus largely boils down to consider-

ation of one fundamental issue: Does the Endangered

Species Act authorize—indeed, require—the EPA to

3a

consider the impact on endangered and threatened spe-

cies and their habitat when it decides whether to trans-

fer water pollution permitting authority to state govern-

ments? For the reasons explained below, we hold that

the EPA did have the authority to consider jeopardy to

listed species in making the transfer decision, and erred

in determining otherwise. For that reason among oth-

ers, the EPA’s decision was arbitrary and capricious.

Accordingly, we grant the petition and remand to the

EPA.

I. Background

A. The National Pollution Discharge Elimination System

(NPDES)

The Clean Water Act (“the Act”), passed in 1972,

established the National Pollution Discharge Elimina-

tion (“pollution permitting”) System. That System gave

the EPA authority to issue permits for the discharge

of pollutants into navigable waters. See 33 U.S.C.

§ 1342(a). The Act further provides that a state may

apply to the EPA to administer the federal pollution

permitting program regarding waters within its bor-

ders. § 1342(b). The EPA Administrator must deter-

mine whether the state has met nine specified criteria

and “shall approve” state applications that meet those

criteria. /d.

The state transfer provisions of § 1342(b) have

proven popular. Arizona was the forty-fifth state to ob-

tain pollution permitting authority from the EPA. See

67 Fed. Reg. 79,629 (Dec. 30, 2002) (announcing ap-

proval of Arizona’s pollution permitting authority); 65

Fed. Reg. 50,528, 50,529 (Aug. 18, 2000) (listing then-

approved states).

da

Once the EPA transfers a permitting program to a

state government, the EPA Administrator maintains an

oversight role to assure that the state follows Clean Wa-

ter Act standards. 33 U.S.C. § 1342(c)(2). If the Admin-

istrator determines that the state is not following those

standards, the Administrator must demand corrective

action. If the state does not take such action, the Admin-

istrator must withdraw approval of the state program.

§ 1342(c)(3).

B. The Endangered Species Act

In 1973, one year after the enactment of the Clean

Water Act, Congress passed the Endangered Species

Act, “the most comprehensive legislation for the preser-

vation of endangered species ever enacted by any na-

tion.” Tenn.Valley Auth. v. Hill, 437 U.S. 153, 180, 98 S.

Ct. 2279, 57 L. Ed. 2d 117 (1978). The present case fo-

cuses on section 7 of the Endangered Species Act, 16

U.S.C. § 1536. 3

Section 7(a)(2) imposes substantive and procedural

requirements on “each Federal agency” with regard to

“any action authorized, funded, or carried out by such

agency.” 16 U.S.C. § 1536(a)(2). Each agency must “in-

sure” that such actions are “not likely to jeopardize the

continued existence of any endangered species or

threatened species or result in the destruction or ad-

verse modification of [critical] habitat of such species.”

id. Agencies must use the “best scientific and commer-

cial data available” to make such decisions, and must do

so “in consultation with and with the assistance of the

Secretary [of the Interior].” /d.

~

oa

Endangered Species Act regulations’ describe the

consultation and action requirements imposed on agen-

cies. Section 7's requirements apply “to all actions in

which there is discretionary Federal involvement or con-

trol.” 50 C.F.R. § 402.03. An agency must determine if

a proposed action “may affect” either endangered or

threatened species (denominated “listed species,”

§ 402.02) or those species’ critical habitat, and, if so,

must seek formal consultation with the FWS, or, for ma-

rine species, the National Marine Fisheries Service.

§ 402.14(a). During such consultations, the FWS issues

a Biological Opinion analyzing whether the action is

likely to jeopardize any listed species or its habitat.

§ 402.14(h). The federal agency then makes a final deci-

sion regarding whether and how to pursue the proposed

action. § 402.15(a).

A Biological Opinion must include a “summary of the

information on which the opinion is based,” a “detailed

discussion of the effects of the action on listed species or

critical habitat,” and “(t]he Service’s opinion on whether

the action is likely to jeopardize the continued existence

of a listed species or result in the destruction or adverse

modification of critical habitat.” § 402.14(h).

The “effects of the action” include “direct and indi-

rect effects . . . together with the effects of other ac-

tivities that are interrelated or interdependent with that

action, that will be added to the environmental baseline|,

which] includes the past and present impacts of all Fed-

eral, State, or private actions and other human activities

' The relevant Endangered Species Act regulations were jointly

issued by the FWS, Department of the Interior, National Marine

Fisheries Service, National Oceanic and Atmospheric Administration,

and Department of Commerce. See 50 C.F.R. ch. 4.

-

6a

in the action area.” § 402.02. “Indirect effects are those

that are caused by the proposed action and are later in

time, but still are reasonably certain to occur.” Jd.

By its terms, section 7(a)(2) applies only to “federal

agenc{ies],” not to state governmental bodies. Accord-

ingly, the EPA’s pollution permitting decisions are sub-

ject to section 7(a)(2), but state pollution permitting de-

cisions are not.

Noting that the “EPA now consults with the [FWS

and National Marine Fisheries Service} under section 7

of the [Endangered Species Act] on . . . approval of

State National Pollutant Discharge Elimination

(NPDES) permitting programs” but recognizing that

after transfer, section 7 will not apply to the state’s per-

mitting decisions, the EPA signed a Memorandum of

Agreement with the FWS governing the two agencies’

involvement with transferred pollution permitting pro-

grams. See 66 Fed. Reg. 11,202, 11,202, 11,207 (Feb. 22,

2001). Asserting that the “EPA’s oversight includes

consideration of the impact of permitted discharges on.

waters and species that depend on those waters,” id. at

11,215, the Memorandum lists several procedures that

the EPA and FWS will establish to ensure that they

communicate federal endangered species concerns to

state water pollution permitting agencies.” /d. at 11,216.

The Memorandum is not, however, binding on states.

Id. at 11,206 (“[T]he MOA . . . does not impose any

requirements on States.”). Rather, the EPA will “en-

courage the State . . . to facilitate the involvement of

permittees” in the described processes. /d. at 11,216

(emphasis added).

~ We discuss these procedures in more detail in Part IITCD)(2)(a),

infra.

Ta

C. The EPA’s approval of Arizona’s pollution permitting

transfer application

The State of Arizona (Arizona) applied on January

14, 2002 for transfer of pollution permitting authority

regarding Arizona waterways (except those on Indian

land). 67 Fed. Reg. 49,916, 49,917 (Aug. 1, 2002). Under

that proposal, the Arizona Department of Environmen-

tal Quality (ADEQ) was to be responsible for issuing

water pollution permits. The EPA’s regional office in

San Francisco determined that the transfer could affect

listed species in Arizona and so initiated formal section

7 consultation with FWS. Announcing this decision, the

EPA stated that “[sjection 7(a)(2) of the [Endangered

Species Act] places a statutory requirement (separate

and distinct from [33 U.S.C. § 1342(b)]) for EPA to ‘in-

sure that any action authorized, funded or carried

out{|by EPA]’” is unlikely to jeopardize listed species or

adversely modify their critical habitat, and that the EPA

is therefore “required” to consult regarding the transfer

decision. 67 Fed. Reg. at 49,917 (final alteration in origi-

nal); see also id. at 49,919."

> The EPA has followed the section 7 consultation process before

transferring permitting authority to states for more than a decade.

Every pollution permitting transfer decision since 1993 has involved

some form of EPA consultation with FWS regarding endangered

species. See 66 Fed. Reg. 12,791 (Feb. 28, 2001) (Maine); 63 Fed. Reg.

51,164 (Sept. 24, 1998) (Texas); 61 Fed. Reg. 65,047 (Dee. 10, 1996)

(Oklahoma); 61 Fed. Reg. 47,932 (Sept. 11, 1996) (Louisiana); 60 Fed.

Reg. 25,718 (May 12, 1995) (Florida); 59 Fed. Reg. 1535, 1543 (Jan. 11,

1994) (announcing 1993 approval of South Dakota’s application after

FWS consultation). Earlier pollution permitting transfer decisions do

not appear to have been preceded by Endangered Species Act consulta-

tion. See, e.g., 52 Fed. Reg. 27,578 (July 22, 1987) (Utah); 51 Fed. Reg.

44.518 (Dec. 10, 1986) (Arkansas); 19 Fed. Reg. 39,063 (Oct. 3, 1984)

(Rhode Island); 47 Fed. Reg. 17,331 (Apr. 22, 1982) (New Jersey); 44

~~

Sa

During the course of the consultation, FWS field of-

fice staff in Arizona expressed serious reservations

about the proposed transfer. F WS staff noted that sec-

tion 7 consultations regarding past pollution permits in

Arizona had led to mitigating measures to protect spe-

cies’ critical habitat, and feared that, without such man-

datory consultation, Arizona would issue permits with-

out mitigating measures. As a result, there could be

harm to certain listed species and habitat, particularly

the southwestern willow flycatcher, Pima pineapple cac-

tus, Huachuca water umbel, cactus ferruginous pygmy

owl,’ “and perhaps other species.” The staff concluded

“that the transfer of this program from EPA to the

State causes the loss of protections to species resulting

from the section 7 process, and the impact of this loss

must be taken into account in the effects analysis in the

biological opinion.” In response, EPA staff opined that

the EPA lacked the legal authority to base its transfer

decision on these concerns, because the agency does

“not have the legal authority to regulate the non-water-

quality-related impacts associated with State NPDES-

Fed. Reg. 61,452 (Oct. 25, 1979) (Alabama); 39 Fed. Reg. 26,061 (July

16, 1974) (announcing approval of applications from fifteen states in the

early years of Clean Water Act operation).

* We note that FWS has proposed removing the pygmy owl from the

list of threatened and endangered species, although the owl currently

remains listed. See 70 Fed. Reg. 44,547 (Aug. 3, 2005). Even if the

FWS eventually de-lists the pygmy owl, that would not affect our

analysis of this case for two reasons. First, we focus on the agency’s

action based on the record before it, which includes the pygmy owl's

listed status. Second, the FPA’s action can affect multiple listed species

in Arizona, noi only the pygmy owl. While we illustrate our analysis

with examples of individual listed species, including the pygmy owl, our

analysis applies with equal force even if the FWS de-lists any such

species.

Ya

permitted projects that are of concern to FWS, includ-

ing the authority to object to such permits based on non-

water quality related impacts to listed species.”

To resolve this disagreement, staff of the two agen-

cies developed an “Interagency Elevation Document,”

summarizing their respective opinions. Pursuant to the

Memorandum of Agreement, this document transferred

authority over the Biological Opinion to the Director of

FWS, the Director of the National Marine Fisheries

Service, and the Deputy Assistant Administrator of Wa-

ter at the EPA. See 66 Fed. Reg. 11,202, 11,209 (Feb.

22, 2001).

After the consultation at the national level between

the EPA and FWS, the Field Supervisor of the Arizona

Ecological Services Field Office of the FWS issued a

Biological Opinion recommending approval of the trans-

fer of permitting authority to Arizona. Noting the loss

of section 7 consultation, the Biological Opinion recog-

nized that, after the transfer, no federal agency would

have the legal authority to consult with developers con-

cerning the potential impact on listed species of any pol-

lution permits. Such consultation had lead to measures

protecting listed species, including the Pima pineapple

cactus, razorback sucker, Gila topminnow, southwestern

willow flycatcher, and cactus ferruginous pygmy owl.

Although Arizona could voluntarily consult with FWS

regarding pollution permits, neither the EPA nor FWS

could require Arizona to act on behalf of listed species.

After recognizing this impact of the transfer of per-

mitting authority, the Biological Opinion concluded that

the loss of any conservation benefit is not caused by

EPA’s decision to approve the State of Arizona’s pro-

gram. Rather, the absence of the section 7 process

10a

that exists with respect to Federal [Clean Water Act]

permits reflects Congress’ decision to grant States

the right to administer these programs under state

law provided the State’s program meets the require-

ments of 402(b) of the Clean Water Act.

The Biological Opinion goes on to conclude:

While reviewing this above referenced approval, the

F WS has spent considerable time analyzing direct

and indirect effects. In the course of this analysis,

our field office staff biologists have expressed con-

cerns that the approval will result in loss of section

7 consultation-related conservation benefits. We

have stated our belief that the loss of section 7 con-

servation benefits is an indirect effect of the authori-

zation. Furthermore, we have stated that this loss of

conservation benefits will appreciably reduce the

conservation status of the cactus ferruginous

pygmyowl and the Pima pineapple cactus. Notwith-

standing this, our final opinion is that the loss of sec-

tion 7-related conservation benefits, which would

otherwise be provided by section 7 consultations, is

not an indirect effect of the authorization action.

In changing from a Federal permitting program

to a State permitting program, the permit-related

section 7 processes for consultation will no longer

apply. Essentially, there will be no substantive

change in the permit program, but there will be a

reduction in the number of mechanisms available to

both of our agencies to protect federally-listed spe-

cies and critical habitat in Arizona. We believe that

the assumption of the program by the State of Ari-

zona will not cause development, and concur that

lla

EPA’s [Clean Water Act|-mandated approval of the

program has only an attenuated causal link to the

reduction in Federal [Endangered Species Act] con-

servation responsibilities.”

As an alternative to this lack-of-causation analysis,

the Biological Opinion stated that other federal and

state laws would sufficiently protect endangered spe-

cies, so that transfer of permitting authority would not

likely jeopardize such species or their critical habitat.

These other laws included section 9 of the Endangered

Species Act, 16 U.S.C. § 1538, which outlaws “taking” an

endangered species. The Biological Opinion’s reliance

on this statute contrasted with earlier FWS staff con-

cerns that “section 9 does not generally apply to plant

species (such as the Pima pineapple cactus) and it is not

effective for extremely rare, but wide-ranging species

(such as the cactus ferruginous pygmy-owl). FWS

therefore does not believe that section 9 enforcement

offsets the effects of approving this program.”

Independently of the Biological Opinion, an official at

the Arizona Game and Fish Department” indicated that

his department had “worked cooperatively with ADE Q”

when reviewing past water pollution permit applications

* The just-quoted passage mentioned two species in passing in the

midst of concluding that any harm to those species was not an indirect

effect of the EPA’s transfer decision. Elsewhere, the Biological Opinion

noted the listed species in Arizona but did not specifically discuss the

effect of the transfer on any of these species.

* The official, Bob Broscheid, whose title at the Arizona Game and

Fish Department is “Project Evaluation Program Supervisor,” wrote

to an official at the EPA's regional office that would supervise Arizona's

permitting decisions. He also carbon copied-an ADEQ official. Bros-

cheid’s letter describes the Game and Fish Department's understand.

ing of its role but does not purport to speak for ADEQ.

12a

and “look{ed] forward to continuing this level of cooper-

ation between our agencies.” Noting the EPA-FWS

Memorandum of Agreement, the official asserted that

“(t]his agreement will serve as a guideline for EPA,

FWS, and the State of Arizona to ensure that NPDES

permits will not negatively impact endangered and

threatened species.” The EPA’s response to the Game

and Fish Department official’s statement was: “EPA

appreciates the commenter’s support. As with all com-

ments submitted, we have considered these comments in

making our final determination on the application.”

FWS staff had earlier suggested the development of

a formal memorandum of understanding with ADEQ or

the Arizona State Lands Department, but did not men-

tion the Game and Fish Department. No such memoran-

dum of understanding was ever signed, and no official

from either ADEQ or the State Lands Department sub-

mitted a letter similar to the Game and Fish Depart-

ment letter.

The EPA approved the permitting authority transfer

two days after the FWS issued the Biological Opinion,

see 67 Fed. Reg. 79,629 (Dec. 30, 2002), noting its belief

that the Biological Opinion “appropriately considered all

relevant information regarding the effects of the ap-

proval.” The Arizona Department of Environmental

Quality (ADEQ) currently operates the program, issuing

permits for water pollution. See ADEQ: Permits, at

http://www.azdeq.gov/environ/water/permits/index.html

(last visited July 5, 2005).

Petitioners, Defenders of Wildlife, the Center for

Biological Diversity, and Craig Miller, a resident of

Pima County, Arizona (collectively, Defenders) chal-

lenge the pollution permitting transfer in two lawsuits,

13a

consolidated before us. In the first, Defenders filed a

petition for review of the EPA’s transfer decision with

this court. The petition alleges that the EPA failed ade-

quately to consider the transfer’s impact on endangered

and threatened species and their habitat, and, in partic-

ular, that the EPA’s reliance on the Biological Opinion

violated the Endangered Species Act and was arbitrary

and capricious under the-Administrative Procedure Act.

See 5 U.S.C. § 706(2)(A). Three other sets of parties

have since intervened, supporting the transfer but tak-

ing some issue with the EPA’s administrative practices

and reasoning: the National Association of Home Build-

ers and several Arizona home builders’ associations

(Home Builders); the Arizona Chamber of Commerce

and several other business associations (Chamber); and

Arizona.

Defenders also filed an Endangered Species Act and

Administrative Procedure Act suit in district court in

Arizona alleging, among other claims, that the Biological

Opinion supporting the pollution permitting transfer

does not comply with Endangered Species Act stan-

dards. The district court held that this court has exclu-

sive jurisdiction over the Biological Opinion challenge

pursuant to 33 U.S.C. § 1369(b)(1)(D), and ordered that

challenge severed from other claims in the district court,

transferred to this court, and consolidated with Defend-

ers’ suit challenging the EPA transfer.

