Biological Opinion Under ESA May Spell End of Floodplain Development in Washington State

In response to a 2004 federal court order,[1] NOAA Fisheries (the “Service”) recently released a biological opinion (“BiOp”) addressing the effects of the Federal Emergency Management Agency’s (“FEMA”) continued administration of the National Flood Insurance Program (“NFIP”) throughout the Puget Sound region (the “FEMA BiOp”).[2] In the FEMA BiOp, the Service determined that the NFIP jeopardizes several marine species listed under the Endangered Species Act (the “ESA”) and adversely affects or destroys their critical habitat. As a result, over 270 Puget Sound communities will soon receive guidance from FEMA explaining what they must do to avoid violating the ESA when authorizing floodplain development.[3] One way for local governments to comply with forthcoming directives would be a blanket building moratorium across 100-year floodplains. Such a prohibition would fundamentally alter the manner in which Washington cities and counties have managed floodplain development for the past half century.[4]

Statutory background

The ESA

Section 7 of the ESA requires federal agencies to “insure that any action authorized, funded, or carried out by such agency … is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of [designated critical] habitat.…”[5] This requires action agencies to consult with the appropriate wildlife Service (either NOAA Fisheries or the U.S. Fish and Wildlife Service). The statute sets forth the following “three-step process to ensure compliance with its substantive provisions by federal agencies”:[6]

1. An agency proposing an action must ask the appropriate Service whether any threatened or endangered species "may be present" in the area of the proposed action.
2. If the answer is affirmative, the agency must prepare a "biological assessment" to determine whether such species "is likely to be affected" by the action.
3. If the Service “determines that a threatened or endangered species ‘is likely to be affected,’” the agency must formally consult with the appropriate Service. The formal consultation results in a BiOp. If the Service concludes that the proposed action would jeopardize the species or destroy or adversely modify critical habitat, the action may not proceed unless the Service “can suggest an alternative that avoids such jeopardization, destruction, or adverse modification. If the opinion concludes that the action will not violate the Act, the [Service] may still require measures to minimize its impact.”[7]

Following the issuance of a BiOp, the action agency must determine “whether and in what manner to proceed with the action in light of its [§] 7 obligations and the Service's [BiOp].”[8] If the action agency determines that it cannot comply with the requirements of § 7 after its consultation with the Service, it may apply for an exemption.[9]

When a Service determines that a federal action is consistent with § 7, it will issue an incidental take statement (“ITS”) specifying the impact of any incidental taking of listed species.[10] The ITS provides reasonable and prudent alternatives (“RPAs”) necessary to minimize impacts, and sets forth terms and conditions with which the action agency must comply in order to implement the RPAs.[11] Incidental takings resulting from the agency action, including those caused by activities authorized by the agency, are exempted from the ESA’s § 9 take prohibition by § 7(o), but only if those takings comply with the ITS.[12]

The National Flood Insurance Act of 1968

The National Flood Insurance Act (the “NFIA”)[13] authorizes FEMA to administer the NFIP. Relevant purposes of the NFIA include: (1) making flood insurance available on a nationwide basis; (2) encouraging state and local governments to make appropriate land use adjustments to constrict development of land that is exposed to flood damage, and minimize damage caused by flood losses; (3) where practicable, guiding future construction away from locations threatened by flood hazards; and (4) identifying flood risks and notifying the public of those risks.[14] The NFIP is supposed to reduce federal expenditures for flood loss and disaster assistance by “providing flood insurance at reasonable rates” in participating communities.[15]

NOAA Fisheries’ analysis in the FEMA BiOp

The action area and jeopardy determinations for relevant species

In the FEMA BiOp, the Service concluded that the proposed action (FEMA’s continued administration of the NFIP) is likely to jeopardize the continued existence of several protected species including the Puget Sound Chinook salmon, Puget Sound steelhead, Hood Canal summer-run chum salmon, and Southern Resident killer whales, and is likely to adversely modify critical habitat of Puget Sound Chinook salmon, Hood Canal summer-run chum salmon, and Southern Resident killer whale. The Service concluded that the proposed action is not likely to jeopardize Lake Ozette sockeye salmon or adversely modify its critical habitat. With respect to killer whales, the Service concluded that the proposed action “will permanently reduce the amount of fish available to the whales in the action area, which includes designated critical habitat.”[16] In “phase two” of the Service’s efforts to comply with the 2004 remand order, the Service will provide another opinion on the effects of the NFIP on listed species located in the remainder of Washington State, including 13 additional salmon species.

The effects of relevant elements of the NFIP on listed species

The NFIA requires FEMA to identify and publish information on special flood hazards in floodplains, and to establish flood risk zone data to set flood insurance rates.[17] NOAA Fisheries describes flood hazard identification as “the backbone of the NFIP,” and “crucial to manage development of the floodplain.” Mapping allows states and communities to evaluate flood risks, insurance companies to rate flood insurance policies, and lending institutions to determine flood insurance requirements.[18] FEMA has mapped flood hazard areas in 323 Washington communities, but the majority of those maps were completed in the 1970s and 1980s.[19] As a result, determinations related to development and insurance requirements may be based on information that is no longer accurate or even relevant.[20]

The NFIA also requires FEMA to develop comprehensive criteria to encourage state and local measures to prevent flood damage. NOAA Fisheries determined that current FEMA criteria allow development in floodplains “regardless of potential flooding depth and velocity[,] and restrict, but do not prohibit development in the floodway.” This element, as well as allowing the placement of fill in the floodplain, displaces salmon habitat. Associated development results in additional fill activities, increased pollution, stormwater runoff, and vegetation removal.[21]

Under the NFIA, FEMA must also establish a voluntary Community Rating System (“CRS”) that affords communities with discounted flood insurance premiums if they adopt land use controls above FEMA’s minimum criteria.[22] The Service determined that some CRS activities are environmentally protective, such as preserving open space and beneficial floodplain functions, as well as creating higher regulatory standards for stormwater. Other CRS activities, however, are not “environmentally benign” – such as removing large trees in order to comply with federal vegetation management requirements.[23]

The Service determined that these three key elements of the NFIP lead to land use changes and
construction in floodplains, which adversely affects listed species and habitat.

