A federal appeals court panel dealt a potentially fatal blow Tuesday to the cactus ferruginous pygmy owl's status as an endangered species.

In a unanimous ruling, the three-judge panel concluded the U.S. Fish and Wildlife Service didn't meet its legal burden for proving that the owl's Arizona population was significantly distinct from Mexico's owls.

There, the bird is far more plentiful but less strictly protected than Arizona's currently known population of 18 adult owls.

The panel overturned a September 2001 U.S. District Court ruling that had upheld the owl listing. It sent the case back to District Court "for further proceedings consistent with this opinion."

But Tuesday's ruling stopped short of setting the endangered listing aside. That decision could come from the lower court or from the Fish and Wildlife Service.

The decision was a victory for home builders. They have struggled off and on with owl-related, habitat-saving requirements, plans and guidelines since the March 1997 listing.

"Sure we care" if the last 18 adult owls die in Arizona, said Edward Taczanowsky, executive vice president of the Southern Arizona Home Builders Association. "But we also care about where our children are going to live. We think it's a balancing act."

Environmentalists held out hope that the federal government could still salvage the listing by making a better scientific case for it.

They said the service can easily prove that the pygmy owl's historic Arizona range, from New River north of Phoenix to the Mexican border, is a major geographical area.

The judges found that the service had failed to prove that:

* The loss of Arizona's population would create a significant gap in the bird's range.

* Arizona owls are genetically different from Mexican owls.

The service "arbitrarily and capriciously" concluded in 1997 that the Arizona owls are a distinct population compared with those in Mexico and south Texas, the judges found. The judges said the service had, however, correctly found that Arizona owls can be considered separately from those in Mexico.

The differences in the level of protection offered in Mexico entitle the government here to move for its protection, even if the owl is not threatened in Mexico, the judges said.

The national and Southern Arizona associations of home builders, whose suit led to this ruling, have won three court cases in three years contesting federal and Pima County efforts to protect the owl and its habitat.

At a news conference Tuesday afternoon, SAHBA's Taczanow-sky said he hoped this ruling would bring more affordable housing because of fewer restrictions on development.

"Whenever you lessen a restriction, when you reduce uncertainty over habitat . . . it allows us to prepare raw land faster," he said. "We have to wait and see how it plays. I wouldn't be so presumptuous to read the mind-set of the courts. But delisting is a distinct possibility, if not a very good possibility."

But even if the owl listing goes away, the Sonoran Desert Conservation Plan will remain because it isn't just a single-species plan; its aim is to protect an ecosystem for 55 vulnerable species, County Administrator Chuck Huckelberry said Tuesday.

The judges appear to have left the door open for the Fish and Wildlife Service to make a better case for its stand that the Arizona population is necessary for the entire species' survival, said Kieran Suckling, executive director of the Center for Biological Diversity, and Mike Senatore, a Defenders of Wildlife attorney.

Other center officials and officials with Defenders of Wild-life and the Tucson Audubon Society held a demonstration in front of SAHBA's office during the news conference.

Suckling went into the office and refused requests from
SAHBA officials to leave.

Now, the question is whether the federal government will pursue the matter expeditiously or let it linger. Suckling noted that it took a lawsuit against the government by his group to get the bird listed in the first place.

On Tuesday, a Fish and Wildlife Service official said agency staffers would know more by the end of the week about how it would proceed.

The service already had a lot of owl issues on its plate. It is considering a proposed owl recovery plan and a proposal to rewrite a critical-habitat designation for the owl that the courts overturned in 2001.

The service also handles numerous day-to-day cases dealing with developments planned in owl habitat, mostly on Tucson's Northwest Side.

"There are too many variables for us to sort out right now," said Steve Spangle, the service's Arizona field supervisor.

But Norm James, a SAHBA attorney, said the District Court will have no choice but to set aside the current owl listing. Federal law and rules won't let the service revisit its 1997 decision based on information received since then, he said.

If the service thinks it can make a better scientific case, it must propose listing the bird again and consider all new scientific information on the owl, he said.

* Contact reporter Tony Davis at 807-7790 or verdin@azstarnet.com.