Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-08-15810/USCOURTS-ca9-08-15810-0/pdf.json

Nature of Suit Code: 893
Nature of Suit: Environmental Matters
Cause of Action: 

---

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ARIZONA CATTLE GROWERS’ 

ASSOCIATION,

Plaintiff-Appellant,

v.

KEN SALAZAR, in his official No. 08-15810 capacity as Secretary of the

D.C. No. Interior; H. DALE HALL, in his

official capacity as Director of  2:06-CV-01744-

Fish & Wildlife Service; UNITED SRB

STATES DEPARTMENT OF THE OPINION

INTERIOR; PAUL K. CHARLTON; ERIC

H. HOLDER JR., Attorney General,

Defendants-Appellees,

CENTER FOR BIOLOGICAL DIVERSITY,

Defendant-intervenor-Appellee. 

Appeal from the United States District Court

for the District of Arizona

Susan R. Bolton, District Judge, Presiding

Argued and Submitted

November 4, 2009—San Francisco, California

Filed June 4, 2010

Before: Betty B. Fletcher, William C. Canby, Jr., and

Susan P. Graber, Circuit Judges.

Opinion by Judge B. Fletcher

8025

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 1 of 26
COUNSEL

Norman D. James, Fennemore Craig, Phoenix, Arizona, for

the plaintiff-appellant, Arizona Cattle Growers’ Association.

Andrew C. Mergen, Rebecca Riley, & Robert H. Oakley, U.S.

Department of Justice, Environment and Natural Resources

Division, Washington, D.C., for the defendant-appellee, U.S.

Fish and Wildlife Service. 

Karen Budd-Falen, Budd-Falen Law Offices, LLC, Cheyenne,

Wyoming, for amicus curiae New Mexico Cattle Growers’

Association.

Marc D. Fink, Center for Biological Diversity, Duluth, Minnesota, and Matt Kenna, Western Environmental Law Center,

Durango, Colorado, for defendant-intervenor-appellee Center

for Biological Diversity.

OPINION

B. FLETCHER, Circuit Judge:

Arizona Cattle Growers’ Association (“Arizona Cattle”)

appeals from the district court’s grant of summary judgment

rejecting its challenge to the United States Fish and Wildlife

Service’s (“FWS”) designation of critical habitat for the Mexican Spotted Owl. Arizona Cattle argues that the FWS unlawfully designated areas containing no owls as “occupied”

habitat and that the FWS calculated the economic impacts of

the designation by applying an impermissible “baseline”

approach. We have jurisdiction under 28 U.S.C. § 1291, and

we affirm.

ARIZONA CATTLE GROWERS v. SALAZAR 8029

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 2 of 26
I. BACKGROUND

A. Litigation History

In 1993 the Mexican Spotted Owl was listed as a threatened

species under the Endangered Species Act (“ESA”). The listing decision prompted a series of lawsuits alternately seeking

to compel the FWS to designate critical habitat for the owl

and, following the FWS’s designation of habitat, attacking

that designation.

The first such lawsuit was in 1995 to compel the FWS to

designate critical habitat and resulted in the FWS’s issuing a

final rule designating 4.6 million acres of critical owl habitat,

a designation that was quickly challenged in court and then

revoked in 1998. After another lawsuit was filed to compel

the FWS to designate habitat, the FWS proposed a rule in

2000 to designate 13.5 million acres of critical habitat and in

2001 the agency promulgated a final rule that again designated 4.6 million acres. That rule was later struck down and,

rather than propose a new rule, the FWS reopened the comment period on the rule it proposed in 2000. In 2004 the FWS

designated approximately 8.6 million acres of critical habitat.

It is this designation, the 2004 Final Rule, that Arizona Cattle

challenges in the current action.

Arizona Cattle moved for summary judgment to set aside

the 2004 Final Rule as invalid on several grounds, only two

of which are appealed. First, Arizona Cattle argues that the

FWS impermissibly treated areas in which no owls are found

as “occupied” under the ESA and, in doing so, bypassed the

statutory requirements for designating unoccupied areas. Second, Arizona Cattle challenges the FWS’s determination of

the economic impacts of the designation, arguing primarily

that the FWS applied an impermissible “baseline” approach

that did not account for economic impacts of the critical habitat designation that are also attributable to the listing decision.

8030 ARIZONA CATTLE GROWERS v. SALAZAR

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 3 of 26
The district court rejected Arizona Cattle’s arguments and

granted the Appellees’ cross-motions for summary judgment.

B. The 2004 Final Rule

The FWS relied on three types of habitat management

areas, first outlined in a Recovery Plan created in 1995, as a

starting point for the 2004 Final Rule: protected areas,

restricted areas, and other forest and woodland types. Protected areas are those areas containing known owl sites,

termed Protected Activity Centers (“PACs”); “steep slope”

areas meeting certain forest conditions; and legally and

administratively reserved lands. “PACs include a minimum of

600 acres . . . that includes the best nesting and roosting (i.e.,

resting) habitat in the area . . . . and the most proximal and

highly used foraging areas.” However, PACs contain only

75% of necessary foraging areas for the owl. Restricted areas

include non-steep slope areas with appropriate forest conditions that are “adjacent to or outside of protected areas.”

“Areas outside of PACs, including restricted areas, provide

additional habitat appropriate for foraging.” According to the

2004 Final Rule, restricted areas “also provide habitat for

nonterritorial birds[,] . . . support dispersing juveniles, and . . .

provide replacement nest/roost habitat on the landscape

through time.”

The FWS used these categories to “develop[ ] alternatives

for critical habitat designation,” selecting protected and

restricted areas as a starting point for potential owl critical habitat.1

 In the 2004 Final Rule the FWS adopted an alternative

that excluded all tribal lands from designation, refined critical

habitat unit boundaries, and excluded certain areas that did

not contain PACs. The FWS also excluded “Wildland-Urban

Interface” areas identified as being at high risk of catastrophic

1As discussed in greater detail below, the FWS also analyzed the areas

meeting these habitat characteristics for evidence of owl presence and

used this information to refine its eventual designation. 

