Reservation Ranch v. United States

OPINION

Plaintiff Reservation Ranch seeks $5,500,-000.00 from the United States for the cancellation of its timber sale contract. The U.S. Forest Service (“Forest Service”) canceled that contract pursuant to a contract provision permitting cancellation and limiting compensation should the Chief of the Forest Service (“Chief’) determine that harvesting the sale would be likely to jeopardize the continued existence of a threatened or endangered species, or cause an adverse impact to a sensitive species. This matter is now before the court following oral argument on cross-motions for summary judgment. The principal issues raised in those motions are whether the contract provision is valid and, if so, whether the Chief properly exercised the provision in this case.

Plaintiff argues that the Forest Service does not have the authority to adopt the species contract provision and compensation limitation at issue here. In particular, plaintiff maintains that the species contract provision conflicts with a Forest Service cancellation regulation which permits cancellation for broad environmental considerations, but which does not limit compensation as provid*698ed for in the contract, Plaintiff concludes that this purported conflict renders the species contract provision invalid, and that different contract terms consistent with the cancellation regulation should be applied to calculate compensation.

Plaintiff claims in the alternative that even if the contract provision is valid, the Chief improperly relied upon that provision to cancel the sale. Plaintiff advances two main arguments in support of this claim. First, plaintiff argues that the Chief does not have the authority under the Endangered Species Act of 1973 (“ESA”), 16 U.S.C. §§ 1531-1543 (1994), to find jeopardy to the threatened northern spotted owl (“spotted owl” or “owl”) in the face of a contrary U.S. Fish and Wildlife Service (“FWS”) determination. Second, plaintiff argues that even if the Chief has the authority, his exercise of that authority in this case was arbitrary. In particular, plaintiff maintains that there is no evidence supporting the Chiefs finding that harvesting timber in spotted owl habitat would likely jeopardize the continued existence of the owl. Plaintiff also claims that the Chiefs reliance upon the cancellation regulation, with its broader measure of compensation, to cancel other timber sales in the region demonstrates that his invocation of the species contract provision here was arbitrary.

In view of these asserted deficiencies, and the purported absence of other legal authority independent from the ESA to protect the owl, plaintiff concludes that the Forest Service breached the contract.

Defendant argues that the prospectus for the timber sale and the contract unambiguously included several unique cancellation and compensation provisions not provided for in Forest Service regulations. Those provisions, according to defendant, properly apportioned between the parties the special risks relating to species preservation, and the experimental harvesting method called for in the contract. Defendant maintains that these clear terms of the contract do not conflict with Forest Service regulations, and must be enforced. Alternatively, defendant argues that even if the Forest Service regulation could be read to provide plaintiff with the right to the measure of compensation it seeks, plaintiff waived that right when it entered into a contract which clearly provides otherwise.

It is decided that the challenged species contract provision is valid. As discussed more fully below, the Forest Service has the legal authority to adopt the species contract provision. Further, while the cancellation regulation prescribes the terms by which federal timber contracts may be unilaterally canceled by the government, it does not limit the ability of the parties to provide otherwise by contract. Finally, even if that regulation could be read to guarantee plaintiff the measure of compensation it seeks, plaintiff waived that measure by agreeing to a contract including a limitation on that compensation.

It is also decided that the Chiefs exercise of the species contract provision was valid. The Forest Service has the legal authority under the ESA to determine that harvesting a timber sale in spotted owl habitat would likely jeopardize the continued existence of the owl, and the Chiefs exercise of this authority here was not arbitrary. The purpose of the ESA is “to provide a means whereby the ecosystems upon which endangered species or threatened species depend may be conserved....” 16 U.S.C. § 1531(b). This relationship between habitat preservation and species conservation in the case of the owl first came under Forest Service study in the 1970s. Since that time, each owl conservation strategy adopted by the agency has reflected this focus. The Forest Service’s first owl conservation strategy directed that-a portion of the area encompassing the sale be protected from harvesting, and formed the basis for the Forest Service finding that harvesting the sale would adversely affect the owl and its habitat. After that finding was made, a new owl conservation strategy directed that the preservation of additional habitat was necessary to avoid the owl’s extinction, and placed a greater portion of the sale within a protected area. In view of this information, the Chiefs finding here that harvesting the sale in spotted owl habitat would likely jeopardize the owl was not arbitrary.