Il. Jurisdiction & Standing

Before proceeding to the merits, we must satisfy our-

selves that we have subject-matter jurisdiction over this

case and that petitioners have standing to raise their

claims. See B.C. v. Plumas Unified Sch. Dist., 192 F.3d

1260, 1264 (9th Cir. 1999). The Chamber contends this

l4a

court lacks jurisdiction to hear Defenders’ challenge to

the Biological Opinion, and the Home Builders maintain

that Defenders do not have standing to bring this action.

Neither argument is convincing.

A. Subject-Matter Jurisdiction

“(Ajny interested person” may seek judicial review

of the EPA Administrator’s pollution permitting or state

transfer decisions in the circuit court in which the per-

son resides, so long as that circuit is directly affected by

the Administrator’s action. 33 U.S.C. § 1369(b)(1). See-

tion 1369(b)(1)(D) grants this court subject matter juris-

diction to review “any determination as to a State permit

program submitted under section 1342(b).” The Cham-

ber argues that §1369(b) authorizes review only of the

EPA Administrator’s transfer decision, not of a Biologi-

cal Opinion completed by the FWS that informs that

decision.

We disagree. The Supreme Court has noted that

biological opinions typically have a “virtually determina-

tive effect” on the ultimate agency action. bennett v.

Spear, 520 U.S. 154, 170, 117 S. Ct. 1154, 1387 L. Ed. 2d

281 (1997); see also id. at 169, 117 S. Ct. 1154 (noting

that a Biological Opinion “in reality . . . has a powerful

coercive effect on the action agency” with the potential

to “alter[ ] the legal regime to which the action agency

is subject”). It would be anomalous to review the ulti-

mate agency “determination” while ignoring the reason-

ing contained in a biological opinion “virtually determi-

native” of that action.

The actual sequence of events in this instance in con-

sistent with the Supreme Court’s observations in

Bennett regarding the impact of a biological opinion on

an agency's final decision. The EPA Administrator's

—

15a

decisionmaking process before approving Arizona’s per-

mitting transfer application included section 7 consulta-

tion with FWS and the consideration of the Biological

Opinion that resulted from it: The initial dispute be-

tween the EPA and FWS regarding the Biological Opin-

ion was “elevated” to the national level, and the final

Biological Opinion incorporated the results of consulta-

tion between the EPA and FWS. The final EPA deci-

sion, in turn, followed the issuance of the Biological

Opinion by two days. In its unpublished Response to

Comments regarding Arizona’s application to assume

permitting authority, released the same day as its final

decision, the EPA noted that it had “considered the [bio-

logical] opinion of the FWS in proceeding with its ap-

proval action.” The EPA went on to approve the Biolog-

ical Opinion’s conclusions, stating its determination that

“F'WS appropriately considered all relevant information

regarding the effects of the approval action on listed

species and designated and proposed critical habitat in

arriving at its conclusion, including a broad range of

direct and indirect effects of EPA’s approval action,”

and declaring that “no information has been submitted

which would indicate that the conclusions in FWS’s bio-

logical opinion are incorrect.”

The EPA, as part of the statutorily mandated consul-

tation process, approved of and relied upon the Biologi-

cal Opinion when considering Arizona’s transfer applica-

tion. Evaluating the Opinion’s evidentiary and analytic

basis is thus integral to reviewing the EPA's final deci-

sion.’

* The EPA does not argue otherwise. Indeed, the EPA’s argument

in this court largely replicates the Biological Opinion’s reasoning,

confirming that the reasoning was a key factor in its decision.

l6a

We conclude that we have jurisdiction to consider the

adequacy of both the section 7 consultation and the Bio-

logical Opinion that resulted from it while reviewing the

EPA’s final decision.

B. Standing

Petitioners who “allege [1] personal injury [2] fairly

traceable to the defendant’s allegedly unlawful conduct

and [3] likely to be redressed by the requested relief”

establish Article III standing. Allen v. Wright, 468 U.S.

737, 751, 104 S. Ct. 3315, 82 L. Ed. 2d 556 (1984). As De-

fenders’ members meet this three-part test, Defenders

has organizational standing to represent their interests.

Several Defenders’ members reside in Arizona and

photograph and observe in Arizona various named,

listed species—such as the cactus ferruginous pygmy

owl, Huachuca water umbel, and the other species noted

in Part I.C, supra—and hike and camp in these species’

various habitats. These members do so regularly and

plan to continue doing so in the future, because, among

other reasons, these activities bring them recreational,

aesthetic, and spiritual fulfillment. The members’ activi-

ties occur on and near land—such as the upper San

Pedro River region, the Sonoran Desert near Saguaro

National Park and Tortolita Mountains Park, and the

Verde River region—where significant commercial and

residential development is taking place, development

that depends on water pollution permits. The members

assert, consistently with the Biological Opinion, that

section 7 consultation has in the past led to mitigation

measures by real estate developers in these areas and

has thereby protected listed species and their habitat.

They further assert that the loss of section 7 consulta-

tion would mean that developers of future projects

17a

would not engage in such mitigation measures and that

listed species, and the members’ interest in their activi-

ties involving them, would thereby be harmed.

The members thus “observe[ | or work[ ] with .. .

particular animalls and plants] threatened by a federal

decision,” Lujan v. Defenders of Wildlife, 504 U.S. 555,

566, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992); allege a

harm to those animals and their habitat throughout Ari-

zona; and assert “that [they have] an aesthetic or recre-

ational interest in a particular place, or animal, or plant

species . . . impaired by a defendant’s conduct.” Eco-

logical Rights Found. v. Pac. Lumber Co., 230 F.3d

1141, 1147 (9th Cir. 2000) (citing Friends of the Earth,

Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 182-83,

120 S. Ct. 693, 145 L. Ed. 2d 610 (2000)); see also

Kootenai Tribe of Idaho v. Veneman, 313 F.3d 1094,

1109-10 (9th Cir. 2002) (holding that regular “recreation

and nature appreciation” on land covered by challenged

agency action established injury-in-fact). Those allega-

tions meet the criteria for demonstrating an adequate

injury in an environmental case.

The Home Builders argue that alleging harm

throughout the state of Arizona cannot establish stand-

ing, because the state encompasses too large an area to

permit a sufficiently specific injury-in-fact allegation.

The Defenders’ members who filed declarations, how-

ever, mention specific subareas within the state where

they engage in activities related to particular listed spe-

cies and where development is occurring. Our cases

require no greater precision. Res. Ltd., Inc. v. Robert-

son, 35 F.3d 1300, 1303 (9th Cir. 1993); see also Kootenai

Tribe, 313 F.3d at 1110 (finding standing where party

alleged harm to 58.5 million acres of land). Moreover, in

18a

light of the statewide impact of the EPA’s transfer deci-

sion, alleging an injury-in-fact covering large areas

within the state simply reflects the relatively broad na-

ture of the potential harm.

The alleged injuries are fairly traceable to the EPA’s

pollution permitting transfer decision. As alleged by

Defenders, that decision will remove water pollution

permitting decisions from the significant protections

provided by section 7.

Finally, the alleged injuries would be redressable by

a court order vacating or mitigating the EPA’s transfer

decision. The protections accorded by the Endangered

Species Act would then come back into operation.

Additionally, section 7(a)(2) of the Endangered Spe- —

cies Act contains both substantive and procedural re-

quirements, and the plaintiffs in this case have alleged

violations of both requirements. They thus have alleged,

in addition to substantive noncompliance, “procedural”

harms, as described in Lujan and subsequent cases—

here, lack of adequate consultation between the EPA

and the FWS, including reliance on a legally improper

Biological Opinion.

Reliance on procedural harms alters a plaintiffs bur-

den on the last two prongs of the Article III standing

test. See Lujan, 504 U.S. at 572 n.7, 112 S. Ct. 2130. To

establish standing by alleging procedural harm, the

members must show only that they have a procedural

right that, if exercised, cou/d protect their concrete in-

terests and that these interests fall within the zone of

interests protected by the statute at issue. See Pub.

Citizen v. Dep't of Transp., 316 F.3d 1002, 1015 (9th Cir.

2003), rev'd on other grounds, 541 U.S. 752, 124 8. Ct.

2204, 159 L. Ed. 2d 60 (2004); Tyler v. Cuomo, 236 F.3d

19a

1124, 1136 (9th Cir. 2000); Churchill County v. Babbitt,

150 F.3d 1072, 1077 (9th Cir. 1998), amended by 158

F.3d 491 (9th Cir. 1998).

The members have met these procedural harm re-

quirements. They have, first, established a reasonable

probability that the challenged action will threaten

their concrete interests. See Citizens for Better For-

estry v. U.S. Dep’t of Agric., 341 F.3d 961, 969-70 (9th

Cir. 2003); Douglas County v. Babbitt, 48 F.3d 1495,

1501 n.6 (9th Cir. 1995). We held in Citizens for Better

Forestry that violating the procedural requirements for

forestry decisions meets that bar, as the violation less-

ens the likelihood that environmental considerations will

be attended to in making those decisions. /d. at 972-75.

Similarly, the use of improper section 7 consultation by

reason of an inadequate biological opinion lessens the

likelihood that the impact of the proposed action on

listed species and their habitats will be recognized and

accounted for in making the transfer decision. See id. at

972.

An association has standing to sue on behalf of its

members who have individual standing if “the interests

at stake are germane to the organization’s purpose, and

neither the claim asserted nor the relief requested re-

quires the participation of individual members in the

lawsuit.” Laidlaw, 528 U.S. at 181, 120S. Ct. 693. The

interests at stake—protection of endangered species—

plainly relate to Defenders’ mission. Nor does this law-

suit require the active involvement of individual mem-

bers, as the relief sought will run equally to all of them.

Accordingly, we hold that Defenders has standing to

challenge the FPA’s pollution permitting transfer deci-

sion. See Defenders of Wildlife v. Flowers, 414 F.3d

20a

1066 (9th Cir. 2005) (holding that Defenders has stand-

ing to challenge particular construction permits in Ari-

zona because of “their members’ interest” in species that

might live where construction would occur).

III. The Merits

A. Standard of Review

Under the Endangered Species Act, each agency has

an obligation to “insure” that any action it takes is “not

likely to jeopardize” listed species or their critical habi-

tats. See § 1536(a)(2);* 50 C.F.R. § 402.15(a) (requiring

each agency to determine how to proceed “in light of its

section 7 obligations and the Service’s biological opin-

ion”). Defenders allege that the EPA failed to satisfy

* The relevant portions of section 7(a) of the Endangered Species Act

provide:

(1) The Secretary shall review other programs administered by

him and utilize such programs in furtherance of the purposes of

this chapter. All other Federal agencies shall, in consultation with

and with the assistance of the Secretary, utilize their authorities in

furtherance of the purposes of this chapter by carrying out pro-

grams for the conservation of endangered species and threatened

species listed pursuant to section 1533 of this title.

(2) Each Federal agency shall, in consultation with and with the

assistance of the Secretary, insure that any action authorized,

funded or carried out by such agency (hereinafter in this section

referred to as an “agency action”) 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, unless such agency has been granted an exemption

for such action by the Committee pursuant to subsection (h) of this

section. In fulfilling the requirements of this paragraph each

agency shall use the best scientific and commercial data available.

16 U.S.C. §8§ 1536(a)(1)-(2) (emphasis added).

2la

this obligation and thus acted arbitrarily and capri-

ciously, in violation of the Administrative Procedure

Act.” See 5 U.S.C. § 706(2)(A); Am. Mining Cong. v.

EPA, 965 F.2d 759, 763 (9th Cir. 1992) (applying

§ 706(2)(A) arbitrary and capricious review to § 1369(b)

petition). |

An agency decision will survive arbitrary and capri-

cious review if it is

~ rational, based on consideration of the relevant fac-

tors and within the scope of the authority delegated

to the agency by the statute. . . . Normally, an

agency rule would be arbitrary and capricious if the

agency has relied on factors which Congress had not

intended it to consider, entirely failed to consider an

important aspect of the problem, offered an explana-

tion for its decision that runs counter to the evidence

before the agency, or is so implausible that it could

not be ascribed to a difference in view or the product

of agency expertise.

Motor Vehicle Mfrs. Ass‘n v. State Farm Mutual Auto.

Ins. Co., 463 U.S. 29, 42-43, 103 S. Ct. 2856, 77 L. Ed.

2d 443 (1983) (citations omitted). Agency decisions may

not, of course, be inconsistent with the governing stat-

ute. 5 U.S.C. § 706(2)(A) (instructing courts to “set

aside” agency action “not in accordance with law”).

Also, internally contradictory agency reasoning renders

resulting action “arbitrary and capricious;” such actions

are not “founded on a reasoned evaluation of the rele-

vant factors.” Ariz. Cattle Growers’ Ass'n v. U.S. Fish

and Wildlife, 273 F.3d 1229, 1236 (9th Cir. 2001) (quot-

" All parties agree that arbitrary and capricious review applies to

Defenders’ petition for review.

22a

ing Marsh v. Or. Natural Res. Council, 490 U.S. 360,

378, 109 S. Ct. 1851, 104 L. Ed. 2d 377 (1989)); see also

Gen.Chem. Corp. v. United States, 817 F.2d 844, 857

(D.C. Cir. 1987) (finding agency action “arbitrary and

capricious” because it was “internally inconsistent and

inadequately explained”).

Defenders allege, in particular, that the EPA’s reli-

ance on the Biological Opinion was arbitrary and capri-

cious, as the Biological Opinion is itself invalid. See Res.

Ltd., 35 F.3d at 1304 (holding that an action agency may

not arbitrarily and capriciously rely on a flawed biologi-

eal opinion); Pyramid Lake Paiute Tribe v. U.S. Dep't of

the Navy, 898 F.2d 1410, 1415 (9th Cir. 1990) (same). An

agency can satisfy the arbitrary and capricious standard

of review, however, even if it relies on an “admittedly

weak” Biological Opinion, if there is no “information the

Service did not take into account which challenges the

[biological] opinion’s conclusions.” /d. at 1415 (cited in

Res. Ltd., 35 F.3d at 1304). The upshot is that we must

consider whether the EPA, through the Biological Opin-

ion or otherwise, considered all the relevant Endan-

gered Species Act factors and offered an explanation for

its decision that is both “plausible” and internally coher-

ent.

Applying this test, we first examine the consistency

of the EPA’s reasoning. Next, we examine the Biologi-

cal Opinion, including its legal conclusion regarding the

effects of the transfer decision on listed species and

their habitat. We then review the other information

relied on by the EPA.

23a

B. Coherent reasoning?

As an initial matter, the EPA’s approval of Arizona’s

transfer application cannot survive arbitrary and capri-

cious review because the EPA relied during the adminis-

trative proceedings on legally contradictory positions

regarding its section 7 obligations. Its reasoning was

therefore “internally inconsistent and inadequately ex-

plained.” Gen.Chem. Corp., 817 F.2d at 857.

The EPA definitively stated several times during the

decisionmaking process, including when announcing its

final decision, that section 7 requires consultation re-

garding the effect of a permitting transfer on listed spe-

cies. The agency so stated when announcing its Memo-

randum of Agreement with the FWS, see 66 Fed. Reg.

11,202, 11,206 (Feb. 22, 2001); when announcing that it

had initiated section 7 consultation regarding Arizona’s

application because, pursuant to 50 C.F.R. § 402.14(a),

approving that application “may affect” listed species,

see 67 Fed. Reg. 49,916, 49,917, 49,919 (Aug. 1, 2002);

when responding, in an unpublished document, to com-

ments regarding Arizona’s application (noting that

“[t]here is no doubt” that the pollution permitting trans-

fer “is an action mandating formal consultation under

section 7”); and when announcing the approval of Ari-

zona’s application. See 67 Fed. Reg. 79,629, 7°,630 (Dec.

20, 2002) (noting that section 7(a)(2) generally “re-

quires” consultation and that the EPA consulted with

FWS “under section 7(a)(2)”).

Also, before deciding that consultation was neces-

sary, the EPA first determined that transferring pollu-

tion permitting authority to Arizona “may affect” listed

species and their critical habitat. See 50 C.F.R.

§ 402.14(a) (requiring consultation when an agency de-

24a

termines its action “may affect” listed species or critical

habitat). The EPA, in its unpublished biological evalua-

tion, made this determination in recognition that in the

absence of section 7 consultation on each permitting de-

cision, “there will be a reduction in the number of mech-

anisms available to the [FWS] to protect Federally-

listed species and designated critical habitat in Arizona.”

Despite the lucidity and consistency of its position on

the consultation point in the administrative proceedings,

in litigation the EPA’s lawyers have taken varying

stances on the same issue. Before the Fifth Circuit, the

EPA “suggest[ed]” that section 7 compelled consultation

regarding pollution permitting transfers and, when nec-

essary to protect species, allowed conditioning such

transfers on formal agreements requiring states to fol-

low section 7 procedures when issuing permits. Am.

Forest & Paper Ass’n v. EPA, 137 F.3d 291, 297 (5th

Cir. 1998). The Fifth Circuit rejected the latter position

and did not address the former. /d. at 298 & n.6.

The EPA’s brief in this case states that American

Forest “supports a finding that EPA lacks” authority to

protect endangered species when considering pollution

permitting approvals. The same brief, however, main-

tains that we need not decide the question because the

agency did not rely on this position in its decision in this

case. At oral argument, the EPA declined to take a posi-

tion as to whether it has an obligation under section

7(a)(2) to consult with FWS with regard to permitting

transfer decisions—even though, during the decision-

making process, the agency unequivocally stated several

times that it does have such an obligation.

25a

The EPA’s post-decision equivocation cannot have

any impact on our consideration of the validity of the

transfer decision. We must review the EPA’s actions

based on the “grounds . . . upon which the record dis-

closes that its action was based.” SEC v. Chenery Corp.