ARIZONA CATTLE GROWERS v. SALAZAR 8031

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 4 of 26
wildfire. The 2004 Final Rule concluded that all of the designated habitat was occupied by the owl.

II. STANDARD OF REVIEW

We review the grant of summary judgment de novo,

reviewing directly the agency’s action under the Administrative Procedure Act’s arbitrary and capricious standard. Gifford Pinchot Task Force v. U.S. Fish & Wildlife Serv., 378

F.3d 1059, 1065 (9th Cir. 2004).

[A]n agency rule would be arbitrary and capricious

if the agency has relied on factors which Congress

has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an

explanation 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 of the U.S., Inc. v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29, 43 (1983). In recognition of the

agency’s technical expertise the court usually defers to the

agency’s analysis, particularly within its area of competence.

See Earth Island Inst. v. Hogarth, 494 F.3d 757, 766 (9th Cir.

2007); Nat’l Ass’n of Home Builders v. Norton, 340 F.3d 835,

843-44 (9th Cir. 2003). However, the court need not defer to

the agency when the agency’s decision is without substantial

basis in fact, and there must be a rational connection between

the facts found and the determinations made. Earth Island,

494 F.3d at 766.

III. THE FWS PROPERLY DESIGNATED ONLY 

OCCUPIED AREAS AS CRITICAL HABITAT

We first consider whether the owl “occupied” the designated areas, as defined by the ESA. We conclude that the

FWS permissibly interpreted the word “occupied” in the ESA

8032 ARIZONA CATTLE GROWERS v. SALAZAR

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 5 of 26
to include areas where the owl was likely to be present and

that, applying this definition, the FWS designated only “occupied” areas.

A. The ESA and the Definition of “Occupied”

[1] The ESA defines a species’ critical habitat as 

(i) the specific areas within the geographical area

occupied by the species, at the time it is listed . . . ,

on which are found those physical or biological features (I) essential to the conservation of the species

and (II) which may require special management considerations or protection; and 

(ii) specific areas outside the geographical area

occupied by the species at the time it is listed . . . ,

upon a determination by the Secretary that such

areas are essential for the conservation of the species.

16 U.S.C. § 1532(5)(A). The statute thus differentiates

between “occupied” and “unoccupied” areas, imposing a

more onerous procedure on the designation of unoccupied

areas by requiring the Secretary to make a showing that unoccupied areas are essential for the conservation of the species.

Although this appeal turns primarily on the factual question

of whether the FWS treated unoccupied areas as occupied to

avoid this more onerous process, we face the preliminary

issue of what it means for an area to be “occupied” under the

ESA.

[2] It is useful to unpack this inquiry into two components:

uncertainty and frequency. Uncertainty is a factor when the

FWS has reason to believe that owls are present in a given

area, but lacks conclusive proof of their presence. Frequency

is a factor when owls are shown to have only an intermittent

presence in a given area. Occasionally, both factors will play

ARIZONA CATTLE GROWERS v. SALAZAR 8033

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 6 of 26
a part in determining whether an area is “occupied.” Because

the ESA permits only one of two possible outcomes for this

inquiry—occupied or unoccupied—when the result is best

characterized by a spectrum, we must determine the scope of

the FWS’s authority to categorize as “occupied” those areas

that may not fit neatly into either pigeonhole.

We have ample guidance on the “uncertainty” issue. The

ESA provides that the agency must determine critical habitat

using the “best scientific data available.” 16 U.S.C.

§ 1533(b)(2); see also id. § 1533(b)(6)(C)(ii). This standard

does not require that the FWS act only when it can justify its

decision with absolute confidence. See, e.g., Pub. Citizen

Health Research Group v. U.S. DOL, 557 F.3d 165, 176 (3d

Cir. 2009); Greenpeace Action v. Franklin, 982 F.2d 1342,

1354-55 (9th Cir. 1992). Although the FWS cannot act on

pure speculation or contrary to the evidence, the ESA accepts

agency decisions in the face of uncertainty. Compare Ariz.

Cattle Growers’ Ass’n v. U.S. Fish & Wildlife, 273 F.3d 1229,

1244 (9th Cir. 2001), with Sw. Ctr. for Biological Diversity v.

Babbitt, 215 F.3d 58, 60-61 (D.C. Cir. 2000).

Turning to the “frequency” component, Arizona Cattle

asserts that the word “occupied” is unambiguous and must be

interpreted narrowly to mean areas that the species “resides

in.” In the context of the owl, they argue that such areas consist only of the 600-acre PACs. The FWS argues for a broader

interpretation. It suggests that where a geographic area is used

with such frequency that the owl is likely to be present, the

agency may permissibly designate it as occupied. FWS contends that, at a minimum, this includes the owl’s “home range”

2

and may include other areas used for intermittent activities.

2Home range is the “area used by an animal during its normal activities”; in the case of the owl, estimates of the owl’s home range size have

varied substantially. Studies cited in the 1995 Recovery Plan, for example,

estimated home range sizes varying from a low of 645 acres to a high of

3,831 acres. 

8034 ARIZONA CATTLE GROWERS v. SALAZAR

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 7 of 26
[3] We cannot agree that “occupied” has an unambiguous,

plain meaning as Arizona Cattle suggests. The word “occupied,” standing alone, does not provide a clear standard for

how frequently a species must use an area before the agency

can designate it as critical habitat. Cf. Amoco Prod. Co. v.