*699Plaintiffs alternative claim that the Chiefs reliance upon the cancellation regulation to cancel other timber sales demonstrates that the use of the species contract provision here was arbitrary also fails. Plaintiff affirmatively alleges that the other sales would have resulted in broad environmental harm. This allegation supports, rather than undermines, the cancellation of those sales pursuant to a regulatory provision allowing cancellation for broad impacts, and the invocation of the species provision in this case. Again, according to plaintiffs own argument, this sale was specifically designed to avoid those broad environmental impacts. In any event, the use of different cancellation authorities is one of form rather than substance since purchasers for all but one of the other sales agreed to exclude from their recovery the lost profits, replacement cost of timber and other anticipatory losses that plaintiff seeks to recover here.

Finally, contrary to plaintiffs contention, the Forest Service has not only the authority, but a legal duty independent from the ESA to consider the impact of the timber sale on the owl. Under the National Forest Management Act (“NFMA”), 16 U.S.C. §§ 472a, 1600-1687 (1994), the Forest Service must maintain viable populations of the owl, a sensitive species under NFMA implementing regulations and policy. The species contract term at issue here reflected that duty by providing for cancellation if harvesting the sale would adversely impact a sensitive species. It is settled law that a cancellation based upon an erroneous ground may be sustained if there existed another adequate ground for the cancellation. Accordingly, even if there were some infirmity in the Chiefs jeopardy determination, the cancellation may be sustained under the sensitive species clause of the cancellation provision based upon the Forest Service finding that the sale would adversely affect the owl.

The Forest Service is charged with managing the national forests in a manner which balances timber sales with its duty to protect threatened and endangered species. The contract term at issue here clearly reflected these requirements by providing that the timber sale could be canceled with compensation to the purchaser upon the Chiefs determination that the balance should be struck in favor of wildlife. The Chief properly canceled the contract under that term when he determined that harvesting the timber sale within protected spotted owl habitat would likely jeopardize the continued existence of the threatened owl. Accordingly, defendant’s motion for summary judgment is granted. Plaintiffs motion for summary judgment is denied. Plaintiff is entitled to compensation as provided for by the species cancellation and compensation provisions of the contract.

FACTS

The Forest Service, an agency of the U.S. Department of Agriculture, manages 156 national forests occupying some 191 million acres, and is the largest federal landholding agency in the Pacific Northwest. Forest Service stewardship of this vast public resource is informed primarily by the Multiple-Use Sustained Yield Act of 1960, 16 U.S.C. §§ 528-582 (1994), NFMA and the ESA.

Together these statutes require the Forest Service to manage the national forests to “best meet the needs of the American people,” 16 U.S.C. § 531(a), by insuring that its decisions reflect the recreational, timber production and fish and wildlife values of these forests. 16 U.S.C. § 529. The Forest Service implements this mandate pursuant to NFMA by preparing land and resource management plans for the forests which balance these competing values. 16 U.S.C. § 1604(a). While these management plans may provide for Forest Service sales of national forest timber, 16 U.S.C. §§ 472a, 1604(i), the Forest Service must insure that the forests support a “diversity of plant and animal communities.” 16 U.S.C. § 1604(g)(3)(B). Where a proposed timber sale would be likely to jeopardize the continued existence of a threatened or endangered species, harvesting must yield to species conservation. 16 U.S.C. § 1536(a)(2).

I. The POC Timber Sale Contract

NFMA authorizes the Forest Service to sell timber from national forests, and directs that contract terms shall promote orderly *700harvesting consistent with the different resource values of the forests, including fish and wildlife resources. 16 U.S.C. §§ 472a, 1604. The Forest Service initiates timber sales through advertisement, and offers prospective purchasers a prospectus describing the terms of sale. 16 U.S.C. § 472a(b); 36 C.F.R. § 223.82-83 (1996).

On July 26,1990, the Forest Service advertised the sale of approximately 1,160 thousand board feet of timber from Six Rivers National Forest, Gasquet Ranger District, California. The sale, termed the POC Aerial Salvage Timber Sale (“POC sale” or “sale”), was designed to enable the Forest Service to study a new harvesting method it anticipated would reduce the environmental impacts of ground-based logging requiring road construction. The new method consisted of an aircraft propulsion unit mounted on a frame suspended from a natural-shaped balloon, or “neutral buoyancy aircraft.” Plaintiff was the sole bidder on the POC sale, and was awarded the contract on November 5, 1990.