(Chenery 1), 318 U.S. 80, 87, 63 S. Ct. 454, 87 L.Ed. 626

(1943); see also Gifford Pinchot Task Force v. U.S.

FWS, 378 F.3d 1059, 1072 n.9 (9th Cir. 2004). The re-

cord shows unequivocally that the EPA based the action

under review in this case on its belief that section 7 re-

quired consultation. We must judge its reasoning taking

that position into account.

Doing so, we conclude that the obligation to consult

—which, under the regulations, applies only to federal

agency actions that “may affect” listed species, 50

C.F.R. § 402.14(a)—and the reasons given in the Biologi-

cal Opinion for concluding that the transfer decision

would not have an indirect effect on endangered species

cannot coexist under section 7(a)(2). The Biological

Opinion reasoned that there could be no such effect, be-

cause (1) the EPA has no authority to disapprove trans-

fer applications because of an impact on listed species,

section 7(a)(2) of the Endangered Species Act notwith-

standing; (2) any impact on the post-transfer protection

of listed species was the result of Congress’ determina-

tion that states have no consultation or mitigation obli-

gations, not of the transfer decision; and (3) the poten-

tial future impact on listed species would be caused en-

tirely by new private development, and the transfer de-

‘cision would not cause such development. By relying on

this line of reasoning after determining that it did have

a consultation obligation, the EPA decided that it had to

consult but had no authority to do anything concerning

the matter about which it had to consult. One would not

26a

expect that Congress would set up such a nonsensical

regime. Not surprisingly, it did not.

Section 7(a)(2) makes no legal distinction between

the trigger for its requirement that agencies consult

with FWS and the trigger for its requirement that agen-

cies shape their actions so as not to jeopardize endan-

gered species.’ Instead, in one, integrated provision,

the statute provides that agencies “shall, in consultation

with and with the assistance of the |[F WS], 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 spe-

cies or result in the destruction or adverse modification

of [critical] habitat of such species. . . .” An agency’s

obligation to consult is thus in aid of its obligation to

shape its own actions so as not to jeopardize listed spe-

cies, not independent of it. Both the consultation obliga-

tion and the obligation to “insure” against jeopardizing

listed species are triggered by “any action authorized,

funded, or carried out by such agency,” and both apply

if such an “action” is under consideration.

This being the case, the two propositions that under-

lie the EPA’s action—that (1) it must, under the Endan-

gered Species Act, consult concerning transfers of CWA

permitting authority, but (2) it is not permitted, as a

" As described above, section 7 consultation is triggered by a

determination that an agency action “may affect” listed species, 50

C.F.R. § 402.14(a), and an obligation to act to mitigate harm to such

species is triggered if the FWS determines that the agency action is

“likely to jeopardize” listed species or “adverse{ly| modifly]" their

habitat. § 402.14(h). If an ageney action cannot legally affect listed

species—as the Biological Opinion concludes regarding the EPA's

approval of Arizona's appiication—then the “may affect” standard is not

met.

27a

matter of law, to take into account the impact on listed

species in making the transfer decision—cannot both be

true. Because the agency’s decisionmaking was based

on contradictory views of the same words in the same

statutory provision, the ultimate decision was not the

result of reasoned decisionmaking.

Additionally, the third prong of the Biological Opin-

ion’s reasoning—that it is private development, not the

EPA’s transfer decision, that would cause any impact on

listed species—suffers from an independent lack of plau-

sibility. Events can, of course, have more than one

cause. Events can be caused by several actions in a

“but-for” causal chain. If any one of the necessary ac-

tions does not take place, the ultimate event does not

occur. See, e.g., Olympic Airways v. Husain, 540 U.S.

644, 653, 124 S. Ct. 1221, 157 L. Ed. 2d 1146 (2004)

(“[T Jhere are often multiple interrelated factual events

that combine to cause any given injury.”). Obviously,

without private decisions to construct new develop-

ments, there will be no Clean Water Act construction

permits and no impact from the issuance of such permits

on listed species or their habitats. Just as obviously,

without the transfer of permitting authority from the

federal to the state government, developers could be

required, as they were before the transfer decision, to

mitigate any impact from their development on listed

species. So the impact of private development will be

different depending upon whether the federal or state

government does the permitting. In other words, the

two sets of decisions together—the private development

decisions and the governmental transfer decision—but

not either one independentiy, have the potential to affect

listed species and their habitat. The Biological Opinion’s

determination to the contrary disregards the obvious

28a

cause analysis and thus fails the reasoned decision-

making standard.

For these reasons, the transfer decision cannot

stand. We must remand to the agency for a plausible

explanation of its decision, based on a single, coherent

interpretation of the statute.

C. Statutory power to protect species?

Even viewed in isolation, the first explanation for the

EPA’s no impact conclusion—that the loss of section 7

consultation was not an effect of its transfer decision

because the agency had no authority to base its transfer

decision on the loss of consultation—fares no better.

Under the statutory regime, the statutory obligation

is to “insure” against likely jeopardy of listed species.

The two critical factors triggering this obligation are

(1) that the “action” be one for which the agency can

fairly be ascribed responsibility, namely, an action “au-

thorized, funded or carried out” by the agency; and

(2) that there is the requisite nexus to an impact on

listed species, namely, a direct or indirect effect “likely

to jeopardize the continued existence of any endangered

species or threatened species or result in the destruction

or adverse modification of [critical habitat].” 16 U.S.C.

§ 1536(a)(2). There are, consequently, three relevant

statutory concepts governing the reach of sect:on

7(a)(2): the nexus to any impact on listed species, the

nature of the obligation to “insure” against jeopardizing

listed species, and the actions covered.

29a

1. Nexus

The case law indicates that a negative impact on

listed species is the likely direct or indirect effect of an

agency’s action only if the agency has some control over

that »sult. Otherwise, the requisite nexus is absent.

A seminal section 7 indirect effects case, National

Wildlife Federation v. Coleman, 529 F.2d 359 (5th Cir.

1976), held that the Department of Transportation was

responsible for development encouraged by interstate

highway construction, because the Department did “con-

trol this development to the extent that [it] control[s]

the placement of the highway and interchanges.” /d. at

374. Recently, the Supreme Court in Department of

Transportation v. Public Citizen, 541 U.S. 752, 770, 124

S. Ct. 2204, 159 L. i&d. 2d 60 (2004) endorsed a similar

standard to that used in National Wildlife Federation,

albeit under a different statute.

Public Citizen concerned the application of the Na-

tional Environmental Policy Act (NEPA), 42 U.S.C. §§

4321-4370f, regulations to the U.S. Department of Trans-

portation’s (DOT) regulations governing safety rules for

Mexican trucks traveling on American roads. The

NEPA regulations share with the Endangered Species

Act regulations a similar definition of “indirect effects.”

Compare 40 C.F.R. § 1508.8(b) (“Indirect effects .. .

are caused by the action and are later in time or farther

removed in distance, but are still reasonably foresee-

able.”) with 50 C.F.R. § 402.02 (“Indirect effects are

those that are caused by the proposed action and are

later in time, but still are reasonably certain to occur.”).

30a

The question in Public Citizen was whether DOT was

required under NEPA to develop an environmental im-

pact statement with regard to the poliution caused by

the entry of Mexican trucks onto United States high-

ways under the North American Free Trade Agreement.

The Court held “that where an agency has no ability to

prevent a certain effect due to its limited statutory au-

thority over the relevant actions, the agency cannot be

considered a legally relevant ‘cause’ of the effect.” Pub.

Citizen, 541 U.S. at 770, 124 S. Ct. 2204 (emphasis

added); see also id. at 767, 124 S. Ct. 2204 (analogizing

“cause” ing ~y for purpose of defining “indirect effects”

to proximate cause inquiry in tort law). ‘:

Given the similarity in the applicable regulations, we

adopt the Public Citizen standard for purposes of deter-

mining the likely effects of agency action under section

7(a)(2) of the Endangered Species Act. Accordingly,

deciding whether the Biological Opinion followed En-

dangered Species Act regulations defining “indirect ef-

fects” requires us to determine whether the EPA can

consider and act upon the loss of section 7 consultation

benefits in deciding whether to transfer pollution per-

mitting authority to Arizona. If so, then the EPA’s

transfer decision can be a cause of the loss of section 7

consultation benefits; the loss of those benefits should

have been included in tne Biological Opinion as an indi-

rect effect of the potential transfer decision; and the loss

of those benefits should have been considered and acted

upon by the EPA.

3la

2. “Insure that any action . . . is not likely to jeop-

ardize the continued existence of any [listed] species”

Authority over the loss of section 7(a)(2) consultation

could be grounded in either the Clean Water Act or the

Endangered Species Act. The former option is not pre-

sented here,'’ so we focus on whether the obligation in

section 7(a)(2) to “insure” against jeopardizing listed

species empowers the EPA to make decisions to pre-

serve listed species and their habitat even if the Clean

Water Act does not so specify. If so, then the EPA has

the authority—indeed, because section 7(a)(2) speaks in

mandatory terms, the duty—to deny a pollution permit-

ting transfer application that meets Clean Water Act

standards but would jeopardize protected species.

The language in section 7(a)(2) providing that each

federal agency “shall . . . insure that any action autho-

rized, funded or carried out by such agency” will not

jeopardize listed species or their critical habitat is ad-

dressed to each agency, without exception. Our question

is: what does it require each agency to do?

The ordinary meaning of “insure” as used in this con-

text requires agencies to take action, as dictionary defi-

nitions make clear. To “insure” is “[t]o make (a person)

sure (of a thing)” and (“[tjo make certain, to secure, to

guarantee (some thing, event, etc.)”).'* VII THE Ox-

"No party questioned the EPA's determination that Arizona's

transfer application met the Clean Water Act factors. Cf Am. Forest

& Paper Ass'n v. EPA, 137 F 3d 291, 298 (5th Cir. 1998) (“EPA's dis-

cretion lies . . . in ensuring that those [§ 1342(b)] criteria are met.”).

" We refer to such actions as “agency actions.”

'’ This definition is consistent with those in dictionaries in print at the

time Congress enacted the Endangered Species Act in 1973. See, e.g.

WERBSTER’'S NEW WORLD DICTIONARY OF THF AMERICAN LANGUAGE

——

32a

FORD ENGLISH DICTIONARY 1059 (2d ed. 1989) (empha-

sis removed). Unless an agency has the authority to

take measures necessary to prevent harm to endangered

species, it is impossible for that agency to “make cer-

tain” that its actions are not likely to jeopardize those

species. Otherwise, agencies would be forced to choose

between violating section 7’s prohibition on agency ac-

tions that are likely to jeopardize listed species and act-

ing beyond their powers to protect such species.

The Supreme Court’s seminal section 7 case, Tennes-

see Valley Authority v. Hill, 437 U.S. 153, 180, 98 S. Ct.

2279, 57 L. Ed. 2d 117 (1978), confirms this textual inter-

pretation:

One would be hard pressed to find a statutory

provision whose terms were any plainer than those in

§ 7 of the Endangered Species Act. Its very words

affirmatively command all federal agencies ‘to in-

sure that actions authorized, funded, or carried out

by them do not jeopardize the continued existence’ of

an endangered species or ‘result in the destruction or

modification of habitat of such species. . . . This

language admits of no exception.

466, 731 (2d College Ed. 1972) (defining “insure” as “same as ensure,”

which is defined as “to make sure or certain; guarantee: secure”). “In-

sure” has multiple definitions, but the alternatives are inapposite to

section 7(a\2). They include “to pledge one’s credit,” “to engage by

pledge or contract,” and “to secure the payment of a sum of money in

the event of loss.” THE OXFORD ENGLISH DICTIONARY 1059 (2d ed.

1989).

33a

437 U.S. at 173, 98 S. Ct. 2279 (first alteration added,

other alterations in original) (citation omitted).'"* An

“affirmative command” by a superior authority—here,

Congress—ordinarily carries with it both the obligation

and the authority to obey that command. For example,

despite policy arguments in favor of continuing con-

struction of the dam, the Court in Hill relied on Con-

gress’s use of “the plainest of words” and section 7’s

equally plain legislative history, id. at 194, 98 S. Ct.

2279, to hold that further construction was in “irrecon-

cilable conflict” with section 7. /d. at 193, 98 S. Ct. 2279;

see also id. at 184, 98 S. Ct. 2279 (“The plain intent of

Congress in enacting this statute was to halt and reverse

the trend toward species extinction, whatever the

cost.”). |

'* The Chamber refers to a case of this court as purportedly limiting

Hill, National Wildlife Federation v. Burlington Northern Railroad,

Inc., 23 F 3d 1508 (9th Cir. 1994). This court cannot, of course, limit any

holding of the Supreme Court; only the Court or, for statutory cases,

Congress may do that. See Rodriguez de Quijas v. Shearson/Am.

Express, Inc., 490 U.S. 477, 484, 109 S. Ct. 1917, 104 L. Ed. 2d 526

(1989).

Further, National Wildlife Federation was not a case concerning a

federal action, and therefore did not raise any section 7(a)(2) issue.

Moreover National Wildlife Federation merely supports the obvious

proposition that a preliminary injunction is an equitable remedy and a

court need not grant an injunction “for every violation of law.” 23 F.3d

at 1512.

Finally, far from abandoning the statutory interpretation in Hill, the

Supreme Court has since National Wildlife Federation relied on and

quoted Hill in reiterating the conclusion that “Congress| | inten[{ded]

to provide comprehensive protection for endangered and threatened

species.” See Babbitt v. Sweet Home Chapter, 515 U.S. 687, 699, 115 S.

Ct. 2407, 132 L. Ed. 2d 597 (1994).

34a

Hill’s analysis of the legislative history of the Endan-

gered Species Act confirms that the authority conferred

on agencies to protect listed species goes beyond that

conferred by agencies’ own governing statutes. Hill

noted that earlier endangered species legislation, as well

as earlier versions of the bills that became the present

Endangered Species Act, included the qualifier “insofar

as is practicable and consistent with [an agency’s] pri-

mary purpose.” See Pub. L. 89-669 § 1(b), 80 Stat. 926

(1966); Hill, 437 U.S. at 181 & n.26, 98 S. Ct. 2279. The

final version of the statute “carefully omitted [those]

reservations,” id. at 182, 98 S. Ct. 2279, and replaced

them with the universal terms of section 7. The “pointed

omission” of such qualifications amounted to an “explicit

congressional decision to require agencies to afford first

priority to the declared national policy of saving endan-

gered species.” /d. at 185, 98 S. Ct. 2279 (emphasis

added); see also id. at 174, 98 S. Ct. 2279 (“Congress

intended endangered species to be afforded the highest

of priorities.”) (quoted in Wash. Toxics Coalition v.

EPA, 413 F.3d 1024, 1033 (9th Cir. 2005)).

Another aspect of the statute’s structure and history,

not directly at issue in Hill, bolsters the conclusion that

section 7 includes an affirmative grant of authority to

attend to protection of listed species within agencies’

authority when they take actions covered by section

7(a)(2). Section 7(a)(1) of the Endangered Species Act

directs agencies to “utilize their authorities in further-

ance of the purposes of this chapter by carrying out pro-

grams for the conservation of [listed] species.” 16

U.S.C. § 1536(a)(1). Section 7(a)(2), in contrast, does not

refer to agencies’ existing “authorities,” but instead di-

rects agencies that, when considering covered “actions,”

35a

they are to proceed in a manner not likely to jeopardize

listed species.

The House Report indicates that this distinction be-

tween the two sections was, as one would expect, delib-

erate. The Report noted the requirement of present

section 7(a)(2) as imposing a “further require{ment]”

beyond that of section 7(a)(1)."" See H.R. Rep. No. 93-

412, at 14 (1973), reprinted in 1 CONGRESSIONAL RE-

SEARCH SERVICE, A LEGISLATIVE HISTORY OF THE EN-

DANGERED SPECIES ACT OF 1973, AS AMENDED IN 1976,

1977, 1978, 1979, AND 1980, at 153 (1982) [hereinafter

LEGISLATIVE HISTORY] (emphasis added). The con-

trasting language of the two sections indicates that the

“further requirement” imposed by section 7(a)(2) turns

on the distinction between using existing authority to

promote conservation of species and conferring an addi-

tional, do-no-harm obligation—and reciprocal author-

ity—applicable when the agency’s own actions could

cause harm to endangered species.

That Congress so provided is confirmed by Repre-

sentative Dingell’s statement concerning the final bill,

relied upon by the Supreme Court as an authoritative

statement of section 7’s intent:"° “(T]he agencies of

Government can no longer plead that they can do noth-

ing about [harm to threatened or endangered species].

They can, and they must. The law is clear.””

This history is consistent with the “canon of statutory interpreta-

tion which holds that terms of the same statute are not to be construed

so as to be redundant.” Agredano v. Mutual of Omaha Cos., 75 F.3d

541, 544 (9th Cir. 1996).

” Representative Dingell was the House manager of the Endangered

Species Act. Hill, 437 U.S. at 183, 98 S. Ct. 2279.

36a

Hill, 437 U.S. at 184, 98 S. Ct. 2279 (quoting 119

Cong. Rec. 42913 (1973), emphasis in Hill)."

After the Supreme Court decided Hill in 1978, Con-

gress amended the Endangered Species Act, creating a

narrow exception to section 7’s requirements. See Pub.

L. No. 95-632, 92 Stat. 3751 (1978). The 1978 amend-

ment did not change section 7’s substantive provisions.

