In a case of first impression, the Massachusetts Supreme Judicial Court (“SJC”) recently rejected a landowner’s challenge to the so-called Priority Habitat regulations issued under the Massachusetts Endangered Species Act (“MESA”).  Pepin vs. Division of Fisheries and Wildlife, 467 Mass. 210 (2014).  These regulations require that projects located in areas mapped as Priority Habitat must undergo pre-development review to determine if the proposed project may result in a “take” of state-listed species.  Because significant portions of Massachusetts have been designated as Priority Habitat (nearly 340,000 acres in western Massachusetts alone), this case has been closely followed due to its potential consequences to real estate development in Massachusetts

Originally enacted in 1990, MESA (M.G.L. c. 131A, §§ 1-7) proscribes the “take” of any plant or animal species listed as endangered, threatened or of special concern by the Massachusetts Natural Heritage and Endangered Species Program (“NHESP”).  Like its federal analog, MESA defines “take” broadly to include the destruction of habitat, as well as the disruption of essential biological activities such as nesting, breeding and migration.  The statute provides for the designation of “Significant Habitat,” areas deemed important for the conservation of endangered or threatened species.  However, MESA also provides strict procedures to protect the rights of property owners whose property is designated as Significant Habitat, including notice and possible compensation.  In the nearly 25 years since MESA was enacted, NHESP has yet to designate any Significant Habitat areas within the commonwealth.

As a workaround, NHESP adopted an ad hoc regulatory process that reviewed proposed development projects to determine if alteration of habitat might result in a “take” of any listed species.  This review process lacked any express regulatory or statutory basis, was based on habitat maps that were not widely available, and lacked any defined criteria or timelines to control NHESP’s review process, including mitigation requirements imposed by NHESP.  Not surprisingly, this program came under attack for being arbitrary and delay-prone, and NHESP was pressured to develop a formal regulatory process.

NHESP responded by promulgating regulations (321 CMR 10.11-10.26) that created a new habitat designation, “Priority Habitat”– a designation not found in MESA – for endangered, threatened and special concern species.  NHESP established both a formal mapping system published on the commonwealth’s GIS website, and a pre-development review process for projects that are located in Priority Habitat.  Based on information provided by the applicant, the regulations provide that NHESP could determine that (i) no “take” would occur, (ii) no “take” would occur based on the imposition of certain conditions, or (iii) a “take” would occur in which case a “conservation and management” permit would be required.  The regulations allow for the use of on-site and off-site mitigation of habitat impacts, i.e., creation of permanently protected areas on-site or off-site providing similar habitat for affected listed species.

NHESP decisions are subject to administrative and judicial review and property owners are provided several procedures to challenge the designation of their property as Priority Habitat.  However, the formal notification and compensation procedures provided for in the case of Significant Habitat were not extended to property owners whose properties have been designated as Priority Habitat.

The Pepin case involved a land in western Massachusetts that had been mapped as Priority Habitat.  NHESP approved the owner’s proposal to build a residence, but on the condition that a deed restriction and conservation easement be recorded for the property.  The owner challenged the approval both on the grounds that the Priority Habitat designation process failed to incorporate the procedures for Significant Habitat and that NHESP improperly designated the plaintiff’s property as Priority Habitat.  The owner also launched a spirited PR campaign against NHESP and the Priority Habitat regulations and promoted the filing of a bill in the Massachusetts Legislature that sought to nullify the Priority Habitat regulations.

After both an administrative law judge and a Superior Court judge ruled in favor of NHESP, the SJC accepted the appeal on direct appellate review (bypassing the Appeals Court).  The SJC wasted little time finding that the Priority Habitat regulations, while not expressly authorized under MESA, nonetheless fulfilled the statutory objective of protecting listed species.  The Court ruled that the fact that MESA provided for the designation of Significant Habitat did not preclude NHESP from establishing another category of protected habitat as a tool to screen potential impacts prior to development.  Finally, the Court concluded that Priority Habitat serves a different purpose than Significant Habitat – the latter designation precludes any alteration, while the former triggers a review process that may or may not constrain development.  Therefore, the procedural protections mandated in the case of Significant Habitat designations were not warranted for Priority Habitat designations.

The Pepin case represents another example of the willingness of Massachusetts courts to defer to administrative agency rulemaking.  For real estate developers, the case means that the Priority Habitat regulations are here to stay and need to be taken into consideration both during acquisition due diligence and development design and planning.