The 13 page written portion of the POC sale prospectus contained several provisions related to threatened and endangered species, as well as several provisions relating specifically to the spotted owl. The most important of those provisions notified bidders that spotted owls were thought to occupy the sale area, that the contract might be canceled in the event that the owl was listed as threatened or endangered under the ESA, and that the contract would include a provision limiting purchaser compensation should the Chief cancel the contract based upon a finding that harvesting the sale would either jeopardize the continued existence of a threatened or endangered species, or adversely impact a sensitive species. Def. Summ. J. Ex. at 212 (prospectus notifying bidders that provision C8.2 and C9.52 would be included in the contract and providing text).

Most importantly, the prospectus notified bidders that should the contract be canceled for these reasons, there would be no recovery of lost profits, the replacement cost of timber or any other anticipatory losses. Id.

The POC sale contract contained an index of the special provisions noted in the prospectus, again calling attention to the provision dealing with cancellation based upon species concerns and limiting compensation for such cancellations.1 Def. Summ. J. Ex. at 228. As noted in the prospectus, provision C8.2 was included in the POC sale contract. It provided:

C8.2 — Termination. (12/89) The Chief, Forest Service, by written notice, may terminate this contract, in whole or in part, (1) to comply with a court order, regardless of whether this sale is named in such an order, upon a determination that the order would be applicable to the conditions existing on this sale; or (2) upon a determination that the continuation of all or part of this contract would:

(a) cause serious environmental degradation or resource damage;

(b) be significantly inconsistent with land management plans adopted or revised in accordance with Section 6 of the Forest and Rangeland Renewable Resources Planning Act of 1974, as amended;

(c) cause serious damage to cultural resources pursuant to C6.24;

(d) jeopardize the continued existence of Federally listed threatened and endangered species or, cause unacceptable adverse impacts on sensitive species, identified by the appropriate Regional Forester.

Compensation for termination under this provision shall be calculated pursuant to C9.5, except; compensation for termination under (1) shall be calculated pursuant to C9.51 when included in this contract, and compensation for termination under *701(2)(d) shall be calculated pursuant to C9.52 when included in this contract.

Def. Summ. J. Ex. at 303 (emphasis added).

Contract provisions C9.5, C9.51 and C9.52 were included in the POC contract. Id. at 311-12. Contract provision C9.5 allows for the largest measure of purchaser compensation for cancellation, while contract provision C9.52 and C9.51 provide more limited measures. Provision C9.5 reads:

Settlement — (10/77). If this contract is terminated by Forest Service under C8.2, Purchaser agrees that the liability of the United States shall be limited to the sum of (1) the value of unused Purchaser Credit; (2) the estimated expenditures for felling, bucking, lopping, skidding, and decking any products so processed, but not removed from Sale Area because of the termination action; (3) out-of-pocket expenses involved in acquiring and holding the contract such as maintaining performance bonds and cash deposits, and (4) the difference between (a) Current Contract rates for the remaining uncut volume, and (b) the rates paid for comparable timber on the same National Forest during the preceding 6-month period multiplied times the remaining uncut volume.

Id.

By contrast with C9.5, contract provision C9.52, applicable to contract cancellations based upon species considerations, limited recovery to those costs set out in subsection (1), (2) and (3) of C9.5, explicitly noting that “out-of-pocket expenses in (3) do not include lost profits, replacement cost of timber or any other anticipatory losses suffered by Purchaser.” Provision C9.51, applicable to contract cancellations mandated by court order, further limited compensation to those costs set out in subsection (1) and (2) of C9.5; that is, were the contract canceled to comply with a court order, the purchaser would receive neither lost profits, replacement cost of timber or other anticipatory losses, nor out-of-pocket expenses. Id.

At the same time, the prospectus and the contract contained provisions relieving the purchaser of liability for failure to perform due to problems with the neutral buoyancy aircraft. Def. Summ. J. Ex. at 211, 304-05, 310-11 (contract provisions C8.223, C8.224 and C9.42).