Instead, Congress created a process by which agencies

could apply to an “Endangered Species Committee” for

exemptions, § 1536(g), and specified standards by which

to judge such-applications, § 1536(h). The Senate Re-

port described this exemption as a direct response to

Hill, stating that Hill represented “the type of Federal

action which should be eligible for review” for a section

7(g) exemption. S. Rep. No. 95-874, at 2 (1978), re-

printed in 3 LEGISLATIVE HISTORY, at 940.

Another portion of Dingell’s same statement was quoted in an

earlier case of this court, County of Okanogan v. Natl Marine

Fisheries Serv., 347 F.3d 1081 (9th Cir. 2003), to support the proposi-

tion that “(t}here is authority that the [Endangered Species Act] does

not grant powers to federal agencies they do not otherwise have.” /d.

at 1085 (citing Hill, 437 U.S. at 183, 98 S. Ct. 2279). The portion of

Dingell’s statement quoted in Okanogan was also quoted in Hill, but it

is not the Supreme Court's own language. Much more of Dingell’s same

statement, including the language we quote in the text, appears as well

in Hill.

To say that “there is authority” regarding a proposition is not to state

a holding of this court. There is, as we judges are well aware in our

daily work, often conflicting “authority” for any proposition. Okanogan

had no need to survey, as we do today, all the relevant authority, as it

went on to decide the case before it on independent grounds. Because

the Okanogan panel rested its opinion on other points, it did not decide

the question now before us.

37a

The limited exemption created by the 1978 amend-

ments and contained in sections 7(g) and (h) has no di-

rect application here, as the EPA did not apply for it. Its

terms, however, serve to confirm that the interpretation

of the “insure” requirement in Hil! remains controlling.

Sections 7(g) and (h) focus on practical concerns, not

legal constraints on agency power to protect species.

To obtain an exemption, an agency must show that

“there are no reasonable and prudent alternatives to

the agency action,” the benefits of the action “clearly

outweigh the benefits of alternative course of action con-

sistent with conserving the species or its critical

habitat, and such action is in the public interest,”

and the action has regional or national significance.

§ 1536(h)(1)(A)(i)-(ili). Critically, no section 7(g) exemp-

tion may be granted until after consultation is com-

pleted. § 1536(g)(1); 50 C.F.R. § 402.15(c). Thus, at the

time consultation occurs, all parties must operate under

the assumption that all of section 7(a)(2)’s substantive

requirements apply to the action agency. The net effect

of the section 7(g) and (h) exemption, then, is to leave

the consultation requirement in effect as it was previ-

ously; to leave in place the kinds of “agency actions” to

which the section 7(a)(2) requirement applies; but to

provide a set of procedures and substantive standards

for limiting in some circumstances the mandate tnat

agencies “insure” that their actions are not likely to

jeopardize listed species.

That the 1978 amendments reiterated rather than

retreated from /Hill’s underlying understanding of the

Endangered Species Act is confirmed by the history of

those amendments. The House Report summarized Cun-

gress’s understanding of Hill's conclusion that “[t]he

38a

pointed omission of any type of qualifying language in

the statute revealed congressional intent to give the con-

tinued cxistence of endangered species priority over the

primary missions of federal agencies.” H.R. Rep. No.

95-1625, 10 (1978), reprinted in 2 LEGISLATIVE HIs-

TORY, at 734 (emphasis added). Congress did nothing to

alter this conclusion. Instead, in enacting the 1978

amendments, Congress once again refused to adopt an

amendment that would have limited section 7 compliance

to situations when compliance is “practicable and consis-

tent with [agencies] primary responsibilities.” S. Rep.

No. 95-874, at 58-59 (1978), 3 LEGISLATIVE HISTORY at

996-97. Congress’s rejection of this amendment under-

lines its continued understanding, consistent with Hill,

that section 7(a)(2) specifies that agencies must when

acting affirmatively refrain from jeopardizing listed

species, even if the agency’s governing statute does not

so provide. The only exception to this rule lies in a sec-

tion 7(g) exemption.

We conclude that the obligation of each agency to

“insure” that its covered actions are not likely to jeopar-

dize listed species is an obligation in addition to those

created by the agencies’ own governing statute. The

next question we must decide is whether the EPA’s

transfer decision is the kind of agency action to which

that obligation applies.

3. Actions “authorized, funded, or carried out” by an

agency

As we interpret section 7(a)(2) in light of the case law,

the Endangered Species Act confers authority and re-

sponsibility on agencies to protect listed species when the

agency engages in an affirmative action that is both

within its decisionmaking authority and unconstrained by

~~

39a

earlier agency commitments. The decision to approve a

state’s pollution permitting transfer application meets

these criteria and is thus the sort of decision to which

section 7(a)(2) applies. The Biological Opinion’s reason-

ing that the EPA had no choice but to disregard the im-

pact of the transfer on listed species in Arizona was

therefore inconsistent with the statute.

Section 7(a)(2) applies to all agency actions “autho-

rized, funded, or carried out” by the agency in question.

This language does indicate that some agency actions are

not covered—those the agency does not “authorize| ],

fund| J, or carr{y] out.” Our determination as to whether

the transfer decision is covered thus depends on the

meaning of those terms."

The regulatory provision that delineates the actions

covered by section 7(a)(2) reads: “Section 7 and the re-

quirements of this Part apply to all actions in which there

is discretionary Federal involvement or control.” 50

C.F.R. § 402.03. Although there is no statutory reference

to “discretionary involvement or control,” there is the

limitation, just noted, to actions “authorized, funded, or

carried out” by the agency. As that limiting language is

the only possible source for the regulation’s “discretion-

ary” qualification of “all actions,” we take the regulation

as a gloss on what the statutory limitation means and

interpret the term “discretionary” accordingly.

' Because we conclude that approving Arizona's application is an

“authorizing” action, and because no party argued that the EF PA’s use

of some other authority—such as its grant-making authority, see 33

U.S.C. § 1256, which helped Arizona implement the pollution permitting

program—we do not decide whether any action besides the transfer

decision triggered section 7(a)(2).

40a

Arizona and the Chamber note that the Clean Water

Act specifies that the EPA “shall approve” state applica-

tions that meet certain enumerated factors. 33 U.S.C.

§ 1342(b). They argue that this language precludes EPA

“discretion” to act on behalf of listed species, and that,

applying 50 C.F.R. § 402.03, section 7 does not apply.

However, “an agency cannot escape its obligation to com-

ply with the [Endangered Species Act] merely because it

is bound to comply with another statute that has consis-

tent, complementary objectives.” Wash. Toxics, 413 F.3d

at 1032. Applying this principle, we reject, for two rea-

sons, Arizona and the Chamber’s argument that

§ 1342(b) of the Clean Water Act eliminates any obliga-

tion to follow section 7(a)(2) of the Endangered Species

Act. .

First, the EPA makes no argument that its transfer

decision was not a “discretionary” one within the mean-

ing of 50 C.F.R. § 402.03. Indeed, it could not so argue

for, as we have seen, the agency recognizes that it hada

duty to consult, a duty the regulations would preclude if

the federal involvement in or control of the transfer deci-

sion was not sufficiently “discretionary.” We may not

affirm the EPA’s transfer decision on grounds not relied

upon by the agency. See Chenery 1, 318 U.S. at 87, 63 S.

Ct. 454; see also Gifford Pinchot Task Force, 378 F.3d at

1072 n.9. Further, we ordinarily defer to an agency's

interpretation of its own regulation. See United States v.

Cleveland Indians Baseball Co., 532 U.S. 200, 220, 121 S.

Ct. 1433, 149 L. Ed. 2d 491 (2001). As the EPA evidently

does not regard § 402.03 as excluding the transfer deci-

sion, we should not so interpret the regulations.

4la

Second, cases applying § 402.03 are consistent with

our understanding that the regulation’s reference to

“discretionary . . . involvement” is congruent with the

statutory reference to actions “authorized, funded, or

carried out” by the agency. Put another way, imposing

section 7(a)(2)’s substantive requirements in those cases

would have gone beyond the limited command of the stat-

ute.

Our § 402.03 “discretionary . . . involvement or con-

trol” cases hold section 7(a)(2) inapplicable if the agency

in question had “no ongoing regulatory authority” and

thus was not an entity responsible for decisionmaking

with respect to the particular action in question. Wash.

Toxics, 413 F.3d at 1033. For example, we have relied on

the “discretionary . . . involvement” regulation to find

section 7(a)(2) inapplicable where the agency lacked any

decisionmaking authority over the action of the kind

challenged. See Ground Zero Ctr. for Non-Violent Ac-

tion v. U.S. Dep’t of the Navy, 383 F.3d 1082, 1092 (9th

Cir. 2004) (holding that the action at issue fell outside the

agency's authority because the risk of harm to listed spe-

cies arose from the President’s decision regarding the

Navy’s nuclear submarine force, not the Navy’s obedi-

ence to that order); see also Marbled Murrelet v. Babbitt,

83 F.3d 1068, 1074 (9th Cir. 1996) (holding section 7(a)(2)

inapplicable where a different agency made the ultimate

decisions, while the respondent agency “merely provided

advice,” without authorizing, funding or carrying out

anything). Other cases have found section 7(a)(2) inap-

plicable where the challenged action was legally foreor-

dained by an earlier decision, such as where the agency

lacked the ability to amend an already-issued permit “to

address the needs of endangered or threatened species.”

Envtl. Prot. Info. Ctr. v. Simpson Timber Co., 255 F.3d

42a

1073, 1082 (9th Cir. 2001) (cited in Wash. Toxics, 413

F.3d at 1032) (applying § 402.16, which has similar lan-

guage to § 402.03); see also Sierra Club v. Babbitt, 65

F.3d 1502, 1509 (9th Cir. 1995) (cited in Wash. Toxics,

413 F.3d at 1032) (holding that section 7(a)(2) did not

apply because the agency had no “{ Jability to influence”

a project based on a right-of-way granted prior to the

Endangered Species Act’s enactment).

In contrast, we have held that section 7(a)(2) does

apply where the agency in question had continuing

decisionmaking authority over the challenged action.

See Wash. Toxics, 413 F.3d at 1032 (holding that

section 7(a}(2) applies to the EPA’s registration of pesti-

cides because of its “ongoing discretion to register pesti-

cides, alter pesticide registrations, and cancel pesticide

registrations”); Turtle Island Restoration Network v.

Nat'l Marine Fisheries Serv., 340 F.3d 969 (9th Cir.

2003) (holding that section 7(a)(2) applies to the granting

of permits—a quintessential “authorizing” action—for

future fishing); see also Sierra Club, 65 F.3d at 1508 (cit-

ing O’Neill v. United States, 50 F.3d 677, 680-81 (9th Cir.

1995), and noting that section 7 applies to already-ap-

proved projects “if the project’s implementation de-

pended on an additional agency action”); Envtl? Prot.

Info. Ctr., 255 F.3d at 1082; Natural Res. Def. Council v.

Houston, 146 F.3d 1118, 1125-26 (9th Cir. 1998) (holding

that section 7(a)(2) applies to “renewal of water con-

tracts” because the agency had power to set the terms

of—that is, to “authorize”—the renewed contracts, and

was not bound to reaffirm merely the previously-negoti-

ated terms); Pac. Rivers Council v. Thomas, 30 F.3d

1050, 1053 (9th Cir. 1994) (holding that section 7(a)(2) did

apply when there was “ongoing agency action” in that the

43a

agency retained power to authorize and carry out land

use decisions).

In sum, we understand our cases applying the “dis-

eretionary . . . involvement” regulation to interpret

that regulation to be coterminous with the statutory

phrase limiting section 7(a)(2)’s application to those cases

“authorized, funded, or carried out” by a federal agency.

Where a challenged action has not been “authorized,

funded, or carried out” by the defendant agency, we have

held that section 7(a)(2) does not apply. Where the chal-

lenged action comes within the agency’s decisionmaking

authority and remains so, it falls within section 7(a)(2)’s

scope."

The dissent concludes that because the Clean Water Act requires

the EPA to consider a list of nine requirements when evaluating a

state’s pollution permitting transfer application, the EPA had no

discretion to reject Arizona’s application on Endangered Species Act

grounds. The EPA has repeatedly taken the position that the question

whether the EPA has sufficient discretion, applying 50 C.% .R. § 402.03,

under the Endangered Species Act is not before us and has twice asked

us to remand any question concerning such discretion. See EPA CR

28(j) letter of July 27, 2005 (“EPA did consult. The only issue before

this Court is the adequacy of that consultation. For the same reason,

the Court should not reach the question regarding whether the EPA

has sufficient discretion to trigger consultation regarding the approval

of the transfer of 402 permitting authority to the State.”); EPA CR 28@)

letter of Aug. 4, 2005 (“Respondents again emphasize that the issue of

whether or not the [EPA] can properly rely on 50 C.F.R. § 402.03 in

deciding whether or not it must consult regarding its approval of the

State of Arizona's Clean Water Act 402 Permitting Program is not

before the Court in this case because EPA did consult regarding the

approval of the program.”). As noted in Part II1.B, supra, the EPA

has taken contradictory positions regarding its section 7(a)(2) obliga-

tions. The dissent does not explain its disagreement with that portion

of our opinion.

The dissent argues that we should nonetheless affirm the KE PA’s

44a

Like the agencies in Washington Toxics, Pacific

Rivers and Houston but not the other § 402.03 cases

noted above, the EPA had exclusive decisionmaking au-

thority over Arizona’s pollution permitting transfer ap-

plication. The EF PA’s decision authorized the transfer,

thus triggering section 7(a)(2)’s consultation and action

requirements.

4. Other Cireuits

Although Washington Toxics and the cases are fully

consistent with our analysis, this case is the first in which

we have specifically addressed the question whether sec-

tion 7(a)(2) of the Endangered Species Act provides a

modicum of additional authority to agencies, beyond that

conferred by their governing statutes, to protect listed

species from the impact of affirmative federal actions.

Other circuits, however, have considered the question.

The reasoning of those opinions reflects an existing

intercircuit conflict on the question before us, with two

circuits reading section 7(a)(2) as we do and two conclud-

ing that section 7 does not itself authorize agencies to

protect listed species even when it is their own action

that is jeopardizing then. Compare Defenders of Wildlife

v. Administrator, EPA, 882 F.2d 1294, 1299 (8th Cir.

1989), and Conservation Law Found. v. Andrus, 623

action based on § 402.083 because the question is one of statutory

interpretation. But that is simply not so; § 402.08 is a regulation, vot a

statute. The dissent offers no analysis of the key statutory provision,

section 7(a)(2) of the Endangered Species Act, nor does it offer any

response to our interpretation of the plain language, intent and history

of that section. Although the dissent does offer an interpretation of the

Clean Water Act, that interpretation only matters if we are wrong

about section 7(a)(2) of the Endangered Species Act and the EPA was

wrong under 50 C.F.R. § 402.05 in consulting about the transfer of

permitting authority.

45a

F.2d 712, 715 (ist Cir. 1979) with Am. Forest & Paper

Ass'n v. EPA, 137 F.3d 291, 294, 298-99 (Sth Cir. 1998),

and Platte River Whooping Crane Critical Habitat

Maint. Trust v. FERC, 962 F.2d 27, 34 (D.C. Cir. 1992).

We do not find the D.C. Circuit and Fifth Circuit cases

persuasive, as they do not reflect a full consideration of

the text and history of section 7(a)(2).

The First Circuit, writing a year after the Supreme

Court decided Hill, noted that the Endangered Species

Act “will continue to apply of its own force to major ac-

tions taken by the [agency],” regardless of the contents

of the specific statute under which the agency acted.

Conservation Law Found., 623 F.2d at 715. Thus, al-

though the governing statute in that case may have con-

tained standards “less stringent than those of the | En-

dangered Species Act]” with regard to the protection of

listed species, “[t]he [Endangered Species Act] by its

terms applies to all action by the Secretary.” Jd. Conse-

quently, “[i]f [the secretary] cannot . . . insure that

exploration wil] not jeopardize the continued existence of

[listed species], he will not approve exploration plans.”

Id.

A decade later, the Eighth Circuit echoed Conserva-

tion Law Foundation, writing that “[e]ven though a fed-

eral agency may be acting under a different statute, that

agency must still comply with the [Endangered Species

Act].” Defenders of Wildlife, 882 F.2d at 1299; John W.

Steiger, The Consultation Provision of Section 7(a)(2) of

the Endangered Species Act and Its Application to

Delegable Federal Programs, 21 ECOLOGY L.Q. 243, 274

(1994) (describing as “well established” the proposition

that “section 7(a)(2) provides an independent source of

46a

authority that is in addition to the authority the Agency

is granted in its programmatic statutes”).

The D.C. Circuit has indicated that the Endangered

Species Act does not empower an agency to impose con-

ditions on an interim, annual license that, unlike the pol-

lution permitting transfer decisions at issue here, the

agency was obliged to issue without any deliberation. In

so concluding, the D.C. Circuit noted in passing the lan-

guage of section 7(a)(2), but reasoned that section 7(a)(1)

instructs agencies to “utilize their authorities,” and that

this section 7(a)(1) language “does not expand the pow-

ers conferred on an agency by its enabling act.” Platte

River, 962 F.2d at 34 (emphasis in original).

Platte River did not recognize the obvious differences

between section 7(a)(1) and 7(a)(2) in both language and

purpose. The D.C. Circuit did not, for example, discuss

at all the meaning of the term “insure” in section 7(a)(2),

absent from section 7(a)(1). Nor did it notice the differ-

ence between affirmative agency attempts to protect

listed species (section 7(a)(1)) and a do-no-harm directive

pertaining to affirmative agency actions with likely ad-

verse impact on listed species (section 7(a)(2)). Finally,

the D.C. Circuit in P/atte River did not mention the avail-

ability of exemptions from section 7(a)(2) under the 1978

amendments, or the repeated decision of Congress not to

approve proposed amendments that would have limited

the reach of section 7(a)(2) so as to accord with the D.C.