Vill. of Gambell, 480 U.S. 531, 548 n.14 (1987) (explaining

that there is “clearly” no plain meaning to the phrase “public

lands which are actually occupied”). Merely replacing the

word “occupied” with the word “resides” does not resolve this

ambiguity. Rather, Arizona Cattle’s argument that “occupied”

is limited to areas where the species “resides” only underscores the flexibility of determining whether an area is “occupied.” Viewed narrowly, an owl resides only in its nest;

viewed more broadly, an owl resides in a PAC; and viewed

more broadly still, an owl resides in its territory or home

range. Determining whether a species uses an area with sufficient regularity that it is “occupied” is a highly contextual and

fact-dependent inquiry. Cf. Cape Hatteras Access Pres. Alliance v. United States DOI, 344 F. Supp. 2d 108, 119-20

(D.D.C. 2004). Relevant factors may include how often the

area is used, how the species uses the area, the necessity of

the area for the species’ conservation, species characteristics

such as degree of mobility or migration, and any other factors

that may bear on the inquiry. Such factual questions are

within the purview of the agency’s unique expertise and are

entitled to the standard deference afforded such agency determinations. See Earth Island, 494 F.3d at 766. 

[4] Having found the term “occupied” dependent on a

number of factors, we must look to whether the agency’s proposed interpretation is permissible as applied to the owl’s

habits and habitat. Arizona Cattle argues that the FWS has

never previously defined “occupied critical habitat.” Thus, it

contends, the agency interpretation urged on appeal is merely

a self-serving construction found only in the FWS’s legal

briefs and is entitled to no deference. But the agency has

defined “occupied critical habitat” in a manner very similar to

the proposed interpretation. In its Endangered Species ConARIZONA CATTLE GROWERS v. SALAZAR 8035

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 8 of 26
sultation Handbook, the agency defines “occupied critical

habitat” as 

critical habitat that contains individuals of the species at the time of the [Section 7] project analysis. A

species does not have to occupy critical habitat

throughout the year for the habitat to be considered

occupied (e.g. migratory birds). Subsequent events

affecting the species may result in this habitat

becoming unoccupied. 

U.S. Fish & Wildlife Serv. & Nat’l Marine Fisheries Serv.,

Endangered Species Consultation Handbook 4-34 (1998),

available at http://www.fws.gov/endangered/pdfs/Sec7/

handbook/ch4.pdf. This definition recognizes that a species

need not be present continuously for habitat to be considered

“occupied.” It also demonstrates that “occupied” habitat is not

limited to areas in which the species “resides,” as it includes

habitat that merely “contains individuals of the species.” At

the very least, this definition is entitled to deference “proportional to its power to persuade” pursuant to the Supreme

Court’s holding in Skidmore v. Swift & Co., 323 U.S. 134

(1944), and subsequent cases. See United States v. Mead

Corp., 533 U.S. 218, 235 (2001) (giving Skidmore deference

to interpretations contained in agency manuals or enforcement

guidelines); Bamonte v. City of Mesa, 598 F.3d 1217, 1228

(9th Cir. 2010) (explaining that, under Skidmore, agency positions not afforded the force of law are entitled to deference

“proportional to [their] power to persuade” (internal quotation

marks omitted)). The definition in the handbook appears to be

the result of the agency’s considered judgment and, for the

reasons we express below, we are persuaded by the agency’s

position that “occupied” should not be interpreted in a restrictive fashion.

[5] The FWS permissibly rejected Arizona Cattle’s “resides in” interpretation as too narrow. Looking to the context

of the present appeal provides a solid justification for this

8036 ARIZONA CATTLE GROWERS v. SALAZAR

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 9 of 26
rejection. The record demonstrates, for example, that PACs

include only 75% of the owl’s foraging habitat. Even if we

assume that each owl “resides in” a PAC, we are not persuaded that Congress intended a definition of “occupied” that

would exclude areas likely to be regularly used by the species.

This is particularly true where those areas contain resources

necessary for species conservation. Arizona Cattle’s proposed

interpretation would also exclude habitat for nonterritorial

owls that may not be under constant or uniform use despite

frequent owl presence. Cf. Cape Hatteras Access Pres. Alliance, 344 F. Supp. 2d at 119-20 (noting the agency’s examination of areas for “consistent use”).

[6] The FWS has authority to designate as “occupied”

areas that the owl uses with sufficient regularity that it is

likely to be present during any reasonable span of time. This

interpretation is sensible when considered in light of the many

factors that may be relevant to the factual determination of

occupancy. For example, Arizona Cattle’s “reside in” interpretation would make little sense as applied to nonterritorial,

mobile, or migratory animals—including the owl—for which

it may be impossible to fix a determinate area in which the

animal “resides.”

3

 Such a narrow interpretation also would

mesh poorly with the FWS’s authority to act in the face of uncertainty.4

[7] We are further persuaded by our decision in Gifford

3

It is easy to envision other contexts in which this interpretation is even

less helpful: consider salmon that swim upstream to spawn, periodical

cicadas that live underground for years before emerging as adults, migratory birds, or other animals that require a diverse array of habitats. 

4By way of example, because PACs represent only known owl sites,

Arizona Cattle’s proposed interpretation that only PACs are “occupied”

because they reflect where the owl “resides” is likely substantially

underinclusive and places a burden on the agency to count every owl. See

Sw. Ctr. for Biological Diversity, 215 F.3d at 60-61 (explaining that the

ESA’s requirement to use the best scientific data available did not require

the agency to conduct independent studies to count every single animal).

ARIZONA CATTLE GROWERS v. SALAZAR 8037

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 10 of 26
Pinchot. In that case we invalidated an agency interpretation

of the ESA that effectively eliminated the independent significance of critical habitat as a measure to protect endangered

species. See Gifford Pinchot, 378 F.3d at 1070; see also

Sierra Club v. U.S. Fish & Wildlife Serv., 245 F.3d 434, 441-

43 (5th Cir. 2001). The same logic leads us here to reject Arizona Cattle’s attempt to shackle the FWS with an overly narrow definition of “occupied.” Critical habitat—including

“occupied critical habitat”—is defined in relation to areas

necessary for the conservation of the species, not merely to

ensure its survival. See 16 U.S.C. § 1532(5)(A); Gifford Pinchot, 378 F.3d at 1070; Sierra Club, 245 F.3d at 441-42. Limiting the agency to designating habitat only where the owl

“resides” focuses too narrowly on owl survival and ignores

the broader purpose of the critical habitat designation.