II. Protection of the Northern Spotted Owl

The northern spotted owl lives in the forested regions of western Oregon, Washington and northwestern California, largely in old growth forest stands in national forests. Studies conducted by the Forest Service in the early 1970s first linked old growth forests slated for sale with the owl, and recognized that such sales could adversely affect the species. By 1973, concern over the loss of old growth prompted federal and state authorities to issue the first in a series of recommendations to set aside old growth in order to preserve habitat for the owl. Over the more than two decades since, the debate over the habitat needs of the owl and the logging of national forests has occupied the attention Forest Service biologists, political leaders and the federal courts.2

a. The National Forest Management Act

The Forest Service implements its NFMA mandate to protect a diversity of plant and animal communities through regulation and agency policy. In particular, the Forest Service is required to maintain ‘Suable populations” of wildlife in national forests. 36 C.F.R. § 219.19. In order to maintain wildlife viability, the Forest Service must insure that habitat exists to support “at least, a minimum number of reproductive individuals and that habitat must be well distributed so that those individuals can interact with others in the planning area.” Id. The Forest Service performs biological evaluations to insure, among other things, that its actions “do not contribute to loss of viability” of a species. Forest Service Manual (“FSM”), Title *7022600, Wildlife, Fish, and Sensitive Plant Habitat Management § 2672.41(1) (1995).

The Forest Service sensitive species policy is designed to promote the conservation of species where viability is in doubt. FSM § 2670.32. A sensitive species is defined as;

Those plant and animal species identified by a Regional Forester for which population viability is a concern, as evidenced by: a. Significant current or predicted downward trends in population numbers or density. b. Significant current or predicted downward trends in habitat capability that would reduce a species’ existing distribution.

FSM § 2670.5(19). The northern spotted owl is a sensitive species, FSM § 2672.24a. Ex. 01 at 16, and was so designated by the Regional Forester in the region encompassing the sale in 1978. FSM § 2633.4 (1978).

A January 21, 1981 Forest Service directive from the Regional Forester in that region to Forest Supervisors informed Supervisors that:

The spotted owl has been designated by the Regional Forester as a sensitive species. Under the direction of FSM 2670, sensitive species ‘will receive special management ... to prevent their placement on Federal lists’ (2670.3(1)); will require habitat protection and protection of ‘individual organisms from harm or harassment’ (2670.3(2)). The NFMA Planning regulations (36 C.F.R. Part 219) state that: ‘Fish and wildlife habitats will be managed to maintain viable populations of all existing native vertebrate species____’

United States Department of Agriculture, Forest Service, Region Five, Spotted Owl: Land and Resource Management Standards and Guidelines, January 21, 1981 (“Region 5 Directive”). The Regional Forester concluded by directing Supervisors to “plan for management of National Forest lands to provide for the continued viability of this species.” Id.

In 1984, pursuant to its NFMA duty, the Forest Service released formal guidelines prescribing a management strategy designed to maintain viable owl populations. That strategy called for the preservation of a network of spotted owl habitat areas (“SOHAs”) throughout the national forests designed to meet the habitat needs of a small number of owl breeding pairs by preserving an area of suitable habitat, and established a minimum number of owl pairs that would represent a viable population. A portion of the POC sale was located within a SOHA. Def. Summ. J. Ex. at 349.

After challenges by both timber companies and environmentalists, the Forest Service reevaluated the strategy. The resulting Forest Service management strategy for maintaining viable owl populations was again challenged as insufficient to maintain viability, and led to injunctions halting many timber sales scheduled in the Pacific Northwest. Seattle Audubon Soc’y v. Robertson, No. C89-16-WD (W.D.Wash. Mar. 24, 1989) (order on preliminary injunction).

The Seattle Audubon suit prompted a response from Congress, popularly known as the “Northwest Timber Compromise.” That compromise, contained in section 318 of the Department of the Interior and Related Agencies Appropriations Act for Fiscal Year 1990, Pub.L. No. 101-121, § 318, 103 Stat. 701, 745-50 (1989), deemed the timber sales that were the subject of the Seattle Audubon suit to be in compliance with the environmental laws that formed the basis for the challenge.3 The compromise also directed the Forest Service to prepare a new spotted owl plan by September 30, 1990, incorporating the recommendations of the Interagency Scientific Committee (“ISC”).

The ISC, a scientific committee led by Forest Service biologists charged with developing a new strategy for maintaining viable owl populations, issued its report in April 1990. In it, the ISC found that:

the owl is imperiled over significant portions of its range because of continuing losses of habitat from logging and natural *703disturbances. Current management strategies are inadequate to ensure its viability. Moreover, in some portions of the owl’s range, few options for managing habitat remain open, and available alternatives are steadily declining throughout the bird’s range. For these reasons, delay in implementing a conservation strategy cannot be justified on the basis of inadequate knowledge.