Circuit's reading of the unamended statute. For all these

reasons, we do not find Platte River's cursory consider-

ation of the question persuasive.

The Fifth Circuit relied on Platte River to hold that

section 7(a)(2) does not permit the EPA to require a state

to consult with FWS before issuing a water pollution per-

47a

mit. Am. Forest & Paper Ass'n, 137 F.3d at 294, 298-99.

While we do not pass on the precise question decided in

American Forest, we do note that, aside from the defi-

ciencies of Platte River on which the Fifth Circuit relied,

American Forest rested on a fundamental misconception

concerning section 7(a)(2): The Fifth Circuit stated that

it is “largely beside the point” whether the EPA’s trans-

fer decision is an “agency action,” because “[e]ven if EPA

were required to consult with the agencies . . . EPA

lacks authority to” require states to protect listed spe-

cies. /d. at 298 n.6. Section 7(a)(2), however, specifies

that if an agency is contemplating a covered “agency ac-

tion,” it has an obligation both to consult and to “insure”

against taking action likely to jeopardize species. The

Fifth Circuit’s notion that the consultation and assurance

aspects of the statute are independent is simply inéor-

rect.

In sum, the better reasoned out-of-circuit authority,

as well as our own precedent, supports our conclusion

that section 7(a)(2) independently empowers EPA to

make pollution permitting transfer decisions on behalf of

listed species and their habitat when undertaking cov-

ered actions.

5. Summary

We hold that approving Arizona’s pollution permitting

transfer application was an agency action “authorized”

by the EPA, thus triggering both section 7(a)(2)’s consul-

tation requirement and its mandate that agencies not

affirmatively take actions that are likely to jeopardize

listed species. The EPA may have complied with its obli-

gations under the Clean Water Act, but compliance with

a “complementary” statute cannot relieve the EPA of its

independent obligations under section 7(a)(2). See Wash.

48a

Toxics, 413 F.3d at 1033. Section 7(a)(2) imposes a duty

on the EPA to “insure” its transfer decision is not likely

to jeopardize protected species or adversely modify their

habitat, and this duty exists alongside Clean Water Act

provisions as the agency’s “first priority.” Hill, 437 U.S.

at 185, 98 S. Ct. 2279.

We therefore conclude that, under Public Citizen, the

EPA’s transfer (ecision will cause whatever harm may

flow from the loss of section 7 consultation on the many

projects subject to a water pollution permit, and that

harm constitutes an indirect effect of the transfer.’ The

Biological Opinion, which ignored this effect while recog-

nizing that section 7 consultations concerning pollution

permitting permits have saved species’ critical habitat in

the past, was therefore deficient. The EPA erred by re-

lying on this fatally deficient Biological Opinion.

D. Other bases for the EPA’s transfer decision

Having concluded that the Biological Opinion upon

which the EPA relied was flawed in-its basic legal prem-

ise,” we now consider whether that Opinion’s other anal-

yses, or any analysis outside the Biological Opinion that

the EPA relied upon, saves the validity of the EPA’s

transfer decision. .

*” Defenders also challenge the Biological Opinion and the EPA for

failing to analyze the “cumulative effects” of the pollution permitting

transfer, as required by Endangered Species Act regulations. See 50

C.F .R. § 402.14(¢)(3) (requiring consideration of “cumulative effects”);

§ 402.02 (defining “cumulative effects”). As we consider the loss of

section 7 consultation benefits on future permits an “indirect effect” of

the EPA’s transfer decision, we need not consider Defenders’ argument

that the EPA and Biological Opinion should have also considered that

effect as part of a “cumulative effect.”

* See supra, Parts TIBI).

49a

1. No “detailed discussion” of effects on all listed species

Consistent with its underlying legal analysis, the Bio-

logical Opinion never considered in any detail the likely

real-world impact of the transfer decision on listed spe-

cies in Arizona. The failure to conduct that inquiry fa-

tally infects the Opinion’s truncated alternative causation

analysis.

50 C.F.R. § 402.14(h)(2) requires a biological opinion

to include a “detailed discussion of the effects of the ac-

tion on listed species or critical habitat.” The Biological

Opinion on which the EPA relies does not do so. Instead,

it refers to a website summarizing listed species’ status,

but includes no discussion of how the pollution permitting

transfer might affect any particular species. The Biologi-

cal Opinion concludes that the transfer will not likely

jeopardize any species—but only because, once again, “it

is not the proposed action itself that is jeopardizing these

species.”

Defending the Biological Opinion, the Home Builders

argue that the “effects of the action”—which the Biologi-

cal Opinion must consider under 50 C.F.R. § 402.14(h)—

exclude the impact of Arizona water pollution permits on

terrestrial species.~ Neither the Biological Opinion nor

= The record indicates that a large portion of permits issued by

ADEQ—up to 20,000 permits annually—will be for “stormwater con-

struction |discharges].” This reference is to storm water that flows

over a construction site, picking up various pollutants and carrying

them across terrestrial and evefitually into aquatic habitat. Storm-

water Discharges from Construction Activities, EPA-NPDES, at

http: cfpub1.epa.gov/npdes’ stormwater const.cfm ?progran—id —6

(last visited July 5, 2005). Such permits relate to the construction itself,

not to a discrete discharge during construction. As a practical matter,

a developer could not perform any construction activities without such

a permit.

50a

the EPA, however, used this argument to support the

agency action. We may not affirm the EPA’s transfer

decision on grounds not relied upon by the agency. See

Chenery I, 318 U.S. at 87, 63S. Ct. 454; see also Gifford

Pinchot Task Force, 378 F.3d at 1072 n.9. Accordingly,

we need not decide the merits of the Home Builders’ ar-

gument.

It is understandable that EPA has not embraced the

Home Builders’ analysis. According to the Home Build-

ers, the section 7 consultations and EPA-requested miti-

gation undertaken in the past regarding federal pollution

permits were improper, because the EPA took into ac-

count as indirect effects the long-run impact of develop-

ment on terrestrial upland species. This argument is

based on a flawed reading of Endangered Species Act

regulations.

A Biological Opinion must discuss the effects of an

agency action, § 402.14(h), including the action’s direct

effects, indirect effects, and “effects of other activities

that are interrelated or interdependent with that action,”

meaning those actions “that are a part of a larger action

and depend on the larger action.” § 402.02. If a con-

struction project cannot go forward without a water pol-

lution permit, then the entire project is “interrelated or

interdependent” with the proposed discharge and must

be considered in a Biological Opinion.

The Home Builders cite a different regulation, requir-

ing a more limited analysis. See § 402.12(c), (d)(2) (de-

scribing requirements of a biological assessment to in-

clude only discussion of effects on listed species and habi-

tat in the “action area”). But that limited analysis ap-

plies to what an action agency must do before formal sec-

tion 7 consultation begins, and does not excuse agencies

5la

from other section 7 requirements that consultation may

trigger.

The Home Builders also cite cases relating to portions

of development projects that “could exist independently

of each other.” Wetlands Action Network v. U.S. Army

Corps of Eng’rs, 222 F.3d 1105, 1116 (9th Cir. 2000).

Seemingly, the Home Builders argue that, because sec-

tion 7 does not require consultation or mitigation with

regard to a development project truly independent of the

one covered by a permit, section 7 also does not cover

development projects that are dependent on the permit

in question. On the contrary, section 7 covers develop-

ment projects “interrelated or interdependent with” the

discharge permitted by a permit, and therefore covers in

many instances the development that will take place if

construction-connected stormwater discharge is permit-

ted.

Neither the FWS nor the EPA makes any argument

that justifies the Biological Opinion’s failure to analyze,

in detail, the likely effect of such future development

projects fostered by pollution permits on specific species.

This failure is especially telling in light of the benefits of

section 7 consultation regarding water pollution permits.

That consultation, as the Biological Opinion noted, has

led various developers to alter their development plans,

preserving thousands of acres of listed species’ habitat.

For example, such mitigation has “maintain[ed] dispersal

and movement corridors” for the pygmy owl. FWS staff

had noted that the absence of section 7 consultation could

harm specific species, yet the Biological Opinion did not

spell out those concerns in any detail.

By not considering the transfer’s specific impact on

listed species—at least those as to which specific con-

j2a

cerns had been expressed—the Biological Opinion “failed

Lo consider an important aspect” of the transfer decision.

Motor Vehicle Mfrs. Ass’n v. State Farm Mutual Auto.

Ins. Co., 463 U.S. 29, 48, 103 S. Ct. 2856, 77 L. Ed. 2d 443

(1983).

2. Alternatives to section 7 consultation

The Biological Opinion notes state and federal endan-

gered species protections that exist without section 7

consultation, including: (1) the Memorandum of Agree-

ment between the EPA and FWS, EPA oversight over

ADEQ; (2) the Endangered Species Act’s anti-take provi-

sions; and (3) Arizona state law. The EPA relies on these

protections as sufficient to assure against jeopardizing

listed species. None of these protections, however, are

sufficient substitutes for section 7’s consultation and mit-

igation mandates.

a. Memorandum of Agreement

The Memorandum of Agreement provides the closest

substitute for the provisions of section 7. It cannot, how-

ever, replace section 7, because it does not grant the fed-

eral government any authority to require Arizona to en-

gage in the kind of consultation and mitigation measures

EPA had conducted before the transfer.

Under the Memorandum, the EPA will review ADEQ

permits and identify those that “may raise issues regard-

ing” listed species. 66 Fed. Reg. 11,202, 11,216 (Feb. 22,

2001). For projects posing a significant threat to listed

species, the FWS “will work with the State . . . to re-

duce the detrimental effects stemming from the permit.”

Id. The FWS, however, has no statutory authority to

mandate that the state revise any problematic permits,

nor does the EPA. In contrast, all federal agencies have

53a

a duty, in consultation with the FWS, to ensure that their

actions are not likely to jeopardize any listed species or

their designated habitat. § 1536(a)(2).

The Memorandum also provides that the “EPA will

use the full extent of its CWA [Clean Water Act] author-

ity to object toa State . . . permit where EPA finds .

. . thata State . . . permit is likely to jeopardize” listed

species. 66 Fed. Reg. at 11,216. However, the Clean Wa-

ter Act does not grant the EPA authority to make pollu-

tion permitting transfer decisions for the benefit of all

endangered species; the EPA has that authority only

when one also considers the Endangered Species Act.”

As a result, Endangered Species Act concerns raised by

a permit are cognizable under the Clean Water Act only

fortuitously, if at all. Unless the EPA is willing to use

the authority granted by section 7 in addition to that ac-

corded by the Clean Water Act, the EPA’s ability to ob-

ject to permits and thereby conserve listed species will

be quite limited.

In sum, the Memorandum calls for the EPA and the

FWS to discuss listed species matters with ADEQ, but

relies on ADEQ voluntarily to cooperate with those fed-

eral agencies. We assume that ADEQ will consider any

listed species issues raised in good faith. Nothing in the

record, however, indicates that ADEQ even has authority

under state law to require permit applicants to protect

~ Pollution permitting standards that apply to both federal permits,

33 U.S.C. § 1342(a), and state permits, § 1342(b)(1)(A), incorporate

concerns for the effect of pollutants on aquatic species living in water-

ways affected by water pollution. See, e.g. 38 U.S.C. § 1317001)

(listing effeet of toxic pollutants on “affected organisms in any waters”

as a factor te consider in issuing permit). These powers do not extend

to terrestrial species, nor do they include section 7(a\(2)'s prohibition

on agency actions that are likely to jeopardize listed species.

54a

listed species. Section 7 thus provides protection for spe-

cies that reliance on purely voluntary action by the state

cannot supply.

EPA oversight

For similar reasons, EPA oversight under 33 U.S.C.

§ 1342(c) provides a weak substitute for section 7 consul-

tation. Such oversight relates to different substantive

standards—those of the Clean Water Act, rather than

the Endangered Species Act. The Clean Water Act stan-

dards governing permitting decisions wil! not directly

relate to protection of most—if any—listed species, and

so cannot substitute for section 7 coverage.

c. Endangered Species Act anti-take provisions

The Endangered Species Act makes it a crime to

“take” any species listed as endangered, defining “take”

as “harass, harm, pursue, hunt, shoot, wound, kill, trap,

capture, or collect, or to attempt to engage in any such

conduct.” 16 U.S.C. § 1538(a); 16 U.S.C. § 1532(19). The

Supreme Court has upheld regulations that define “take”

to include any act “which actually kills or injures wild-

life,” where such acts may include “significant . . . mod-

ification or degradation” of listed species’ habitat.” See

Babbitt v. Sweet Home Chapter of Cmties. for a Great

Or., 515 U.S. 687, 691, 115 S. Ct. 2407, 132 L. Ed. 2d 597

(1995) (upholding 50 C.F.R. § 17.3). Section 10 of the

* The regulation defines “{hjarm in the definition of ‘take’ in the Act

{as} an act which actually kills or injures wildlife. Such act may include

significant habitat modification or degradation where it actually kills or

injures wildlife by significantly impairing essential behavioral patterns,

including breeding, feeding or sheltering.” 50 C.F.LR. § 17.3.

5da

Endangered Species Act creates an “incidental take”

permit program pursuant to which the Secretary of Inte-

rior may grant permits for activity—such as some con-

struction projects—that may incidentally “take” an en-

dangered species specimen, so long as the permittee suf-

ficiently mitigates the risk of a take. See 16 U.S.C.

§ 1539. These anti-take provisions apply to all actors, not

only the federal government. § 1538(a)(1). Accordingly,

private developers are subject to sections 9 and 10 re-

gardless of whether the EPA or a state government is-

sues the developers’ water pollution permits.

Sections 9 and 10 are important provisions, but they

are not substitutes for section 7 coverage. Section 7 cov-

ers any federal agency action that could threaten species

or their critical habitat. While the anti-take provisions

prohibit “[e}liminating a threatened species’ habitat,”

Envtl. Prot. Info. Ctr., 255 F.3d at 1075, or “significant

. modification or degradation where it actually kills

or injures wildlife,” 50 C.F.R. § 17.3, the effectiveness of

these prohibitions depends on their enforcement by the

appropriate authorities. “|T]he Government cannot en-

force the § 9 prohibition until an animal has actually been

killed or injured.” Sweet Home, 515 U.S. at 703, 115 S.

Ct. 2407. Accordingly, after-the-fact enforcement cannot

prevent threats to listed species the way section 7 can.

Prevention of takings may come from the section 10 per-

mitting process, but private parties choose whether to

‘pursue a section 10 incidental take permit. Defenders of

Wildlife v. Bernal, 204 F.3d 920, 927 (9th Cir. 2000). Pri-

vate parties only have an incentive to do so if there is a

meaningful threat of section 9 enforcement.

On this record, there is no indication that section 9 is

or will be enforced meaningfully enough to provide a suf-

56a

ficient substitute for section 7. The record reflects no

instances in which F WS has initiated a section 9 enforce-

ment action with regard to listed species in Arizona. Ad-

ditionally, FWS staff stated in the Interagency Elevation

Document that they did “not believe that section 9 en-

forcement is an acceptable substitute for section 7 consul-

tation.” This opinion reflected staff concerns, expressed

in internal emails, that section 9 is ill-suited to protect

species such as the pygmy owl, whose numbers are so low

that section 9 enforcement may come too late to prevent

extinction. The Biological Opinion contains no indication

the FWS will increase section 9 enforcement nor any

other analysis alleviating FWS staff concerns. The ab-

sence of record evidence of section 9 enforcement is con-

firmed by our own research, which reveals public notices

regarding only two applications for incidental take per-

mits for projects occurring in Arizona since January 1,

2001. See 69 Fed. Reg. 75,556 (Dec. 17, 2004); 69 Fed.

Reg. 15,362 (Mar. 25, 2004). Compared to the large num-

ber of construction projects in the state, this low number

suggests that developers do not feel that section 9 en-

forcement is sufficiently likely for them to apply for sec-

tion 10 permits.

d. Arizona state law

The Biological Opinion notes one Arizona law that

prohibits the taking of “native plants”’—which, the Opin-

ion notes, includes endangered or threatened plants—

from any land within the state without following certain

procedures. See Ariz. Rev. Stat. § 3-904. The Opinion

implies that this law partially fills a gap left open by the

Endangered Species Act, which limits the taking of en-

dangered plants on federal land only, not all land. See 16

U.S.C. § 1538(a)(2)(B).

57a

The Arizona statute, however, is not an adequate sub-

stitute for section 7(a)(2)’s limitation on granting permits

that could jeopardize listed species. As the Biological

Opinion notes, the Arizona statute merely requires pri-

vate landowners to notify a state agency of plans to de-

stroy certain plants on their property and regulates when

that destruction may take place. See Ariz. Rev. Stat. § 3-

904. It does not prohibit such destruction, or set stan-

dards to be taken into account in the issuance of water

pollution permits. The Biological Opinion does not dis-

cuss the standards that govern Arizona’s regulation of

native plant takes, and does not indicate that Arizona

considers the listed status of plants for federal purposes

in granting native plant take permits.

In sum, the Biological Opinion fails to provide a rea-

soned explanation concerning why Arizona’s native plant

law adequately substitutes for section 7, even for plants.

As it obviously does not do so for animals, § 3-904 is no

substitute for section 7(a)(2) of the Endangered Species

Act.

