PLF sues U.S Fish and Wildlife to protect small businesses

July 31, 2017 | By REED HOPPER

There appears to be a universal recognition that small business is the lifeblood of our economy and a necessary component of our way of life:

Economic freedom is the foundation for individual success and prosperity. This freedom is evident in the entrepreneurial small business sector, which creates most of the new jobs and a large share of the innovations in the American economy. When government takes small businesses into consideration in developing regulations, it saves time and money and supports the growth of the nation’s most productive sector.

-Small Business Administration, Office of Advocacy

This recognition has precipitated a number of presidential executive orders calling for regulatory reduction on small businesses and produced a little-known law called the Regulatory Flexibility Act (RFA). Its purpose is to protect small entities (i.e. small businesses, small organizations, and small governmental jurisdictions) from undue regulatory burdens. The RFA seeks to accomplished this lofty goal by directing federal agencies to take into account the economic impacts of their myriad regulations on small entities and to consider alternatives that will lessen their regulatory burdens, including the reduction of red tape for such entities and outright exemptions, when feasible.

However, the U.S. Fish and Wildlife Service refuses to comply with the RFA, claiming its implementation of the Endangered Species Act is exempt from this law. This claim is groundless.

One of the most burdensome of federal regulations is the designation of critical habitat by the U.S. Fish and Wildlife Service to conserve protected species. Critical habitat is strictly regulated by the federal government, often impairing or eliminating ordinary land use. When the designation affects small landowners or small business entities, the impact can be extreme. For example, the Service estimated the designation of more than 1500 acres of private land in St. Tammany Parish, LA, as critical habitat for the dusky gopher frog, could cost the small business/landowners as much as $34 million in lost value.

The designation of critical habitat is not a benign exercise of federal authority, To the contrary, it is an intrusive regulatory regime that places disproportionate physical and administrative burdens on small entities. This is the very type of agency rule-making the RFA was designed to address.

Last year the U.S. Fish and Wildlife Service designated critical habitat for the Sierra Nevada Yellow-Legged Frog, the northern population of the Mountain Yellow-Legged Frog, and the Yosemite Toad. The designation covers over 1.8 million acres in 16 California counties. Among other things, the rule restricts the use of public and private lands for grazing and timber harvesting imperiling the livelihood of farmers, ranchers, landowners, and local enterprises dependent on these activities. Even schools are affected that derive income from timber production. But the Fish and Wildlife Service refused to consider these impacts or provide the alternatives analysis the RFA requires asserting its critical habitat regulations only affect other federal agencies and not small entities.

The SBA Office of Advocacy, which is tasked with the responsibility of providing federal agencies guidance on how to comply with the Regulatory Flexibility Act, takes issue with this interpretation. According to the Office of Advocacy, “critical habitat designations have direct effects on small businesses which should be reflected in [the Service’s] regulatory flexibility analyses . Advocacy encourages [the Service] to review its cost impact estimates and to consider the current state of the [affected] industry when determining areas that can be excluded from this critical habitat designation based upon economic impact.”

Had the Service done the requisite analysis under the RFA, the agency could have excluded certain grazing and timber lands from the critical habitat designation without putting the species at risk.

Significantly, the National Oceanic and Atmospheric Administration (or NOAA), that also designates critical habitat under the Endangered Species Act, does comply with the RFA.  In the hands of the Service and many other federal agencies, however, the RFA is a paper tiger because these agencies skirt the requirement to quantify and consider the full economic impacts of their regulations on small entities.

On behalf of the California Cattlemen’s Association, the California Wool Growers Association, and the California Farm Bureau Federation, whose members risk losing their livelihood due to restrictions on grazing in the new critical habitat area, PLF is suing the Service for failing to comply with the RFA.

This case would put some teeth back into the Act requiring federal agencies to consider regulations that are less burdensome on small entities. A meaningful RFA would allow affected parties to challenge needlessly onerous regulations. A favorable  decision would benefit thousands of landowners, small businesses, and municipal organizations across the country.