Report of the Interagency Scientific Committee to Address the Conservation of the Northern Spotted Owl, A Conservation Strategy for the Northern Spotted Owl (“ISC Report’’) (USDA 1990) at 1. The ISC concluded that the Forest Service SOHA strategy was “a prescription for the extinction of spotted owls.” Id. at 39.

Based upon this conclusion, the ISC recommended abandoning the SOHA strategy in favor of protecting larger blocks of habitat, dubbed “Habitat Conservation Areas” (“HCAs”). Id. The ISC found that large blocks of habitat capable of supporting multiple pairs of owls placed closely enough to enable dispersal and mating of owls between blocks would be more likely to insure a viable owl population. Id. While only part of the POC sale had fallen within a SOHA, under this more aggressive strategy more of the area encompassing the POC sale fell within a protected HCA. Def. Summ. J. Ex. at 387-88. Under the ISC recommendations, no harvesting, including the harvesting of dead and dying timber, was to occur in HCAs. ISC Report at 4, 325.

On September 28,1990, the Forest Service indicated that it was abandoning its SOHA strategy, and stated that it would manage timber sales in a manner “not inconsistent with” the ISC recommendations. Northern Spotted Owl Habitat Management, Vacation of Northern Spotted Owl Guidance, 55 Fed. Reg. 40,413 (October 3, 1990). The planning of additional sales was again enjoined, however, pending the Forest Service’s fulfillment its NFMA duty to insure that those sales could proceed without threatening the viability of owl populations. Seattle Audubon Soc’y v. Evans, 771 F.Supp. 1081, 1086 (W.D.Wash.), aff'd, 952 F.2d 297 (9th Cir. 1991).

In that challenge, the Ninth Circuit rejected the Forest Service argument that it was relieved of its NFMA duty to plan for the owl’s viability once the species was listed under the ESA. The court made clear that the requirements of the ESA and NFMA are independent and concurrent; accordingly, compliance with the ESA did not abrogate the Forest Service’s NFMA duty to maintain viable owl populations. Seattle Audubon, 952 F.2d at 301-03.

b. The Endangered Species Act

At the same time that the Forest Sendee sought to prepare a conservation strategy to insure the viability owl populations under NFMA, the FWS was petitioned to list the owl as a threatened or endangered species under the ESA. See 16 U.S.C. § 1533(b)(3)(A); 5 U.S.C. § 553(e) (1994). The initial FWS decision to reject the petition to list was challenged, and found to be arbitrary and capricious. Northern Spotted Owl v. Hodel, 716 F.Supp. 479 (W.D.Wash. 1988). Upon reevaluation, the FWS reversed itself, and proposed to list the owl as a threatened species. Endangered and Threatened Wildlife and Plants; Proposed Threatened Status for the Northern Spotted Owl, 54 Fed.Reg. 26,666 (June 23, 1989).

The FWS proposal to list the spotted owl triggered the ESA requirement that the Forest Service confer with the FWS concerning the effect that harvesting the POC sale would have on the owl. 50 C.F.R. § 402.10 (1996). The ESA informal conference procedure for a species proposed for listing assists federal agencies in identifying potential future conflicts between its activities and species concerns, should the species later be listed. See 50 C.F.R. § 402.10(a). If the species is later listed as threatened or endangered under the ESA, the federal agency is required to review its action to determine if further ESA requirements must be met. 50 C.F.R. § 402.10(c).

Pursuant to Forest Service policy, the agency prepares a biological evaluation to determine how a proposed action, including a timber sale, will affect species both proposed for listing under the ESA, or any species identified by the agency as sensitive under *704NFMA.4 FSM § 2672.41. Biological evaluations serve as the basis for viability determinations concerning sensitive species under NFMA. FSM § 2672.41(1).

Consistent with this requirement, the Forest Service conducted a biological evaluation of the POC sale under the then-applicable SOHA strategy. In that evaluation, Forest Service biologists found that the portion of the sale within the SOHA was occupied owl habitat, that very little suitable habitat remained in the Gasquet District of Six Rivers National Forest, and that this area of the sale provided a key link in the network of SOHAs, thereby facilitating owl dispersal and mating among protected areas in the region. With respect to harvesting in such an area, the biologists found that:

[t]he proposed sale essentially targets soon-to-be-dead standing timber. The number and condition of snags and downed logs are important components of suitable spotted owl habitat. Snags provide food, cover, and nest substrates for a variety of small mammal and bird species used as prey by the spotted owl.