Our decision is also informed by Supreme Court precedent

that has treated the word “occupied” with considerable

breadth. In Amoco Production Co., the Court distinguished a

statute referring to land “in Alaska” from a statute referring

to “public lands which are actually occupied.” 480 U.S. at

547-48 n.14. The Court explained that while “in Alaska” had

a “precise geographical/political meaning[ ],” the phrase

“public lands which are actually occupied” did not and was

properly construed to include substantial areas of adjacent

waters. Id. (citing Hynes v. Grimes Packing Co., 337 U.S. 86,

110-16 (1949)). The Court’s interpretation of “actually occupied” as including adjacent waters suggests that it is permissible for the FWS to interpret “occupied” more broadly than

merely the area where an individual or species “resides.”

Finally, this interpretation is supported by the purpose of

the ESA “ ‘to prevent animal and plant species endangerment

and extinction caused by man’s influence on ecosystems, and

to return the species to the point where they are viable components of their ecosystems.’ ” Trout Unlimited v. Lohn, 559

F.3d 946, 949 (9th Cir. 2009) (quoting H.R. Rep. No. 95-

8038 ARIZONA CATTLE GROWERS v. SALAZAR

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 11 of 26
1625, at 5 (1978), reprinted in 1978 U.S.C.C.A.N. 9453, 9455).5

Where data are inconclusive or where habitat is used on a

sporadic basis, allowing the FWS to designate as “occupied”

habitat where the species is likely to be found promotes the

ESA’s conservation goals and comports with the ESA’s policy of “institutionalized caution.” See 16 U.S.C. § 1531; cf.,

e.g., Defenders of Wildlife v. Flowers, 414 F.3d 1066, 1074

(9th Cir. 2005); Sierra Club v. Marsh, 816 F.2d 1376, 1386

(9th Cir. 1987) (“Congress clearly intended that [agencies]

give the highest of priorities and the benefit of the doubt to

preserving endangered species.” (internal quotation marks

omitted)).

It is possible for the FWS to go too far. Most obvious is

that the agency may not determine that areas unused by owls

are occupied merely because those areas are suitable for

future occupancy. Such a position would ignore the ESA’s

distinction between occupied and unoccupied areas. See Ariz.

Cattle Growers’ Ass’n, 273 F.3d at 1244. We note as a caveat,

however, that determining whether an area is occupied or

merely will be occupied in the future may be complicated in

the context of migratory or mobile species. The fact that a

member of the species is not present in an area at a given

instant does not mean the area is suitable only for future occupancy if the species regularly uses the area.6

5Arizona Cattle cites to the legislative history surrounding the enactment of the statutory definition of “critical habitat.” Although this history

suggests that Congress was concerned that agencies were giving equal status to “lands needed for population expansion” as to those presently occupied by the species and that Congress intended the agency to be

circumspect about designating unoccupied areas, the history sheds little

light on what frequency of species use renders an area “occupied,” the

issue of substance in this case. See S. Rep. No. 95-874, at 10 (1978). 

6Consider, for instance, habitat that a currently living owl has migrated

through—and used—in the recent past, and through which owls are likely

to migrate and use similarly in the future. While owl presence in this area

at a particular time may be limited, we are disinclined to hold that the

FWS must find this area “unoccupied” simply because, despite owl use in

the recent past and foreseeable future, no owl is using the area during a

particular temporal window. 

ARIZONA CATTLE GROWERS v. SALAZAR 8039

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 12 of 26
Having thus framed the inquiry, we turn to the primary

issue before the court: whether the FWS included unoccupied

areas in its critical habitat designation.

B. The FWS Did Not Designate Unoccupied Areas as

Critical Habitat

[8] After a thorough review of the record we find that the

FWS did not arbitrarily and capriciously treat unoccupied

areas as occupied. We reiterate that when an agency is acting

within its expertise to make a scientific determination “a

reviewing court must generally be at its most deferential.”

Balt. Gas & Elec. Co. v. NRDC, 462 U.S. 87, 103 (1983);

Lands Council v. McNair, 537 F.3d 981, 993 (9th Cir. 2008)

(en banc), abrogated in part on other grounds by Winter v.

NRDC, 129 S. Ct. 365 (2008).

[9] The FWS took, as a starting point for its 2004 designation, the three types of habitat management areas that it developed in the 1995 Recovery Plan. Simply by virtue of the

definitions of these habitat management types, there is a direct

link between the designated territory and owl occupancy.

PACs are explicitly defined with reference to frequent owl

presence, and non-PAC protected areas and restricted areas

are “devised around” and “adjacent to” PACs. More to the

point, we note significant record support for owl occupancy

of these areas in the form of studies correlating the habitat

characteristics of protected and restricted areas with owl presence. Cf. Gifford Pinchot, 378 F.3d at 1066; cf also Envtl.

Prot. Info. Ctr. v. U.S. Forest Serv., 451 F.3d 1005, 1017 (9th

Cir. 2006) (rather than counting individual animals, an agency

may in appropriate cases use habitat as a proxy). 

[10] The agency did not stop there. It further refined its

designation by adding and removing areas on the basis of evidence of owl occupancy or lack thereof. A striking example

of this is the FWS’s analysis of owl occupancy in the pro8040 ARIZONA CATTLE GROWERS v. SALAZAR

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 13 of 26
posed critical habitat in Arizona.7

 This analysis proceeds, unit

by unit, through the addition of areas to the critical habitat

proposal on the basis of information about known owl locations. It also demonstrates that the FWS, even where it could

not identify known owl sites (PACs) with certainty, was considering other evidence of current owl use in designating habitat, such as “owl calling routes.”