FEMA’s administration of the NFIP leads to floodplain development in Washington State

NOAA Fisheries also determined that FEMA’s implementation of the NFIP leads to floodplain development in the State, some of which jeopardizes listed species and destroys or adversely affects critical habitat. The Service supported this conclusion with the following evidence:

1. The National Association of Homeowners (intervenors in the 2004 lawsuit) demonstrated “the close connection between the NFIP and floodplain development in the Puget Sound region.”
2. The Washington Association of Realtors represented that “the inability to obtain NFIP insurance would effectively shut down new housing in affected areas” because “most real estate purchasers cannot purchase property without obtaining financing, and in areas where it applies, flood insurance is a prerequisite to obtain financing”[24] -- hence, “the strong incentive for communities to participate in the NFIP[.]”
3. The Eleventh Circuit Court of Appeals recently held that “FEMA has the authority in its administration of the NFIP to prevent the indirect effects of its issuance of flood insurance by, for example, tailoring the eligibility criteria that it develops to prevent jeopardy to listed species. Therefore, its administration of the NFIP is a relevant cause of jeopardy to the listed species.”[25]
4. The definition of “indirect impacts” of agency action is broadly defined in FEMA’s regulations implementing Executive Order 11988 (Floodplain Management), as “an indirect result of an action whenever the action induces or makes possible related activities which effect the natural values and functions of floodplains or wetlands.”[26]

RPAs

RPAs for the proposed action are at the heart of the FEMA BiOp. RPAs are alternative actions identified during formal consultation that: (1) can be implemented consistently with the action’s intended purpose and the scope of the action agency's legal authority and jurisdiction; 2) are economically and technologically feasible; and 3) the Service Director believes will avoid jeopardizing the continued existence of listed species or destroying or adversely modifying critical habitat. Although discretionary, they describe measures that the Service determined “will prevent or minimize additional displacement of floodplain habitat important to the survival and recovery of listed species in the Puget Sound region” -- measures that Washington communities will probably have to take in order to continue participating in the NFIP and develop floodplains.[27] The specific RPAs identified by NOAA Fisheries require FEMA to do the following:

1. Notify all NFIP participating Puget Sound communities of the Service’s fundamental conclusion in the FEMA BiOp: that development under the current NFIP jeopardizes listed species and destroys or adversely modifies their critical habitat. This includes notification that current floodplain management ordinances, without modification, will violate the ESA.
2. Within six months of the BiOp’s issuance, change the mapping program by, among other things, prioritizing mapping based upon the presence of sensitive salmon populations; improving the maps’ accuracy; and conditioning FEMA’s processing of “Letters of Map Change caused by manmade alterations” only when a proponent has avoided or mitigated adverse effects on habitat.
3. Modify implementation of minimum criteria “in order to prevent and/or minimize the degradation of channel and floodplain habitat” by, among other things, not allowing any development in the floodway, riparian buffer zone, and other areas, unless the local permitting authority can demonstrate that development in those areas “does not adversely affect water quality, water quantity, flood volumes, flood velocities, spawning substrate, and/or floodplain refuge for listed salmonids”; and either (a) prohibiting development in the 100-year floodplain; or (b) only allowing development if floodplain storage loss can be “avoided, rectified or compensated for.”
4. Within nine months of the BiOp’s issuance, change the CRS to achieve long-term objectives by, among other things, creating incentives for the use of Low Impact Development methods, and thereby decreasing the need for added stormwater treatment.
5. Address the effects of levee vegetation maintenance and certain types of floodplain construction in order to meet some or all of the Service’s habitat-based objectives.
6. Engage in floodplain mitigation activities.
7. Annually report on its progress in implementing RPAs 1-6 to the Service, and implement monitoring and adaptive measurement to ensure appropriate mitigation.

The Service also identified “conservation recommendations” including adoption of “a coordinated, watershed-based, multi-objective approach for all water resource activities.” If the RPAs are implemented, the Service believes that the rate of incidental take as a result of the proposed action will decline. The Service therefore provided FEMA with an ITS authorizing a limited amount of take that it anticipates will result from the proposed action, as modified and mitigated by implementation of RPAs. “If actual take exceeds an amount or (geographic and temporal) extent specified [in the FEMA BiOp], the exemption from the prohibition on take will be invalid for that excess amount, and re-initiation of consultation will be required.”[28]

Conclusion

The NFIP is essentially the only way to obtain insurance on structures in floodplains. FEMA has recognized that if a community does not participate in the NFIP, economic development in its flood hazard areas may be “severely restricted.”[29] FEMA’s guidance and local government responses to that guidance will likely have widespread effects on floodplain construction and sales throughout Puget Sound. When the Service completes phase two of the 2004 remand order, development in floodplains throughout the State where listed species and/or critical habitat occur may be significantly curbed. Any future development will likely have to comply with Low Impact Development protocols and be limited to circumscribed geographic areas.

Property owners and developers, including the National Association of Homebuilders, have criticized the BiOp and think its recommendations may extend beyond Washington State.[30] The issuance of a BiOp is considered a final agency action and is subject to judicial review,[31] and the FEMA BiOp may be challenged in federal district court.

For more information on the FEMA BiOp or the ESA generally, contact Jessica Ferrell or any member of Marten Law Group’s Endangered Species & Natural Resources practice group.