Def. Summ. J. Ex. at 352. Snags are dead standing trees. ISC Report at 422. The biologists concluded that harvesting such timber would further reduce snag densities below levels needed to maintain the suitability of that habitat for owls. Def. Summ. J. Ex. at 352. Based upon these factors, the Forest Service concluded that the portion of the POC sale within the SOHA was “likely to adversely affect spotted owls and suitable habitat,” id. at 353, and requested a FWS conference on the sale.

The FWS issued an informal conference report on the POC sale and the Forest Service biological evaluation on November 8, 1989. In it, the FWS discounted the Forest Service concern that the sale would destroy suitable spotted owl habitat based on the rationale that this habitat was “expected to become unsuitable in 1-2 years as trees continue to die.” Plf. Summ. J. Ex. at 59. This FWS rationale was not responsive to the Forest Service concern, however, since that concern was premised on the view that dead timber was necessary to maintain the suitability of habitat.

In its report, the FWS nonetheless recognized the importance of such habitat by recommending that Forest Service funds be expended to add snags and downed trees after harvest to replace the lost habitat. Id. The FWS also recognized the importance of this habitat in its definition of suitable spotted owl habitat:

The age of the forest is not as important a factor in determining habitat suitability as are vegetational or structural components. Suitable owl habitat has moderate to high canopy closure (60 to 80 percent); a multi-layered, multi-species canopy dominated by large (> 30 inches in diameter at breast height (dbh)) overstory trees; a high incidence of large trees with various deformities (e.g., large cavities, broken tops, dwarf-mistletoe infections, and other evidence of decadence); numerous large snags; large accumulations of fallen trees and other woody debris on the ground; and sufficient open space below the canopy for owls to fly.

Endangered and Threatened Wildlife and Plants; Determination of Threatened Status for the Northern Spotted Owl, 55 Fed.Reg. 26,114, 26,116 (June 26, 1990) (emphasis added). Based in part upon the premise that the replacement of such habitat would occur, the FWS concluded that the portion of the POC sale in the SOHA would not adversely affect the owl. Id.

On June 22, 1990, the FWS listed the owl as threatened under the ESA5 Id. The *705FWS failure to designate critical habitat for the owl at the time of listing was challenged and found to be arbitrary and capricious. The FWS was ordered to prepare and submit a critical habitat plan. Northern Spotted Owl v. Lujan, 758 F.Supp. 621, 629 (W.D.Wash.1991).

The owl’s listing under the ESA guaranteed it new protections distinct from those afforded by NFMA. The ESA provides for the conservation of threatened and endangered species, and the habitat upon which they depend, 16 U.S.C. § 1531(b), by prescribing that all necessary means be taken to insure both the survival and recovery of the species to the point where the statute’s protections are no longer necessary. 16 U.S.C. § 1532(3). Those protections include the prohibition of the taking (e.g. kill, harm, harass) of any threatened or endangered species. 16 U.S.C. §§ 1532(19), 1538(a)(1)(B). This take prohibition applies to any person and any act that harms a threatened or endangered species, including habitat modification which has this effect.6 50 C.F.R. § 17.3; see also Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515 U.S. 687, 698, 115 S.Ct. 2407, 2413, 132 L.Ed.2d 597 (1995). A person found to have knowingly violated this prohibition faces both civil and criminal penalties. 16 U.S.C. § 1540(a)-(b).

Those protections also include the requirement that federal agencies like the Forest Service insure, after consulting with the FWS, that its actions are not likely to place the continued existence of a threatened or endangered species in jeopardy. 16 U.S.C. § 1536(a)(2). The ESA specifically provides:

Each Federal agency shall, in consultation with and with the assistance of the ... [FWS], 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 [critical] habitat of such species____

Id. This consultation process culminates in a FWS jeopardy or no jeopardy determination supported by a FWS biological opinion. The FWS will reach a jeopardy finding if it determines that the federal action “reasonably would be expected, directly or indirectly, to reduce appreciably the likelihood of both the survival and recovery of a listed species in the wild by reducing the reproduction, numbers, or distribution of that species.”7 50 C.F.R. § 402.02.

After considering the FWS opinion, the Forest Service retains the ultimate authority to decide whether to offer the sale in light of its ESA obligation to insure that its action is not likely to cause jeopardy. 16 U.S.C. § 1536(a)(2); 50 C.F.R. § 402.15(a).