A point of recurring significance to our analysis is that

PACs reflect only known owl sites. Although the 2004 Final

Rule identified 1,176 PACs, owl populations have been estimated to be significantly greater than the maximum 2,352

owls reflected by this number of PACs. For example, the

2004 Environmental Analysis notes that more owls than this

may exist in a single recovery unit: “a pilot study (Ganey et

al., 2000) conducted in 1999 estimated the number of Mexican spotted owls for the Upper Gila Mountains Recovery

Unit, exclusive of tribal lands, as 2,950.” Since the listing of

the species, the FWS has repeatedly revised upward its estimates of owl populations and identified new PACs. Likewise,

the 2004 Final Rule recognizes that “[a]dditional surveys are

likely to document more owls.” Efforts by the FWS to identify other evidence of owl presence when it is unable to fix the

location of a PAC with certainty are, therefore, highly significant.

Even more significant is the fact that the FWS excluded

areas with evidence of few or no owls. The 2004 Final Rule

explains that the FWS “did not designate some areas that are

known to have widely scattered owl sites, low owl population

densities, and/or marginal habitat quality.” We find this statement supported by record evidence explaining the FWS’s

decision to exclude several areas due to an absence of owls.

We likewise find that the record demonstrates that where the

FWS did include areas in which owl presence was uncertain

7This document is particularly significant because Arizona contains the

largest areas of designated critical habitat. 

ARIZONA CATTLE GROWERS v. SALAZAR 8041

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 14 of 26
—such as the North Kaibab Ranger District (“NKRD”), the

Peloncillo Mountains, the Prescott National Forest, and certain “sky islands”—it did so after thoughtful consideration of

owl occupancy. Finally, we note that a comparison of the

areas designated in the 2004 Final Rule to PAC locations confirms that the FWS excluded the vast majority of critical habitat units that contained no PACs and refined the boundaries

of the critical habitat units to exclude large areas that are distant from PACs.

[11] The FWS’s process for designating critical habitat

gives us a strong foundation for our conclusion that the

agency did not arbitrarily and capriciously treat areas in

which owls are not found as “occupied.” With this context in

mind, we turn to Arizona Cattle’s specific arguments that the

agency improperly designated unoccupied areas as critical

habitat and our reasons for disagreement.

1. The FWS Did Not Impermissibly Change Course

in the 2004 Final Rule from Its Approach to Prior

Designations

Arizona Cattle argues that the 1995 Recovery Plan and the

agency’s prior proposed habitat designations demonstrate that

the FWS considered only PACs to be occupied and intended

non-PAC areas—specifically restricted habitat—to provide

future owl habitat. This, it contends, is proof that the 2004

Final Rule must have falsely labeled restricted areas as “occupied.” Arizona Cattle singles out an e-mail that it contends is

a smoking gun demonstrating that the FWS made an abrupt

shift in its description of protected and restricted areas, deciding to refer to these areas as “suitable habitat outside of

PACs” rather than “unoccupied habitat.” 

We have already suggested some of the reasons why it

would be inappropriate to read the 2004 Final Rule as treating

PACs as the only areas occupied by the owl. We pause here

to explain this conclusion further. First, the 2004 Final Rule

8042 ARIZONA CATTLE GROWERS v. SALAZAR

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 15 of 26
is explicit that PACs represent only the best habitat used by

the owl. The record also demonstrates that the FWS believed

that owls may use habitat within a one-mile buffer around

PACs and that PACs were intended to “minimize activities

occurring in close proximity to owl nests . . . and preserve the

best habitat close to known nesting and roosting sites.” As

already discussed, the record reflects that known, territorial

owls regularly use substantial areas outside of their PACs for

foraging. For these owls, we find that the agency’s suggestion

that the owl’s home range is an appropriate measure of the

territory occupied by the owl is well-supported by the record.

Even that measure would not present a complete picture of

the territory occupied by the owl because PACs reflect only

known owl sites. It is implausible to believe the FWS intended

—or was statutorily required—to limit “occupied” habitat to

PACs, or to the home range of only known owls, when such

a decision would be significantly underinclusive. Similarly, it

is clear that PACs and the owl’s home range do not reflect

areas used by nonterritorial owls or areas used for certain

other intermittent owl activities, such as dispersal or migration. The agency points out in the 2004 Final Rule, for example, evidence that “some [owls] migrate considerable

distances 12-31 miles . . . during the winter.”

8

 It does not

appear that the FWS intended to limit “occupied” habitat to

PACs, nor was this decision arbitrary and capricious.

[12] As to the FWS’s purported shift in approach between

the 2004 Final Rule and earlier agency actions, we find that

it reflects merely a change in the agency’s perspective, a

movement away from an unnecessarily restrictive view of the

areas the owl “occupies.” In other words, the apparent difference between the 2004 Final Rule and the agency’s prior

8The 2004 Final Rule also notes that “some [owls] remain in the general

area but exhibited shifts in habitat use patterns.” Such shifts in habitat use

could also explain some of the statements in the previous rule that discuss

replacement of nesting and roosting habitat over time. 

ARIZONA CATTLE GROWERS v. SALAZAR 8043

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 16 of 26
approach did not arise because the agency suddenly decided

to treat substantial areas where owls were not present as “occupied.” The agency simply reassessed its previous approach,

which focused narrowly on “known nesting sites” as the areas

occupied by the owl, adopting the broader approach that we

have held reflects the proper definition of “occupied.” See

Nat’l Ass’n of Home Builders v. Defenders of Wildlife, 551

U.S. 644, 658-59 (2007) (explaining that agencies may

change their minds if proper procedures are followed and federal courts ordinarily review only an agency’s final action);

Motor Vehicle Mfrs. Ass’n, 463 U.S. at 44; PLMRS Narrowband Corp. v. FCC, 182 F.3d 995, 1001-02 (D.C. Cir. 1999).