3. The EPA’s reliance on the Biological Opinion

The EPA had an independent duty under section

7(a)(2) to ensure that its pollution permitting transfer

decision was not likely to jeopardize listed species or ad-

versely modify their habitat. Arbitrarily and capriciously

relying on a faulty Biological Opinion violates this duty.

Res. Ltd., 35 F.3d at 1304; Pyramid Lake, 898 F.2d at

1415.

When considering challenges to agency actions based

on factual objections to the Biological Opinion, however,

we have held that an agency can satisfy the arbitrary and

capricious standard of review even if it relies on an “ad-

mittedly weak” Biological Opinion, if there is no “infor-

58a

mation the Service did not take into account which chal-

lenges the [biological] opinion’s conclusions.” J/d.; see

also Stop H-3 Ass’n v. Dole, 740 F.2d 1442, 1460 (9th Cir.

1984). This holding is based on the notion that action

agencies should be able to rely on the expert judgments

that underlie most Biological Opinions. See id. (twice

noting reasonableness of action agency’s reliance on “the

expert agency”) (emphasis added). Here, however, the

Biological Opinion’s flaws are /egal in nature. Discerning

them requires no technical or scientific expertise. The

EPA should have understood the legal errors of the Bio-

logical Opinion’s analysis. Its failure to do so led to

an action based on reasoning “not in accordance with

law” and is thus arbitrary and capricious. See 5 U.S.C.

§ 706(2)(A).

Even applying the Pyramid Lake standard, the EPA

acted arbitrarily and capriciously. Information not con-

sidered by the Biological Opinion that challenges its con-

clusion includes FWS staff members’ articulated, specific

concerns about the impact of the loss of section 7 consul-

tation, supported by information regarding the effect of

past section 7 consultations.

The EPA notes that it relied on two pieces of evidence

supporting its conclusion beyond that contained in the

Biological Opinion and argues that consideration of this

evidence provided the reasoned consideration that the

arbitrary and capricious standard requires.~’

The first such evidence is the EPA’s own Biological

Fvaluation. This report focused largely on Clean Water

~ Any explanation for its decision based on facts or reasoning not in

the Biological Opinion must, of course, satisfy the EPA’s substantive

obligations under section 7(a\2) and the arbitrary and capricious

standard of review discussed above.

59a

Act requirements and devoted only a few pages to endan-

gered species. The report summarizes the EPA-FWS

Memorandum of Agreement, Endangered Species Act

anti-take provisions, EPA oversight of ADEQ’s permit

program, and Arizona’s native plant laws, without ad-

dressing their limitations, discussed above. The report’s

“Discussion of Effects” notes the loss of section 7 consul-

tation, but otherwise focuses on Clean Water Act compli-

ance and repeats the protections afforded by other pro-

grams. It does not discuss the impact on listed species of

the loss of section 7 consultation and mitigation and so

adds nothing to the Biological Opinion.

The second piece of evidence on which the EPA relies

is an “assurance| | from the Arizona Game and Fish De-

partment .. . that Federally-listed species would not

suffer” from the lack of section 7 consultations. This doc-

ument is from an Arizona official of a state department

that is wot the one that will issue Clean Water Act per-

mits. He writes that the EPA-FWS Memorandum of

Agreement “will serve as a guideline for . . . Arizona to

ensure that [pollution] permits will not negatively impact

endangered and threatened species.”

There is no indication that Arizona would be bound by

this letter. The ADEQ, the agency primarily responsible

for implementing Arizona’s pollution permitting author-

ity, has not subscribed to its assurances. Nor does the

letter writer explain by what authority Arizona will “en-

sure that . . . permits will not negatively impact endan-

gered and threatened species,” or indicate that his

agency has any authority to do so, let alone authority as

broad as the protections mandated by the Endangered

Species Act as applied by the EPA.

60a

In the abstract, voluntary compliance by state agen-

cies willing to follow FWS recommendations to the same

extent as would the EPA might substitute for section 7

coverage. The EPA, however, could not so conclude

without first analyzing the likelihood that all relevant

Arizona agencies can and would live up to the Game and

Fish Department’s promises, as well as considering the

effectiveness of federal oversight if Arizona agencies fail

to live up to any such promises.

Given its serious faults, the independent evidence on

which EPA relies cannot fill in the crucial gaps in the

Biological Opinion. Neither the Biological Opinion nor

the EPA, consequently, adequately considered indirect

effects of the transfer. The EPA thus “entirely failed to

consider an important aspect of the problem.” State

Farm, 463 U.S. at 43, 103 S. Ct. 2856. Because neither

the Biological Opinion nor the EPA examined all relevant

data, the EPA’s transfer decision was arbitrary and ca-

pricious.

4. Summary

The EPA’s most serious errors were (1) its failure to

understand its own authority under section 7(a)(2) to act

on behalf of listed species and their habitat and (2) its

failure to discuss the specific effects of its decision on the

various listed species present in Arizona. It is possible

that some combination of state and federal protections

for listed species and state agency cooperation with the

federal Memorandum of Agreement might sufficiently

replace the benefits of section 7 consultation so that no

harm to listed species would be “reasonably certain to

occur” as a result of losing section 7 consultation. 50

C.F.R. § 402.02. But the FPA could not so conclude with-

out specifically analyzing each listed species within Ari-

Hla

zona and without more certain assurances of voluntary

state cooperation from officials at all relevant Arizona

agencies, as well as a more careful consideration of the

actual protection accorded by other federal and state

statutory provisions and the Memorandum of Agree-

ment.

IV. Remedy

Typically, when an agency violates the Administrative

Procedure Act and the Endangered Species Act, we va-

cate the agency’s action and remand to the agency to act

in compliance with its statutory obligations. In certain

instances, however, “when equity demands, the [chal-

lenged action] can be left in place while the agency fol-

lows the necessary procedures.” /daho Farm Bureau

Fed’n v. Babbitt, 58 F.3d 1392, 1405 (9th Cir. 1995).

We have carefully considered whether equitable con-

siderations warrant allowing Arizona to maintain its au-

thority over pollution permitting decisions while the EPA

“follows the necessary procedures,” beginning with con-

sultations with the FWS based on legal understandings

consistent with this opinion. Arizona has undoubtedly

expended significant funds to obtain and implement pol-

lution permitting authority and granted a significant

number of permits pursuant to this authority.” We can-

not reverse the expenditure of those funds nor the issu-

* For instance, one type of water pollution permit issued by Arizona

under its pollution permitting authority, stormwater discharge permits,

account for approximately 20,000 permit applications annually. ARIZ.

DEP’T OF ENVT'L QUALITY, ADEQ Director Steve OwensUnveils a

Web-based System to Apply for Stormwater Discharge Permits, at

http://www.azdeq.gov/function news/2003/june html #609 (last visited

July 5, 2005).

62a

ance of those permits. We further recognize the adminis-

trative difficulties in transferring a program like pollu-

tion permitting from Arizona back to the EPA and very

possibly back to Arizona again. Based on the desire of

Arizona to keep its polkition permitting authority and the

record of other states obtaining and maintaining their

own pollution permitting authority, even after full consul-

tation regarding the transfer’s effect on endangered and

threatened species, see supra note 3, it seems likely that

Arizona will again apply for pollution permitting author-

ity. Finally, we note that all of the actors in this case—

Arizona, the EPA, and FWS—operated in a somewhat

murky legal environment. Faced with two circuit court

cases suggesting that the EPA lacked authority to make

pollution permitting transfer decisions based on Endan-

gered Species Act concerns, “the extent of doubt whether

the agency chose correctly” was not insignificant. Sugar

Cane Growers Coop. v. Veneman, 289 F.3d 89, 98 (D.C.

Cir. 2002).

Other factors, however, weigh heavily in favor of va-

cating the EPA’s approval of Arizona’s transfer applica-

tion. As noted above, Arizona annually issues tens of

thousands of pollution permits pursuant to the EPA’s

action. See supra note 22. We have concluded that, ab-

sent section 7- coverage, we have no strong assurances

that these permits will not allow development projects

that are likely to jeopardize listed species or adversely

modify their habitat. The purpose of the Endangered

Species Act—to conserve endangered and threatened

species rather than allow them to go extinct, see 16

U.S.C. § 1531—-renders the risk of harm to listed species

too great. This is particularly true in this case, in which

the record suggests that one species—the pygmy owl—

numbers less than 100. Temporary harms while the

63a

agency “follow [ed] the necessary procedures,” /daho

Farm Bureau, 58 F.3d at 1405, could lead to the perma-

nent harm of extinction. See id. (noting “the potential

extinction of an animal species” as a crucial factor to con-

sider when determining whether a challenged agency

action should be vacated). Our concern with the risk of

extinction comports with our understanding of the En-

dangered Species Act’s ‘“institutionalized caution man-

date.” Wash. Toxics, 413 F.3d at 1030 (quoting Sierra

Club, 816 F.2d at 1389). Without greater assurances that

harm to listed species would not occur, our “institution-

alized caution” makes us unwilling on the present record

to order any remedy other than vacation of the EPA’s

approval of Arizona’s transfer application.

For the just-stated reasons, we vacate the EPA’s de-

cision to approve Arizona’s pollution permitting applica-

tion. Pursuant to 28 U.S.C. § 1631, we transfer Defend-

ers’ Endangered Species Act and Administrative Proce-

dure Act suit challenging the validity of the Biological

Opinion to the district court where it was originally filed

for proceedings consistent with this opinion. The petition

for review is GRANTED and REMANDED to the EPA

for proceedings consistent with this opinion.

THOMPSON, Senior Circuit Judge, dissenting:

Because I disagree with the conclusion in Part ILI of

the majority opinion that the EPA had the authority to

consider the impact on endangered and threatened spe-

cies in making its decision to transfer administration of

the pollution permitting system to the State of Arizona,

I respectfully dissent.

As the majority observes, the requirements of section

7 of the Endangered Species Act “apply to all [agency |

actions in which there is discretionary Federal involve-

64a

ment or control.” 50 C.F.R. § 402.03. “Where there is no

agency discretion to act, the [Endangered Species Act]

does not apply.” Natural Res. Def. Council v. Houston,

146 F.3d 1118, 1125-26 (9th Cir. 1998). We have previ-

ously held that an agency lacks the requisite discretion

to act when the agency does not have the authority to

take action on behalf of endangered or threatened spe-

cies. Ground Zero Ctr. for Non-Violent Action v. United

States Dep’t of the Navy, 383 F.3d 1082, 1092 (9th Cir.

2004) (where agency lacks discretion, to require compli-

ance with section 7 of the Endangered Species Act

“would be an exercise in futility”); Turtle Island Restora-

tion Network v. Nat'l Marine Fisheries Serv., 340 F.3d

969, 974 (9th Cir. 2003) (“[T]he discretionary control re-

tained by the federal agency must have the ability to in-

ure to the benefit of a protected species. If no discretion

to act is retained, then consultation would be a meaning-

less exercise.”) (internal citation omitted); Sierra Club

v. Babbitt, 65 F.3d 1502, 1509 (9th Cir. 1995) (“[WJhere

. the federal agency lacks the discretion to influence

the . . . action, consultation would be a meaningless

exercise; the agency simply does not possess the ability

to implement measures that inure to the benefit of the

protected species.”).

The majority interprets the “discretionary involve-

ment” language of 50 C.F.R. § 402.03 to be “coterminous

with” all actions “authorized, funded, or carried out” by

a federal agency. Stated differently, the majority now

holds that any action which comes within a federal

agency's decisionmaking authority falls within the scope

of section 7(a)(2) of the Endangered Species Act. In my

view, our cases do not take such an expansive view of the

meaning of § 402.03. Rather, we have consistently recog-

nized that an agency may have decisionmaking authority

65a

and yet not be empowered, either as an initial matter or

in conjunction with some continuing authority, to act to

protect endargered or threatened species. See Marbled

Murrelet v. Babbitt, 83 F.3d 1068, 1074-75 (9th Cir. 1996)

(federal agency’s decision to consult with and to provide

advice to private entity was not discretionary agency

action triggering section 7); Sierra Club v. Babbitt, 65

F.3d at 1508-1510 (holding that although the Bureau of

Land Management retained the right to object to a road

development project in three specified circumstances,

“the agency simply [did] not possess the ability to imple-

ment measures that inure to the benefit of the protected

species.”); cf. Turtle Island Restoration Network, 340

F.3d at 975 (concluding that Congress’ decision to use the

words “including but not limited to”” in the statute

granting the Fisheries Service the authority to issue fish-

ing permits “contemplated that the list of potential obli-

gations that the United States had under the Agreement

was not exhausted by those listed in the subsection”).

Here, the EPA did not have discretion to deny trans-

fer of the pollution permitting program to the State of

Arizona; therefore its decision was not “agency action”

within the meaning of section 7 of the Endangered Spe-

cies Act.' The Clean Water Act, by its very terms, per-

. ' The majority concludes that pursuant to SEC v. Chenery Corp.,

318 U.S. 80, 87, 63S. Ct. 454, 87 L. Ed. 626 (1943) (Chenery 1), it may

not deny the petition for review on this basis hecause the EPA didnot

contend that it lacked discretion to consult under Section 7 in conjune-

tion with the transfer of pollution permitting authority to Arizona. We

have, however, previously declined to take such a broad view of Che-

very and instead have observed that although “| glenerally, a reviewing

court may only judge the propriety of an agency's decision on the

grounds invoked by the agency, . . . the court is not so bound when,

us here, the issue in dispute is the interpretation of a tederal statute.”

66a

mits the EPA to consider only the nine specified factors.

If a state’s proposed permitting program meets the enu-

merated requirements, the EPA administrator “shall

approve” the program. 33 U.S.C. § 1342(b). This Con-

gressional directive does not permit the EPA to impose

additional conditions. Although the majority quite prop-

erly concludes that a federal agency cannot escape its

obligation to comply with section 7 of the Endangered

Species Act when it is “bound to comply with another

statute that has consistent, complementary objectives,”

Wash. Toxics Coalition v. EPA, 413 F.3d 1024 (9th Cir.

2005), here, the EPA has an obligation to evaluate the

state’s application against nine exclusive requirements.

33 U.S.C. § 1342(b); see also Am. Forest & Paper Ass’n

v. EPA, 137 F.3d 291, 297 (5th Cir. 1998) (“The language

of § 1342(b)] is firm: . . . ‘Unless the Administrator of

EPA determines that the proposed state program does

not meet [the specified] requirements, he must approve

the proposal.””) (quoting Save the Bay, Inc. v. EPA, 556

F.2d 1282, 1285 (5th Cir. 1977)); Nat’l Res. Defense

Council v. BPA, 859 F.2d 156, 173-74 (D.C. Cir. 1988)

(observing that “[t]he [Clean Water Act] specifies pre-

requisites for state assumption of the program . . . and

commands the Administrator to approve the state permit

Ry. Executives’ Ass'n v. ICC, 784 F.2d 959, 969 (9th Cir. 1986). The

majority's conclusion further disregards our obligation to review an

agency's statutory mandate de novo, see Portland Adventist Med. Ctr.

v. Thompson, 399 F.3d 1091, 1095 (9th Cir. 2005); see also Am. Rivers

v FERC, 201 F.3d 1186, 1194 (9th Cir. 2000) (noting that review of

“substantive issues of statutory construction” “proceed(s| along [a]

different analytic path! |” and is “subject to |a] separate standard] | of

review than review of an agency's compliance with procedural require-

ments), and, in doing so, to “give effect to the unambiguously expressed

intent of Congress.” Chevron v. Natl Res. Defense Council, 467 US.

S37, 843, 10458. Ct. 2778. 81 L. Ed. 2 694 (1984).

67a

system once he determines that the statutory require-

ments and administrative guidelines are met.”). To im-

pose the additional requirement of consultation under

section 7 would be inconsistent both with the EPA’s stat-

utory obligation to consider only the requirements enu-

merated in § 1342(b) and with the Clean Water Act’s

clearly expressed objectives. See 33 U.S.C. § 1251(b) (“It

is the policy of the Congress to recognize, preserve, and

protect the primary responsibilities and rights of States

to prevent, reduce, and eliminate pollution,” and “that

the States will manage . . . and implement” the

NPDES pollution permitting program).

Nor, in my view, does the EPA possess the kind of

continuing authority to monitor states’ administration of

their pollution permitting programs that would render its

oversight discretionary. As the majority notes, the

EPA’s limited oversight under 33 U.S.C. § 1342(c) relates

only to the substantive standards of the Clean Water Act

and does not grant any additional continuing review au-

thority that would permit meaningful section 7 consulta-

tion. The EPA’s authority to grant or to deny the State

of Arizona’s application to administer the pollution per-

mitting program was nondiscretionary; | would deny the

petition for review. 420 F.34 946, 60 ERC 2025, 35 Envtl.

L. Rep. 20,172, 05 Cal. Daily Op. Serv. 7480, 2005 Daily

Journal D.A.R. 10,216.

68a

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

_ Nos. 03-71439, 03-72894

DEFENDERS OF WILDLIFE; CENTER FOR BIOLOGICAL

DIVERSITY; CRAIG MILLER, PETITIONERS

v.

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY, RESPONDENT, NATIONAL ASSOCIATION OF

HOME BUILDERS; STATE OF ARIZONA; ARIZONA CHAM-

BER OF COMMERCE, INTERVENORS

Uv.

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY, ROBERT B. FLOWERS, RESPONDENTS

June 8, 2006

ORDER

Before: STEPHEN REINHARDT, DAVID R. THOMPSON,

and MARSHA 8S. BERZON, Circuit Judges.

