A federal appeals court upheld a key portion of the Endangered Species Act this week, rejecting a bid by a California real estate developer to complete a project that would jeopardize an endangered species of toad.

A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit on Tuesday unanimously upheld a lower court ruling that the interstate commerce clause of the law applies to the 202-acre project even though it would not cross the state's borders.

That means the planned residential development in San Diego County, which has allegedly damaged some of the last remaining habitat of the southwestern arroyo toad, must make changes suggested by the U.S. Fish and Wildlife Service or other modifications to protect the species.

Although the ruling was based on legal interpretations of the interstate commerce clause of the Constitution rather than on ecological arguments, it appeared to bolster federal oversight of areas that are host to fragile species of wildlife because it affirmed that preservation of endangered species is historically a federal function.

Quoting from an earlier precedent-setting case, U.S. Circuit Judge Merrick B. Garland wrote that the Rancho Viejo firm's development, "located near a major interstate highway, is likewise one that 'is presumably being constructed using materials and people from outside the state, and which will attract' construction workers and purchasers 'from both inside and outside the state.' "

Chief Judge Douglas H. Ginsburg and Judge Harry T. Edwards concurred.

Interior Department spokesman John Wright declined to comment.

John C. Eastman, an attorney representing the developers, noted that the U.S. Court of Appeals for the 5th Circuit recently rejected the D.C. Circuit's logic in a similar case -- while accepting legal theories the D.C. Circuit rejected.

"That split on rationales may well give us grounds to ask the Supreme Court to look at this," said Eastman, a professor of constitutional law at Chapman University in California.

The southwestern arroyo toad lives in a handful of places in California and southwestern Mexico. About 75 percent of its natural habitat has been destroyed over the years, leading the Interior Department to list the species as endangered in 1994.

When the Rancho Viejo development began construction in May 2000 in part of the animal's habitat, the U.S. Fish and Wildlife Service filed objections. The developers sued, saying that the government was overstepping the boundaries of the commerce clause.

But U.S. District Judge Ellen Segal Huvelle upheld the government's action, and the three-judge appellate panel agreed this week.