Because we conclude that the 2004 Final Rule remained

within permissible bounds, we find no fault in the rule on this

front.

The e-mail that Arizona Cattle contends demonstrates the

FWS’s shift in approach is explicit that this change was one

of agency perspective and was entirely consistent with the

evidence of the areas used by the owl. The e-mail states that,

in its previous discussion of “occupied habitat,” the agency

was “really referring to . . . known nesting sites” and that

“non-PAC protected areas, restricted areas, and other forest

and woodland types within one mile of a PAC . . . may be

used by owls at any given time.” It explains that, although a

narrow definition of “occupied habitat” that focused exclusively on nesting might not include these areas, non-PAC protected areas and restricted areas “may potentially harbor an

owl at any given time.” The same e-mail states that the FWS

believed these areas were, in fact, presently used by owls—

even if they had been previously labeled “unoccupied” under

an unnecessarily restrictive approach to that term. Thus, statements in prior agency actions as to the suitability of certain

areas for “future owl occupancy” or characterizing restricted

areas as “unoccupied” lose their force because they reflect

this change in approach rather than a contradiction as to owl

presence or use of these areas. We will “uphold a decision of

less than ideal clarity if the agency’s path may be reasonably

8044 ARIZONA CATTLE GROWERS v. SALAZAR

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 17 of 26
discerned.” Nat’l Ass’n of Home Builders, 551 U.S. at 658

(internal quotation marks omitted); see also Wetlands Action

Network v. U.S. Army Corps of Eng’rs, 222 F.3d 1105, 1122

n.8 (9th Cir. 2000).

We find the e-mail’s explanation for the agency’s change

in perspective supported by the record. For example, the

record contains notes taken at a meeting that demonstrate the

FWS’s focus on assuring that the agency could identify a

“reasonable expectation” of occupancy in the areas it planned

to designate. The record likewise demonstrates the agency’s

view that restricted areas are “temporally occupied” even if

not used full-time for nesting purposes. As we have already

explained, there is sufficient record support for the agency’s

decision in the 2004 Final Rule not to treat PACs as the only

areas occupied by the owl. Another example is an e-mail in

which the agency explains that, although the exclusion of certain land resulted in the FWS’s proposing to designate an area

that contained no PACs, the agency considered the restricted

area occupied.

The FWS was not attempting to designate areas devoid of

owls as “occupied” in the 2004 Final Rule. Although seeming

inconsistencies between the FWS’s decisions may shed light

on the agency’s process, and changes from past positions that

are unsupported by evidence are unlawful, ultimately it is the

2004 Final Rule that is before the court and our inquiry is

whether the FWS exceeded its authority or deviated from the

evidence.9See Nat’l Ass’n of Home Builders, 551 U.S. at 658-

9Arizona Cattle does point to a few statements in the record questioning

owl presence in areas proposed for designation in what eventually became

the 1995 Final Rule. These statements are dated and their applicability to

the 2004 Final Rule is questionable. The record reflects evolving agency

knowledge as to owl population and location in the decade between the

listing of the owl and the 2004 Final Rule, a point that is explicit in the

1995 Recovery Plan and that Arizona Cattle acknowledges in its reply

brief. These isolated statements of disagreement with the FWS’s approach

in a prior rule promulgated in the mid-1990s do not overcome the record

support for the agency’s decision in 2004. 

ARIZONA CATTLE GROWERS v. SALAZAR 8045

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 18 of 26
59; Wetlands Action, 222 F.3d at 1122 n.8. The FWS’s analysis solidly demonstrates the connection between the designated areas and owl occupancy, notwithstanding that the

agency previously adopted an unnecessarily restrictive view

of the areas the owl occupied as limited to known nesting

sites. The agency’s approach in the 2004 Final Rule was supported by the evidence and within permissible bounds.

2. The Amount of Land Designated Is Not 

Disproportionate to the Number of Owls

[13] Arizona Cattle also argues that even using the owl’s

substantially larger home range as the appropriate measure for

the territory occupied by the owl, the FWS has designated a

grossly disproportionate amount of land compared to the

amount the owl occupies. It ties this argument to a seemingly

simple calculation: multiplying the 1,176 PACs by the maximum estimated home range size of the owl of 3,831 acres, the

resultant area is only approximately 4.5 million acres, in contrast to the 8.6 million acres designated. This calculation,

however, rests on a faulty assumption that the PACs represent

all extant owls. We have already explained that PACs reflect

only known owl sites and that there is record support for the

existence of substantially greater numbers of owls and undiscovered sites. Nor does this calculation, tied as it is to the

number of PACs, reflect areas used by nonterritorial owls,

areas used for juvenile dispersal, or areas used for owl migration.10 Arizona Cattle’s argument does not overcome the

10We note again here the complexity of determining whether an area is

occupied in the context of a mobile species. Areas used for juvenile dispersal, for example, may be necessary for owl survival but only used for

portions of the year. The record reflects that juvenile dispersal involves the

connection of owl groups into “metapopulations.” It does not mean that

habitat used for dispersal is not used by owls, but is rather under intermittent use for routine owl movement from one area to another. Regardless,

we do not rest our holding on this point because, even absent this rationale, the FWS has sufficiently justified the designation.

8046 ARIZONA CATTLE GROWERS v. SALAZAR

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 19 of 26
strong evidence that the FWS was focused on designating

areas occupied by owls.