Within a week of the owl’s listing, the Forest Service requested that the FWS prepare a biological opinion on the POC sale. In the request, the Forest Service noted that its biologists had concluded that harvesting the sale would adversely affect the owl and its habitat. The FWS issued a 14 page biological opinion less than a month later, covering not only the POC sale, but 43 other fiscal year 1990 timber sales in Six Rivers National Forest. Def. Summ. J. Ex. at 384— 97. The biological opinion treated those 44 sales collectively and, in contrast to the For*706est Service biological evaluation, did not contain a specific analysis of the POC sale. The opinion did, however, denote that the POC sale was located within a protected HCA occupied by spotted owls. Id. at 388.

In the general discussion of the timber sales, the FWS recognized that the ISC had concluded that in order to protect the viability of the owl population, no harvesting, including the harvesting dead and dying timber, should occur in protected areas. Id. at 387. The FWS also explicitly found that “some northern spotted owls will be adversely impacted” by the sales, and that the ISC recommendations “will not be completely implemented if the timber sales proceed as proposed.” Id. at 391. Although this general discussion further reflected the FWS view that dead and dying timber are necessary components of suitable owl habitat, providing nesting sites and supporting the owl’s prey, a chart in the biological opinion denoted that the harvest of such timber under the POC sale would not render the area unsuitable as owl habitat. Id. at 388.

While acknowledging the soundness of the ISC strategy, and its finding that then-current management practices would not prevent the owl’s extinction, the FWS nonetheless concluded that none of the 44 sales continuing such practices, including the POC sale, would jeopardize the continued existence of the owl. Id. at 391.

At the same time, the FWS declined to include the area encompassing the POC sale within the critical habitat designation for the spotted owl. “Critical habitat” comprises those areas that the FWS determines possess the physical or biological features that are essential to the listed species conservation, and which need special management or protection to serve that function. 16 U.S.C. § 1532(5)(A). The FWS is required to designate this habitat at the time of listing if such habitat is discernable on the basis of the best scientific information available, 16 U.S.C. § 1533(a)(3), after considering several factors, including the economic impact of the designation. 16 U.S.C. § 1533(b)(2).

In the critical habitat designation for the spotted owl, the FWS excluded all timber sales sold and awarded as of August 13,1991, because in its view the market value of such sales exceeded the benefits of halting the sales. Endangered and Threatened Wildlife and Plants; Determination of Critical Habitat for the Northern Spotted Owl, 57 Fed. Reg. 1,796, 1,808 (January 15, 1992) (codified at 50 C.F.R. pt. 17).

In the designation the FWS noted, however, that the ISC recommendations were the best available conservation strategy for maintaining viable owl populations, that the critical habitat designation did not replace the HCA network, and that federal agencies should follow the ISC recommendations in HCAs. Id. at 1,812; see also Endangered and Threatened Wildlife and Plants, Revised Proposed Determination of Critical Habitat for the Northern Spotted Owl, 56 Fed.Reg. 40,002, 40,012 (August 13, 1991) (“Critical habitat offers additional protection ... but it does not replace the HCA network and management recommendations____ Critical habitat will help to retain options until long-term conservation plans are accepted and fully implemented.”).

III. Cancellation of the POC Timber Sale

On October 5, 1990, Northcoast Environmental Center (“NEC”) sought to enjoin the Forest Service from proceeding with a number of timber sales, including the POC sale, on the ground that the sales were planned in HCAs contrary to the ISC Report. North-coast Environmental Ctr. v. Barker, Civ. No. S-90-1250-EJG (E.D. Calif.1990). The Forest Service settled that suit on January 31, 1991. The settlement order provided:

The Forest Service will terminate the contracts for the following six sales: Mini, Resalvage, POC Aerial ..., Tomcat, Cotton, and Wilson. These sales will not be offered or re-offered. If any location covered by these sales is to be proposed for logging in the future, such proposed logging will proceed under entirely new planning and documentation. The Forest Service acknowledges that intervenors with canceled sales are entitled to their out-of-pocket expenses on any canceled contracts. Intervenors agree that they will limit their claims for expenses or damages on these contracts to out-of-pocket expenses in*707volved in acquiring and holding the contract such as maintaining performance bonds and cash deposits. Out-of-pocket expenses do not include lost profits, replacement cost of timber or any other anticipatory losses suffered by Purchasers.

