Jeff Jeffords / DiveGallery.com

A dwarf, or pygmy, seahorse.

A species of seahorse that's just an inch tall, the smallest in U.S. waters, appears to warrant endangered protection, the U.S. said Thursday in kicking off a year-long review process.

Found in seagrass beds in the Gulf of Mexico, as well as in the Atlantic off Florida and the Caribbean, the dwarf seahorse caught the attention of the Center for Biological Diversity, a conservation group that petitioned for protection a year ago.

"The petition and information in our files present substantial scientific or commercial information indicating that the petitioned actions may be warranted," the National Marine Fisheries Service said in its decision.

"Declines in the dwarf seahorse population have been documented in a number of Florida’s estuaries and bays," the agency added. "It is evident that the dwarf seahorse is inextricably associated with seagrass and the inferences made about the species’ declining status due to habitat loss are supported."

Seagrass is critical habitat for the seahorses, and the center said that Florida alone has lost more than half of its seagrasses since 1950.

It argued that the dwarf seahorse -- which lives for about a year and is the third smallest seahorse species in the world -- is also threatened by the aquarium trade and could be impacted by the 2010 BP oil spill.

"I'm not aware of any new studies on seahorses that have been published since the spill," Tierra Curry, a biologist for the group, told msnbc.com, but the original petition includes references to "studies that have been done on the toxicity of oil to seahorses and seagrasses." 

"Oil spills like the one two years ago in the Gulf of Mexico exact a terrible toll on marine life, especially species like the dwarf seahorse that were already struggling to survive," Curry added. "These inevitable, catastrophic spills will be a threat as long as we persist with destructive, dangerous offshore drilling."

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