The panel has voted to deny the petition for panel

rehearing. The full court was advised of the petition for

rehearing en banc. A judge requested a vote on whether

to rehear the matter en banc. The matter failed to re-

ceive a majority of the votes of the nonrecused active

judges in favor of en bane. Fed. R. App. P. 35. The re-

quest for panel rehearing and rehearing en bane is DE-

69a

NIED. Judge Kozinski’s and Judge Kleinfeld’s dissents

from denial of en bane rehearing, and Judge Berzon’s

concurrence in denial of en banc rehearing, are filed con-

currently herewith.

KOZINSKI, Circuit Judge, with whom Judges

O’SCANNLAIN, KLEINFELD, TALLMAN, CALLAHAN and

BEA join, dissenting from denial of rehearing en banc:

Less than two years ago, the Supreme Court unani-

mously reversed our interpretation of the National Envi-

ronmental Policy Act (NEPA). See Dep't of Transp. v.

Pub. Citizen, 541 U.S. 752, 124 S. Ct. 2204, 159 L. Ed. 2d

60 (2004). Tone-deaf to the Supreme Court’s message,

the panel majority in this case interprets the Endan-

gered Species Act (ESA) in precisely the same incorrect

way we interpreted’ NEPA, dramatically expanding agen-

cies’ obligations under the law. Along the way, the ma-

jority tramples all over the Fish and Wildlife Service’s

(F WS) reasonable interpretation of the ESA, deliber-

ately creates a square inter-circuit conflict with the Fifth

and D.C. Circuits, and ignores at least six prior opinions

of our own court. Finally, the decision is one of consider-

able importance to the federal government and the states

of our circuit. This is precisely the kind of case we should

take en banc to set our own house in order.

Background

The Clean Water Act (CWA) instructs that the Envi-

ronmental Protection Agency (EPA) “shall” transfer

pollution permitting authority to a state if the state’s

proposal meets nine criteria. See 33 U.S.C. § 1542(b).

None of the criteria involves consideration of endangered

species. Arizona applied to take over the CWA permit-

ting process within its borders—the forty-fifth state to

70a

do so. There is no dispute that its proposal met all nine

criteria listed in the CWA.

The EPA regional office in San Francisco, however,

was worried that the transfer might affect endangered

species. See 16 U.S.C. § 1536(a)(2) (section 7(a)(2) of the

ESA) (requiring federal agencies to “insure” that their

actions do not jeopardize endangered species). It thus

initiated consultation with FWS pursuant to ESA section

7. The regional office also stated publicly that section 7

required EPA to take endangered species into account

when making a transfer decision. FWS’s local office in

Arizona similarly expressed concerns about the transfer.

Next, the matter was “elevated,” meaning the na-

tional offices of EPA and FWS took over. After national-

level discussions, FWS reversed course, recommending

immediate approval of the transfer. That agency issued

a Biological Opinion (BiOp) concluding that any impact of

the transfer on endangered species would be the un-

avoidable result of (1) Congress’s decision to make ESA

section 7 inapplicable to the states, and (2) Congress’s

decision to require transferring the permitting process

to the states, provided the nine criteria were met (none

of which included consideration of endangered species).

Thus, under FWS’s interpretation, the ESA was inappli-

cable: EPA’s decision to grant the transfer could not

“cause” any impact on endangered species because the

decision was non-discretionary. Two days after receiving

FWS’s recommendation, EPA approved the transfer.

Discussion

In striking down EPA’s transfer approval, the major-

ity makes five fundamental blunders: First, it mistakes

EPA’s internal deliberations for analytical inconsistency.

Second, the majority fails to give appropriate deference

Tla

to FWS’s interpretation of the ESA. Third, the majority

treats the ESA as superior to all other laws, thereby nul-

lifying a crucial ESA regulation and forcing agencies to

violate their governing statutes. Fourth, the majority

contradicts the Supreme Court’s recent pronouncement

in Public Citizen. Finally, the majority dismisses the

reasoned opinions of two other circuits, creating a square

conflict.

1. The majority first finds that EPA’s decision-

making process was internally inconsistent. See Defend-

ers of Wildlife v. EPA, 420 F.3d 946, 959-62 (9th Cir.

2006). On the one hand, EPA stated several times that

the ESA required it to consider endangered species be-

fore approving the transfer. On the other hand, the

agency concluded it had no discretion under the CWA to

take endangered species into account when making the

transfer decision. Thus, the majority finds, EPA’s deci-

sion “cannot stand.” /d. at 962.

The majority makes a big fuss over the supposed in-

ternal inconsistency in EPA’s reasoning, but the so-

called problem is of the panel’s own making. The only

“inconsistency” is between the San Francisco regional

office’s interpretation of the ESA and the interpretation

by EPA headquarters in Washington, D.C. In other

words, EPA changed its mind upon further reflection at

a higher level. The agency’s position is that adopted by

EPA at the national level; the position taken by the

agency's regional office was simply overruled by the na-

tional office in Washington. There is no inconsistency in

the agency’s final action, which is the only one we are

entitled to review. See 5 U.S.C. § 704.

The majority also points out that EPA’s final action in

this case was inconsistent with the actions it has taken

72a

when other states have applied for a transfer. See De-

fenders of Wildlife, 420 F.3d at 952 n.3 (noting that all of

EPA’s transfer decisions since 1993—six besides Ari-

zona—have taken endangered species into account,

whereas none before 1993 did). But there is no indication

that EPA’s deliberations in the other cases were ever

elevated to the national level. As far as we know, this is

the only case in which EPA’s Washington, D.C. office has

opined on the applicability of the ESA to the transfer of

the CWA permitting process. Moreover, an agency is not

locked into a particular position forever; it is entitled to

change its view over time. See Mesa Verde Constr. Co. v.

N. Cal. Dist. Council of Laborers, 861 F.2d 1124, 1130

(9th Cir. 1988) (en banc). EPA’s actions in other cases

are irrelevant to whether its analysis was internally in-

consistent in this one.

In any event, the majority’s finding of an inconsis-

tency in EPA’s analysis, if correct, should have been the

end of the case; the majority should have remanded to

EPA for further clarification, as the agency asked.the

panel to do. See Defenders of Wildlife, 420 F.3d at 969

n.19. Even the majority itself says it “must remand” to

EPA for clarification. See id. at 962. Instead, it embarks

on a 17-page boondoggle, conducting the very analysis

that EPA should have had an opportunity to conduct for

itself. See Gonzales v. Thomas, _ U.S. ;

126 S. Ct. 1613, 1614, 164 L. Ed. 2d 358 (2006) (“The

Ninth Circuit’s failure to remand is legally erroneous,

and that error is ‘obvious in light of Ventura,’ itself a

summary reversal.”).

2. In faulting EPA for its alleged internal inconsis-

tencies, the majority misconstrues the way the ESA was

meant to operate. Under the ESA, a federal agency must

73a

consider whether its action “may affect” endangered spe-

cies. 50 C.F.R. § 402.14(a). If the agency thinks endan-

gered species might be affected, it must ask FWS

whether its supposition is correct—whether its action

would, in fact, affect endangered species—and, if so,

what the impact on endangered species will be. See id.;

id. §§ 402.14(e), (h). Then, FWS must respond by issuing

a BiOp that the agency must take into account before

making its decision. See id. §§ 402.14(e), 402.15(a).

In this case, EPA was initially concerned that its ap-

proval of Arizona’s transfer application might affect en-

dangered species. EPA does not administer the ESA, so

it doesn’t have the expertise to know for sure. See Am.

Forest & Paper Ass'n v. EPA, 137 F.3d 291, 297 (Sth Cir.

1998). In order to find out whether its transfer approval

would, in fact, affect endangered species, EPA did ex-

actly what it was supposed to do: It asked FWS, the

agency that is charged with administering the ESA. See

United States v. McKittrick, 142 F.3d 1170, 1174 (9th

Cir. 1998). And FWS did exactly what it was supposed to

do: It responded with a BiOp informing EPA that its

approval would not, in fact, affect endangered species.

See p. 396 supra. With this advice from the congressio-

nally designated experts in hand, EPA decided that its

initial concerns were unfounded and that it could go for-

ward with the transfer approval.

The majority finds this perfectly logical sequence of

events to be “nonsensical” and impermissible. See De-

fenders of Wildlife, 420 F.3d at 961. According to the

majority, once EPA expressed concern that its action

might affect endangered species, it had already conclu-

sively determined that its decision was governed by the

ESA. See id. In other words, under the majority's inter-

74a

pretation, once FWS is consulted for guidance, it is pre-

cluded from ever determining that the ESA is inapplica-

ble.

With all due respect to my colleagues, it is their con-

clusion that is nonsensical, undermining the entire con-

sultative process that the ESA establishes and striking

down F'WS’s perfectly reasonable interpretation of the

ESA. The majority forgets that FWS is the agency

charged with administering the ESA, and that its inter-

pretation of the ESA is thus entitled to Chevron defer-

ence. See Babbitt v. Sweet Home Chapter of Communi-

ties for a Great Oregon, 515 U.S. 687, 703, 115 S. Ct.

2407, 132 L. Ed. 2d 597 (1995) (citing Chevron U.S.A.

Ine. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 104

S. Ct. 2778, 81 L. Ed. 2d 694 (1984)). Here, FWS deter-

mined—after careful study at the local and national

levels—that the ESA was inapplicable to EPA’s decision,

and it issued a BiOp relaying its conclusion to the EPA.

The majority cannot overturn FWS’s statutory interpre-

tation simply because it disagrees with it.

3. Having decided to conduct—on its own—the very

analysis that FWS already conducted, the majority co-

mes out the other way, getting it flatly wrong. The ma-

jority concludes that section 7 of the ESA required EPA

to take endangered species into account when making the

transfer decision, notwithstanding the plain contrary

language of the CWA. It thus transformed the ESA into

an overriding mandate that trumps an agency’s obliga-

tions under its own governing statute. See Defenders of

Wildlife, 420 F.3d at 963-67.

Further, the majority handily disposes of a regulation

issued by FWS that was supposed to limit ESA’s applica-

bility to “actions in which there is discretionary Federal

\

Tha

involvement or control.” 50 C.F.R. § 402.03 (emphasis

added). Unable to reconcile this regulation with its

newly expansive interpretation of the ESA’s mandate,

the majority simply finds that the word “discretionary”

in the regulation is meaningless; the regulation, an-

nounces the majority, is “coterminous” with the statute

it interprets. See Defenders of Wildlife, 420 F.3d at 967-

69. In other words, despite FWS’s regulation, the major-

ity finds that the ESA applies to anything “authorized,

funded, or carried out” by a federal agency, 16 U.S.C.

§ 1536(a)(2), whether discretionary or not. Again, the

majority fails to give FWS the deference it is due.’

In his dissent, Judge Thompson succinctly identifies

the serious flaws in the majority’s analysis. He points

out that EPA had no authority under the CWA to con-

sider endangered species when making the transfer deci-

sion. And he explains that the majority’s interpretation

of the scope of ESA’s applicability contradicts our prece-

dents: “{Wle have consistently recognized that an

agency may have decisionmaking authority and yet not

be empowered . . . to act to protect endangered spe-

cies.” Defenders of Wildlife, 420 F.3d at 979-80 (Thomp-

son, J., dissenting) (citing six Ninth Circuit precedents

that contradict the majority’s holding). Once the nine

criteria were met, the dissent concludes, the CWA man-

dated the transfer; nothing in ESA section 7 allows—let

' The majority points out that Ҥ 402.03 is a regulation, not a

statute,” Defenders of Wildlife, 420 F.3d at 969 n.19, as if that somehow

robs its interpretation of deference. But FWS issued the regulation in

question. See id. at 951 n.1. Its interpretation of the regulation is

therefore also entitled to “substantial deference.” Martin v. Occupa

tional Safety & Health Review Comm'n, 499 U.S. 144, 150, 1118. Ct.

1171, 113 L. Ed. 2d 117 (1991) (internal quotation marks omitted).

76a

alone requires—the EPA to ignore the clear language of

the CWA. See id. at 980-81."

4. The majority’s superfluous holding—that ESA

forces an agency to consider the impact of its decisions

on endangered species, even when the agency’s govern-

ing statute precludes it from doing so—also flies in the

face of Public Citizen, where the Supreme Court unani-

mousiy reversed our interpretation of NEPA. See 541

U.S. at 770, 773, 124 S. Ct. 2204.

The issue in Public Citizen was whether NEPA

“require[s] the Federal Motor Carrier Safety Adminis-

tration (F MCSA) to evaluate the environmental effects

of cross-border operations of Mexican-domiciled motor

carriers” before deciding whether to grant registration

to Mexican trucks. /d. at 756, 124 S. Ct. 2204. NEPA’s

language, regarding when and how an agency must

take into account the impact of its actions on the environ-

ment, is similar to ESA’s language regarding endangered

' species. Compare 42 U.S.C. § 4332(2)(C) and 40 C.F.R.

§ 1508.18, with 16 U.S.C. § 1536(a)(2) and 50 C.F.R.

§ 402.03. And the FMCSA’s governing statute, like

the CWA, instructs that the agency “shall” grant regis-

tration to any carrier meeting certain criteria, none of

which involves environmental concerns. See 49 U.S.C.

§ 13902(a)(1).

* We cannot presume that Congress repealed the CWA's categorical

mandate sub silentio, simply by passing the ESA. See n4 infra. But

even if we were inclined to believe, as the panel majority does, that the

CWA and ESA need to be reconciled, FWS's regulation is a perfectly

plausible way to do so: By limiting the ESA's applicability to “disere-

tionary” agency actions, 50 C.F.R. § 402.03, the regulation avoids the

supposed conflict the majority has created between the ESA and gov-

erning statutes—like the CWA—that mandate agency action.

77a

In upholding the agency’s decision to grant registra-

tion without taking into account the environmental im-

pact of Mexican trucks, the Supreme Court stressed that

“F MCSA has only limited discretion regarding motor

vehicle carrier registration: It must grant registration

- to all domestic or foreign motor carriers that are willing

and able to comply with the applicable . . . require-

ments. FMCSA has no statutory authority to impose or

enforce emissions controls or to establish environmental

requirements unrelated to motor carrier safety.” /d. at

758-59, 124 S. Ct. 2204 (internal quotation marks

and citation omitted). The Supreme Court concluded

that “where an agency has no ability to prevent a

certain effect due to its limited statutory authority over

the relevant actions, the agency cannot be considered

a legally relevant ‘cause’ of the effect.’ Hence, under

NEPA .. . the agency need not consider these effects.

. . . [BJecause FMCSA has no discretion to prevent the

entry of Mexican trucks, [it] did not need to consider the

environmental effects arising from the entry.” Public

Citizen, 541 U.S. at 770, 124 S. Ct. 2204.

The Supreme Court’s holding in Public Citizen ap-

plies equally to this case: Because EPA had no discre-

tion under the CWA to prevent the transfer of permitting

authority to Arizona, it did not need to consider the trans-

fer’s effects on endangered species. The majority’s con-

’ The majority quotes this sentence verbatim from Public Citizen.

Detenders of Wildlife, 420 F 3d at 963. But, instead of recognizing that

this language controls the case, the majority uses it as a springboard to

launch into its unnecessary analysis.

78a

trary conclusion cannot be reconciled with the Supreme

Court’s unanimous decision.’

* Judge Berzon’s concurrence dismisses Public Citizen as “entirely

uninformative,” concurrence at 406, by labeling NEPA as a “strictly

procedural statute” and the ESA as a “partially substantive statute,” 7d.

What Judge Berzon must be arguing is that the ESA effected a sub

silentio repeal of EPA’s categorical obligation under the CWA, so that

the statutory “shall” was foreshortened to “may.” There is absolutely

no indication that Cong,ess meant to do any. such thing and we should

long hesitate before concluding that it did this unknowingly. See Watt

v. Alaska, 451 U.S. 259, 267, 101 8. Ct. 1673, 68 L. Ed. 2d 80 (1981) (not-

ing the maxim of statutory interpretation that “repeals by implication

are not favored,” and stating that “|tlhe intention of the legislature to

repeal must be clear and manifest” (internal quotation marks omitted));

id. at 280, 101 S. Ct. 1673 (Stewart, J., dissenting) (“The maxim that

‘repeals by implication are disfavored’ has force when the argument is

made that a general statute . . . eviscerates an earlier and more

specific enactment of limited coverage but without an indication of

congressional intent to do so.”); see also Ex parte Yerger, 8 Wall. 85,

105, 19 L. Ed. 332 (1869) (“Repeals by implication are not favored.

They are seldom admitted except on the ground of repugnancy; and

never, we think, when the former act can stand together with the new

act.”).

If the ESA were as powerful as the majority contends, it would

modify not only EPA’s obligation under the CWA, but every categorical

mandate applicable to every federal agency. We should be particularly

chary of holding that the ESA made such sweeping changes when the

agency charged with implementing the statute has adopted a regulation

allowing the ESA to coexist peacefully with all categorical mandates.

See 50 C.F.R. § 402.03; n.2 supra. There is no justification for nullifying

countless congressional directives by casting aside the ageney’s authori-

tative interpretation of the ESA, formally adopted pursuant to notice

and comment procedures.