3. The FWS’s Decision to Include the North Kaibab

Ranger District in the Designation Was Not 

Arbitrary and Capricious

Finally, we turn to the single specific location11 where Arizona Cattle contends that the FWS has failed to demonstrate

owl occupancy: the NKRD. Citing a letter to the FWS detailing certain studies conducted in the area without owl sightings, Arizona Cattle maintains that the agency treated the

NKRD as occupied despite evidence that owls were in fact

absent from the District. Arizona Cattle, however, overlooks

a responsive memorandum by the agency in which the FWS

explains that it declined to rely on those studies because it

concluded that the studies were not reliable evidence that

owls were not present. This memorandum also explains the

reasons for the agency’s conclusion that owls are present,

including a history of owl sightings in the NKRD. This is precisely the sort of decision within the agency’s technical expertise that we are not free to second-guess. This memorandum,

along with the FWS’s diligent review of the proposed designation for owl occupancy, detailed above, persuades us that

the FWS’s decision had a sound basis in fact.

[14] We conclude that the agency designated only “occupied” areas as critical habitat, even though it may not have

identified with certainty in all cases a known owl constantly

inhabiting that territory. The process that the FWS used to

select habitat for designation, the measures it took to exclude

11Although Arizona Cattle points to areas where it contends that the

amount of land designated is disproportionate to the number of PACs contained in the area, this argument is simply a variant on Arizona Cattle’s

mathematical argument we reject above. In addition, even as to known

owls the argument relies on the 600-acre PACs, rather than a more accurate measure of occupied area. 

ARIZONA CATTLE GROWERS v. SALAZAR 8047

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 20 of 26
areas where owls were absent or use by owls was infrequent,

and its careful work to confirm the presence of owls in the

designated areas demonstrate that the FWS designated areas

that correspond to habitat where the owl is likely to be found.

The agency action was neither based on speculation nor

counter to the evidence. 

IV. THE FWS’S ECONOMIC ANALYSIS WAS NOT

ARBITRARY AND CAPRICIOUS

Arizona Cattle challenges the FWS’s analysis of the economic impacts of the critical habitat designation. For the reasons expressed below, we find no fault with the agency’s

economic analysis.

A. The FWS Permissibly Used the Baseline Approach

in Conducting the Economic Analysis

The decision to list a species as endangered or threatened

is made without reference to the economic effects of that decision. See N.M. Cattle Growers Ass’n v. U.S. Fish & Wildlife

Serv., 248 F.3d 1277, 1282 (10th Cir. 2001). Listing alone

results in certain protections for the species, including a

requirement that federal agencies “insure that any action

authorized, funded, or carried out by such agency . . . is not

likely to jeopardize the continued existence of any endangered

species or threatened species.” 16 U.S.C. § 1536(a)(2); see

also, e.g, id. § 1538. These protections may impose economic

burdens.

[15] In contrast to the listing decision, under the ESA the

agency may designate critical habitat only after considering

the economic impact of the designation on any particular area.

Id. § 1533(b)(2). The agency has discretion to exclude any

area from the designation if the agency determines “that the

benefits of such exclusion outweigh the benefits of specifying

such area as part of the critical habitat,” unless exclusion

would result in extinction of the species. Id. This can be a del8048 ARIZONA CATTLE GROWERS v. SALAZAR

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 21 of 26
icate balancing act. After critical habitat is designated, the

ESA requires that federal agencies “insure that any action

authorized, funded, or carried out by such agency . . . is not

likely to . . . result in the destruction or adverse modification”

of critical habitat. Id. § 1536(a)(2); see also Gifford Pinchot,

378 F.3d at 1069.

[16] The crux of the parties’ dispute over the FWS’s economic analysis is whether the FWS was required to attribute

to the critical habitat designation economic burdens that

would exist even in the absence of that designation. The parties agree that the FWS applied the “baseline” approach to the

economic analysis. Under this approach, any economic

impacts of protecting the owl that will occur regardless of the

critical habitat designation—in particular, the burdens

imposed by listing the owl—are treated as part of the regulatory “baseline” and are not factored into the economic analysis of the effects of the critical habitat designation.12 Arizona

Cattle, relying on the Tenth Circuit’s decision in New Mexico

Cattle Growers Association, argues that this was error and

that the FWS was required to apply a “co-extensive” approach

to the economic analysis. Under the co-extensive approach,

the agency must ignore the protection of a species that results

from the listing decision in considering whether to designate

an area as critical habitat. Any economic burden that designating an area would cause must be counted in the economic

analysis, even if the same burden is already imposed by listing the species and, therefore, would exist even if the area

were not designated.

12For example, suppose that the decision to list the owl as endangered

resulted in a ban on logging in a particular area, and that designating that

area as critical habitat would independently result in the same ban.

Because the listing decision would result in the logging ban even if the

agency did not designate critical habitat in that area, the baseline approach

would not treat the ban as a burden that was imposed by the critical habitat

designation. 

ARIZONA CATTLE GROWERS v. SALAZAR 8049

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 22 of 26
[17] In New Mexico Cattle Growers Association the Tenth

Circuit held that the baseline approach was impermissible

under the ESA. See 248 F.3d at 1285. It did so, however, relying on an FWS regulation that defined “destruction or adverse

modification” as effectively identical to the standard for determining whether an agency action places a species in “jeopardy.” See id. at 1283-85; see also Gifford Pinchot, 378 F.3d at

1069-70.

13 The Tenth Circuit held that this regulation rendered an economic analysis relying on the baseline approach

“virtually meaningless” because it allowed the agency, in all

cases, to find no economic impact to the critical habitat designation. See N.M. Cattle Growers Ass’n, 248 F.3d at 1283-85.

Our court and others have since found the agency’s definition

of “adverse modification” too narrow. See Gifford Pinchot,

378 F.3d at 1070; see also Ctr. for Biological Diversity v.

BLM, 422 F. Supp. 2d 1115, 1151-53 (N.D. Cal. 2006); Cape

Hatteras Access Pres. Alliance, 344 F. Supp. 2d at 128-30.