Plf. Summ. J. Ex. at 82 (emphasis added).

All of the six canceled timber sale contracts included both species provision C8.2(2)(d) and the court order provision C8.2(l), and the corresponding compensation limitations.8 Of the six canceled sales, four purchasers agreed to limit their compensation as provided above. Because the settlement order provided for the recovery of out-of-pocket expenses, the compensation measure applied to those claims was larger than that which would have been applied had the Forest Service exercised the court order provision of C8.2(l). Minimum Impact Logging did not agree to settle, and was ultimately awarded compensation calculated pursuant to the larger measure found in Forest Service regulation 36 C.F.R. § 223.116(a)(5). Section 223.116(a)(5) provides that a timber sale contract may be canceled:

Upon determination by the Chief, Forest Service, that operations thereunder would result in serious environmental degradation or resource damage and with reasonable compensation to the purchaser for unrecovered costs incurred under the contract and the difference between the current contract value and average value of comparable National Forest timber sold during the preceding 6-month period.

Since this regulation provides for the recovery of replacement cost of timber on a eon-tract canceled to avoid broad environmental harm, it affords a greater measure of compensation than the POC sale contract provisions related specifically to species preservation and court-ordered cancellation.

By a July 8, 1992 letter to plaintiff, the Chief canceled the POC sale:

I am canceling the POC Aerial Timber Sale ... in accordance with Special Provision C8.2 — Termination, upon my determination that operations thereunder would jeopardize the continued existence of a Federally-listed threatened ... species. Specifically, this sale is being canceled because it is located within northern spotted owl habitat. The northern spotted owl is listed as threatened under the Endangered Species Act (See 8.2(2)(d)). Compensation to the purchaser for this contract will be provided as a stated in Special Provision C9.52.

Def. Summ. J. Ex. at 340.9

Plaintiff filed a claim with the Forest Service seeking $4,780,000.00 in compensation on September 2, 1992. In that claim, plaintiff alleged that contract provisions C8.2(2)(d) (species cancellation provision), C9.51 (compensation calculation for court-ordered cancellation) and C9.52 (compensation calculation for species related cancellation) were invalid. The claim was later amended to increase the compensation sought to $5,500,-000.00. The contracting officer rendered his decision on June 23,1993.

Although the contracting officer acknowledged in his decision that the POC sale was canceled pursuant to the species clause, he *708found that compensation should be governed by the larger measure of C9.5. The contracting officer’s sole basis for this conclusion was that Minimum Impact Logging had received essentially‘this measure of compensation pursuant to 36 C.F.R. § 223.116(a)(5). Plf. Summ. J. Ex. at 109. Disagreeing with plaintiffs appraisal under C9.5 of $5,500,-000.00, however, the contracting officer limited the award to $63,721.00. Plf. Summ. J. Ex. at 115. Plaintiff refused that award, and filed this action on June 21,1994.

ANALYSIS

The Contracts Disputes Act (“CDA”), 41 U.S.C. §§ 601-613 (1994), applies to any express or implied contract entered into by an executive branch agency for the procurement of goods, services or disposal of personal property. 41 U.S.C. § 602(a). A timber sale contract is a contract for the disposal of personal property within the meaning of the CDA. Mendenhall v. Kusicko, 857 F.2d 1378, 1379 (9th Cir.1988) (per curiam). After receiving the contracting officer’s decision on a claim, the contractor may file a direct action on that claim before this court, 41 U.S.C. § 609(a)(1), which has jurisdiction to hear disputes arising under such contracts, “including disputes concerning contract termination, rights in property ... and other non-monetary disputes on which a contracting officer has issued a decision.” Janicki Logging Co. v. Mateer, 42 F.3d 561, 564-65 (9th Cir.1994) (citing the Tucker Act, 28 U.S.C. § 1491(a)(2) (1994)).

Both plaintiff and defendant have moved for summary judgment, arguing that no genuine issues of material fact surround the resolution of plaintiffs claim under the POC contract, and that judgment may therefore be entered as a matter of law. RCFC 56(c). A dispute over a material fact is one “that might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248,106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). In this case, since defendant’s motion is granted, defendant is considered the moving party and plaintiff is considered the non-moving party.

The moving party bears the initial burden of demonstrating the absence of all genuine issues of material fact. Celotex Corp. v. Ca-trett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553-54,