Unless one buys into the dubious proposition that Congress somehow

repealed the term “shall” in 33 U.S.C. § 1342(b), this case is a carbon

copy of Public Citizen. “Shall” means shall here as it did there; thus

PA has no discretion to deny the transfer once the nine statutory

criteria are satisfied. See Kleinfeld dissent at 401-02. Just as in Public

(Citizen, the agency’s aetion—granting the transfer—is not a legally

79a

5. Finally, the majority opinion squarely, and admit-

tedly, conflicts with the Fifth and D.C. Circuits. See De-

fenders of Wildlife, 420 F.3d at 970. In American Forest

& Paper Ass'n v. EPA, the Fifth Circuit considered pre-

cisely the same question at issue in this case: whether

the ESA imposes its own criteria on EPA’s decision to

transfer CWA permitting authority to a state—in that

case, Louisiana—or whether the nine factors enumerated

in the CWA are, as the plain text of the statute requires,

an exhaustive list that precludes consideration of endan-

gered species. See 137 F.3d 291, 297-99 (5th Cir. 1998).

In American Forest, unlike in this case, the EPA

wanted tg condition the transfer of the permitting pro-

cess on protection of endangered species. But the Fifth

Circuit determined—in direct contradiction to the major-

ity here—that “[{t]he (CWA’s] plain language directs

EPA to approve proposed state programs that meet the

enumerated criteria; particularly in light of the command

‘shall approve,’ [the CWA] cannot be construed to allow

EPA to expand the list of permitting requirements” to

include consideration of endangered species. /d. at 298.

Further, when EPA argued that the ESA compelled it to

consider endangered species, the Fifth Circuit inter-

relevant “cause” of any impact on endangered species because the

agency had no discretion in the matter once the statutory criteria were

met. See 541 U.S. at 769, 1248. Ct. 2204.

When we are confronted with a question of statutory interpretation,

we must take into account the Supreme Court's previous interpretation

of highly similar words in an analogous situation, even if the two cases

are not “identical.” Concurrence at 404. It is no doubt symptomatic of

my “myopic” view of the world, id. at 406, but I believe we should treat

Supreme Court pronouncements as binding, not as mere hazards to

navigation.

80a

preted section 7(a)(2) of the ESA to mean exactly the

opposite of the majority’s holding:

[I]f EPA lacks the power to add additional criteria to

CWA § 402(b), nothing in the ESA grants the agency

the authority to do so. Section 7 of the ESA .. .

confers no substantive powers. . . . [T]he ESA

serves not as a font of new authority, but as some-

thing Far more modest: a directive to agencies to

channel their existing authority in a particular direc-

tion. The upshot is that EPA cannot invoke the ESA

as a means of creating and imposing requirements

that are not authorized by the CWA.

Id. at 298-99 (second emphasis added) (footnote omit-

ted). In recognition of the circuit split it is creating, the

majority dismisses the Fifth Circuit’s reasoning out of

hand, calling it a “fundamental misconception” and “sim-

ply incorrect.” Defenders of Wildlife, 420 F.3d at 971.

The D.C. Circuit has also considered the ESA’s power

to override the mandate of an agency’s governing statute.

See Platte River Whooping Crane Critical Habitat

Maint. Trust v. FERC, 962 F.2d 27, 32-33 (D.C. Cir.

1992). Under the Federal Power Act, the Federal En-

ergy Regulatory Commission (FERC) was precluded

from amending the annual licenses it gave to a hydroelec-

tric plant, and thus could not insert wildlife protective

conditions into the license upon renewal. See id. at 32.

Petitioners alleged, however, that notwithstanding the

Federal Power Act, section 7 of the ESA required FERC

to impose such conditions on the licensee. See id. at 33.

The D.C. Circuit disagreed:

The Trust reads section 7 essentially to oblige the

Commission to do “whatever it takes” to protect the

Sla

threatened and endangered species that inhabit the

Platte River basin; any limitations on FE RC’s author-

ity contained in the [Federal Power Act] are implic-

itly superseded by this general command. . . . We

think the Trust’s interpretation of the ESA is far-

fetched. As the Commission explained, the statute

directs agencies to “utilize their authorities” to carry

out the ESA’s objectives; it does not expand the pow-

ers conferred on an agency by its enabling act.

Id. at 34. Like the Fifth Circuit, the D.C. Circuit’s inter-

pretation of the ESA directly contradicts the majority’s

holding in this case. But again, the majority dismisses its

sister circuit’s reasoning as “cursory” and unpersuasive.

Defenders of Wildlife, 420 F.3d at 971.’

° The majority concedes the conflict with the Fifth and D.C. Circuits

but claims it is merely taking sides in a preexisting conflict, because the

First and Eighth Circuits have issued opinions agreeing with its

position. See id. at 970-71 (citing Conservation Law Found. v. Andrus,

623 F.2d 712 (1st Cir. 1979), and Defenders of Wildlife v. EPA, 882 F.2d

1294 (8th Cir. 1989)). The First and Eighth Circuit cases, however, do

not support the majority's position. Both cases addressed situations

where the governing statute and the ESA were complementary, not

where the governing statute precluded consideration of endangered

species as the CWA does. See Andrus, 623 F.2d at 715 (“(T Jhe assump-

tion that the ESA and OCSLA are mutually exclusive . . . is

incorrect—the standards of these two acts are complementary, and the

ESA will continue to apply of its own force. . . .”); Defenders of

Wildlife, 882 F.2d at 1299 (“FIFRA does not exempt the EPA from

complying with ESA requirements when the EPA registers pesti-

cides.”). Neither circuit held, as the majority in this case does, that the

ESA trumps the governing statute, or that the ESA applies when the

governing statute precludes agency discretion regarding endangered

species. The inter-circuit conflict is entirely of the panel's own making.

=

82a

The majority’s opinion has far-reaching effects on the

scope of the Endangered Species Act. Its holding—that

the ESA imposes-an affirmative duty on a federal agency

to protect endangered species, even in the face of a gov-

erning statute that explicitly precludes the agency from

doing so—contradicts FWS’s statutory interpretation,

ignores the very recent instructions of the Supreme

Court, and creates a conflict with two other circuits. And

for what? All EPA asks for is to have an opportunity to

clarify its position on the issue, and explain why its deci-

sion to transfer permitting authority to Arizona made

sense. Even more recent Supreme Court instructions

emphatically command us to do just that. See Thomas,

126 S. Ct. at 1614-15. The majority’s stubborn refusal to

give the agency that opportunity before vacating its

transfer decision has put us in a highly precarious posi-

tion vis-a-vis the executive branch, the states, the other

circuits and the Supreme Court. We should have taken

the case en banc and fixed the problems ourselves.

KLEINFELD, Circuit Judge, dissenting from denial of

rehearing en banc:

I join in Judge Kozinski’s thorough dissent, but write

separately to show just how simple this case should have

been. As Judge Thompson pointed out in his dissent

from the panel’s decision, the statute is mandatory. Con-

gress commands that the agency “shall approve” state

programs “unless” one or more of nine conditions are not

met. The “shall/unless” formula makes the nine condi-

tion list exclusive, and courts cannot add conditions to

the list.' The language has the look of a careful legisla-

' See, ¢.g.. Department of Transp. v. Public Citizen, 541 US. TA2,

767, 1248. Ct. 2204, 159 L. Ed. 2d 60 (2005).

S3a

tive compromise necessary to get the votes for passage.”

The statute leaves no room for conditions ten, eleven, or

whatever else we may think Congress should have

added.’

BERZON, Circuit Judge, concurring in the order deny-

ing the petition for rehearing en banc:

1.

I begin by explaining why I am writing this concur-

rence: A practice has developed in this court of writing

dissents from denial of 1ehearing en banc consideration

as a matter of routine. Those dissents sometimes read

more like petitions for writ of certiorari than judicial

opinions of any stripe. They pose a dilemma for those

who believe the original opinion correct, as they may

raise issues not addressed by that opinion because not

articulated by the parties before the petition for rehear-

ing stage—or ever.

The result, absent some response, is a distorted pre-

sentation of the issues in the case, creating the impres-

sion of rampant error in the original panel opinion al-

though a majority—often a decisive majority—of the

active members of the court either perceived no error or

thought the case not one of much consequence. At the

> Cf Weyer v. Twentieth Century Fox Film Corp., 198 F.3d 1104,

1113 (9th Cir. 2000) (“Legislation often results from a delicate compro-

mise among competing interests and concerns. If we were to ‘fully

effectuate’ what we take to be the underlying policy of the legislation,

without careful attention to the qualifying words in the statute, then we

would be overturning the nuanced compromise in the legislation, and

substituting our own cruder, less responsive mandate for the law that

Was actually passed.”).

Cf. Longview Fibre Co. v. Rasmussen, 980 F.2d 1307, 1312-13 (9th

Cir. 1992).

S4a

same time, answering the newly raised contentions by

amending the panel opinion is usually not feasible. The

court has voted not to rehear en banc the original opinion

and ought not to have to accept a new version without a

second opportunity to determine whether the opinion

deserves en banc consideration. The result, quite obvi-

ously, could be a form of infinite regression which pre-

cludes us from ever finally deciding the case.

In this case, Judge Kozinski writes an impassioned

dissent from denial of en banc consideration, accusing the

panel majority of all manner of judicial perfidy. The

problem is that his accusations are either flat wrong or

indicate a misunderstanding of the holdings in the panel

opinion. As the author of the panel opinion, | have no

choice but to try to set the record straight. So as to avoid

establishing a new tradition of group concurrences in

denial of en banc to match the group dissents, I inten-

tionally write for myself alone, without the concurrence

of any of my colleagues.

II.

The majority opinion in Defenders of Wildlife v. EPA,

420 F.3d 946 (9th Cir. 2005), if carefully read, contains

responses to most of the baseless attacks that Judge

Kozinski has dropped upon it. Among other errors in the

dissent from denial of rehearing en banc that are exposed

in the opinion are:

(1) the notion that the national Environmental Pro-

tection Agency (EPA) did not endorse in this case the

position that the Endangered Species Act requires

consultation with regard to Clean Water Act permit-

85a

ting decisions, Kozinski Dissent at 6290-91, when it

did, see Defenders of Wildlife, 420 F.3d at 959-60;'

(2) the repeated assertion that section 401 of the

Clean Water Act “precludes” application of the plain

language of section 7 of the after-enacted Endan-

gered Species Act, Kozinski Dissent at 6294, when the

pertinent part of the Clean Water Act does not men-

tion the Endangered Species Act at all, see Defenders

of Wildlife, 420 F.3d at 963-69;

(3) the insistence that the Endangered Species Act

does not apply to any action “authorized, funded, or

' Judge Kozinski insists that “[a]ll EPA asks for is to have an

opportunity to clarify its position on the issue, and explain why its deci-

sion to transfer permitting authority to Arizona made sense.” Kozinski

Dissent at 401; see also id. at 396. In fact, in its petition for rehearing

en banc the EPA quarreled at length with the merits of the majority

opinion, and, building upon Judge Thompson’s dissent, asserted an

intracircuit conflict. The possibility of a remand for clarification of the

agency’s interpretation of the statute is mentioned in a single footnote

and only with regard to the portion of the opinion that discusses EPA's

prior inconsistent positions (an inconsistency which, unlike Judge

Kozinski, the EPA does not dispute).

Furthermore, Judge Kozinski’s citation to Gonzales v. Thomas,

US. 126 S. Ct. 1613, 164 L. Ed. 2d 358 (2006) is inapposite. In

Thomas, t the Supreme Court faulted this court for not giving the agency

an opportunity to decide an issue in the first instance. Here, in con-

trast, the EPA did decide that a transfer was appropriate and that it did

not have the authority to consider the impact on endangered and

threatened species of the transfer decision. We disagreed with both

conclusions. Now, the EPA wants to decide the issue again, explaining

its reasoning once more. /NS v. Ventura, 537 U.S. 12, 1238. Ct. 3538,

154 L.. Ed. 2d 272 (2002), does not require that an agency have tivo

chances to consider a factual or legal question before appellate review,

only one. Further, the majority opinion ultimately does remand the

transfer decision for consideration on proper legal grounds.

S6a

carried out” by a federal agency, Kozinski Dissent at

6293, when that is exactly what section 7(a)(2) says, in

a perfectly clear statutory requirement that may not

be contravened by an interpretative regulation, see

Chevron U.S.A., Inc. v. Natural Res. Def. Council,

467 U.S. 837, 842-43 & n.9, 104 S. Ct. 2778, 81 L. Ed.

2d 694 (1984); Defenders of Wildlife, 420 F.3d at 969;

(4) the allegation that there was not a preexisting cir-

cuit split, even though Defenders of Wildlife v. EPA,

882 F.2d 1294 (8th Cir. 1989), and Conservation Law

Foundation v. Andrus, 623 F.2d 712 (1st Cir. 1979),

held that agencies do have to comply with the Endan-

gered Species Act as well as their own governing

statutes, see Defenders of Wildlife, 420 F.3d at 970;

(5) the contention that the analysis contained in

Platte River Whooping Crane Critical Habitat Main-

tenance Trust v. Federal Energy Regulatory Com-

mission, 962 F.2d 27, 34 (D.C. Cir. 1992), and Amevi-

can Forest & Paper Ass’n v. U.S. Environmental

Protection Agency, 137 F.3d 291, 293-94 (5th Cir.

1998), is more accurate than the analysis in Defenders

of Wildlife, even though those cases rely on the lan-

guage of section 7(a)(1) and disregard the quite dif-

ferent wording of section 7(a)(2), see Defenders of

Wildlife, 420 F.3d at 970-71;

(6) the statement that American Forest decided pre-

cisely the same question addressed in Defenders of

Wildlife, Kozinski Dissent at 400, when the issue in

that case was not what factors the FPA must consider

in making the transfer decision but whether the EPA

87a

must impose Endangered Species Act requirements

on the states as a condition of transfer;

(7) the accusation that the panel opinion “ignor|ed] at

least six prior opinions of our own court,” Kozinski

Dissent at 395, when the panel opinion discusses and

distinguishes those opinions at some length, Defend-

ers of Wildlife, 420 F.3d at 967-69; and

(8) the assertion that the Fish and Wildlife Service’s

(FWS) position regarding the impact of the transfer

is entitled to Chevron deference, Kozinski Dissent at

398, even though that position required, in part, an

interpretation of the Clean Water Act, over which the

FWS has no regulatory power, 33 U.S.C. 1251(d)

(designating the Administrator of the EPA to “ad-

minister this chapter”).*

* Judge Kozinski also insists that the majority opinion “presume [s]

that Congress repealed the CWA’s categorical mandate sub silentio,

simply by passing the ESA.” Kozinski Dissent at 398 n.2. As the

opinion makes clear, we do not see the Endangered Species Act as

repealing any part of the Clean Water Act. Rather, the Endangered

Species Act, a later-enacted statute, adds one requirement to the list of

considerations under the Clean Water Act permitting transfer provi-

sion. The repeal accusation places entirely too much weight on the

word “shall,” supposing that it shuts out any and all additional federal

requirements concerning federal decision-making.

Moreover. if the precept disfavoring repeals by implication does

apply, the very definite, unqualified language of the after-enacted

Endangered Species Act must still prevail. See United Ass'n of Jour-

neymen v. Reno, 72 F.3d 1134, 1140 (D.C. Cir. 1996) (finding that a

specific, detailed provision precludes operation of an earlier-enacted

general statute that would otherwise apply); id. at 1142 (Edwards, J.,

dissenting) (noting that the specific provision did not mention the other

provision or statute at issue in the case); see also Tenn. Valley Anth. v.

Hill, 437 US. 158, 188, 98 8S. Ct. 2279, 57 L. Ed. 2d 117 (1978) (noting

that Congress expressly limited the Endangered Species Act's “broad

88a

There is, however, one point upon which Judge

Kozinski places much stock—perhaps more than on any

other—that is not addressed in the majority panel opin-

ion. The reason for the lapse is not that Judge Kozinski

is correct in his emphatic assertions regarding Depart-

ment of Transportation v. Public Citizen, 541 U.S. 752,

124 S. Ct. 2204, 159 L. Ed. 2d 60 (2004), but that he is so

wrong that there was no reason we would have addressed

his argument in the first instance.

Il.

Judge Kozinski boldly asserts that the panel opinion”

“flies in the face of Public Citizen”. The assertion that

the two cases are identical, even similar, misunderstands

both Public Citizen and Defenders of Wildlife itself,

while ignoring a Supreme Court case that is closely on

point, Tennessee Valley Authority v. Hill, 437 U.S. 153,

98 S. Ct. 2279, 57 L. Ed. 2d 117 (1978).

The Endangered Species Act, at issue in Defenders of

Wildlife, sets a substantive requirement that all agencies

must follow. As Tennessee Valley Authority states, the

Endangered Species Act “affirmatively command/s/ all

federal agencies ‘to insure that actions authorized,

funded, or carried out by them do not jeopardize the

continued existence’ of an endangered species.” Defend-

ers of Wildlife, 420 F.3d at 964 (quoting Tenn. Valley

Auth., 487 U.S. at 173, 98 S. Ct. 2279). Public Citizen

concerned an entirely different environmental statute,

the National Environmental Policy Act (NEPA). NEPA,

in contrast to the Endangered Species Act, establishes

sweep” in certain, enumerated situations, and because of such express

limitations “we must presume that these were the only ‘hardship cases’

Congress intended to exempt”).

89a

only the requirement that environmenta! impact must be

considered when making certain federal decisions. See

42 U.S.C. § 4332(2)(C) (requiring a statement of environ-

mental impact for “major Federal actions” but requiring

no federal response to any environmental impact demon-

strated); Public Citizen, 541 U.S. at 756-57, 124 S. Ct.

2204 (citing Robertson v. Methow Valley Citizens Coun-

cil, 490 U.S. 332, 350, 109 S. C

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