We therefore reject the Tenth Circuit’s approach in New Mexico Cattle Growers Association as relying on a faulty premise

and hold that the FWS may employ the baseline approach in

analyzing the critical habitat designation.

The baseline approach is, if anything, more logical than the

co-extensive approach. The very notion of conducting a

cost/benefit analysis is undercut by incorporating in that analysis costs that will exist regardless of the decision made.14

Moreover, the practical relevance of the economic analysis

13The Tenth Circuit declined to address whether the FWS’s definition

of “adverse modification” was invalid. See N.M. Cattle Growers, 248 F.3d

at 1283-85. 

14We note further the confusion engendered by the co-extensive

approach on the “benefit” side of the equation. If the FWS must consider

“burdens” imposed by the critical habitat designation as if there were no

protections imposed by the listing decision, must it also assume that in the

absence of the critical habitat designation the species is entirely unprotected in considering the “benefits” of designating a particular area? The

co-extensive approach runs the risk of becoming a purely academic exercise. 

8050 ARIZONA CATTLE GROWERS v. SALAZAR

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 23 of 26
under the ESA is to determine the benefits of excluding or

including an area in the critical habitat designation: if there is

no net benefit (such as a reduction in economic impacts) to

excluding the area, the agency must designate it. See 16

U.S.C. § 1533(b)(2). The baseline approach, in contrast to the

co-extensive approach, reflects this purpose. 

Congress has directed the FWS to list species, and thus

impose a regulatory burden, without consideration of the costs

of doing so. See 16 U.S.C. § 1533(a); N.M. Cattle Growers,

248 F.3d at 1282. It would be strange to conclude that Congress intended the FWS to consider costs at the critical habitat

phase that the agency was barred from considering at the listing phase where, as a result, the analysis would bear little

relationship to reality.15 It would also be strange to conclude

that Congress intended to use the critical habitat designation

to require the agency to consider the previously irrelevant

costs of listing the species, particularly given that the decision

to exclude an area from critical habitat for economic reasons

is discretionary. See 16 U.S.C. § 1533(b)(2); Bennett v. Spear,

520 U.S. 154, 172 (1997). The simpler explanation is that the

economic analysis of the critical habitat designation is exactly

what it sounds like and is not intended to incorporate the burdens imposed by listing the species.

Arizona Cattle argues that if the FWS designated critical

habitat at the same time as it listed the species, see 16 U.S.C.

§ 1533(a)(3), there would be no baseline to which to compare

the critical habitat designation. Even if the FWS lists the species concurrently with designating critical habitat, however,

listing the species is a necessary antecedent to designating

habitat. We see little inconsistency with the FWS’s considering the burdens imposed by the critical habitat designation

15Although the Tenth Circuit is likely correct that inclusion of the costs

of listing in the critical habitat analysis does not affect the FWS’s listing

process, see N.M. Cattle Growers, 248 F.3d at 1285, it has clear potential

to distort the critical habitat analysis. 

ARIZONA CATTLE GROWERS v. SALAZAR 8051

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 24 of 26
while taking into account those necessarily imposed by the

listing decision even in these circumstances. 

Finally, Arizona Cattle argues that the baseline approach

allows the FWS to treat the economic analysis as a mere procedural formality. We reject the argument that, as a matter of

course, the FWS will neglect its duty to perform a thorough

economic analysis. To hold otherwise would amount to a presumption that the FWS will act in an arbitrary and capricious

fashion, a presumption that is inconsistent with the deference

the court affords agencies. See, e.g., Smith v. U.S. Forest

Serv., 33 F.3d 1072, 1077 n.2 (9th Cir. 1994). Furthermore,

contrary to Arizona Cattle’s contention that the impact of designating critical habitat cannot be negligible, the costs of a

critical habitat designation could, in fact, be subsumed by the

burdens imposed by listing the species—any burden that is

entirely “co-extensive” with the listing decision will reflect

exactly such a case.

We hold that the FWS permissibly applied the baseline

approach in conducting the economic analysis of the effects

of the designation.

B. Remaining Arguments

We can easily dispose of Arizona Cattle’s two remaining

challenges to the FWS’s economic analysis. First, Arizona

Cattle suggests that the FWS’s analysis ignored the economic

effects of designating unoccupied habitat. Having already

rejected this argument’s premise—that the FWS’s critical

habitat designation included unoccupied habitat—we need

give no further consideration to this argument. Second, Arizona Cattle asserts that the FWS’s economic analysis ignored

the difference between the jeopardy and adverse modification

standard in light of Gifford Pinchot, and should have considered the economic impacts of additional consultations and

project modifications that the adverse modification standard

imposes. Arizona Cattle did not make this argument at the

8052 ARIZONA CATTLE GROWERS v. SALAZAR

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 25 of 26
district court level and we therefore do not consider it now.16

See Solis v. Matheson, 563 F.3d 425, 437 (9th Cir. 2009);

Harger v. Dep’t of Labor, 569 F.3d 898, 904 n.9 (9th Cir.

2009).

V. CONCLUSION

We find no fault with the FWS’s designation of habitat for

the Mexican Spotted Owl. The FWS did not impermissibly

treat unoccupied areas as “occupied,” and we hold that it permissibly applied the baseline approach in analyzing the economic impact of the critical habitat designation. 

The judgment of the district court is AFFIRMED.

16Although we need not reach it, we note that this argument appears

fundamentally inconsistent with Arizona Cattle’s primary complaint

regarding the FWS’s application of the baseline approach. The baseline

approach counts precisely these economic impacts and Arizona Cattle’s

disagreement with the baseline approach is, in fact, that it counts only

impacts like these. 

ARIZONA CATTLE GROWERS v. SALAZAR 8053

Case: 08-15810 06/04/2010 ID: 7359780 DktEntry: 29-1 Page: 26 of 26