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«Toward More Effective Endangered Species Regulation By Jacob P. Byl Dissertation Submitted to the Faculty of the Graduate School of Vanderbilt ...»

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So Congress passed a law explicitly exempting the Tellico dam from the ESA and started engaging in discussions about how the ESA should be amended (Salzman 1990). In 1978, Congress amended the ESA to require the implementing agencies to designate critical habitat based on the “best scientific data available and after taking into consideration the economic impact... of specifying any particular area as critical habitat” (16 U.S.C. § 1533(b)(2)(emphasis added)). The 1978 amendments to the ESA also added a committee that has authority to exempt certain activities from ESA regulations to prevent drastic outcomes like that in Tennessee Valley Authority (16 U.S.C. § 1538). This “God Squad” committee is usually described as an escape valve intended to prevent repeats of the Tellico dam situation (Salzman 1990).

B. Agency and Court Interpretations As it has stood for over thirty years, the ESA allows for no role of economic analysis in the process of listing a species as threatened or endangered, but the statute requires the FWS and NMFS to engage in economic analysis when designating critical habitat of listed species. The FWS and NMFS have interpreted “taking into consideration the economic impact” in critical habitat designation as a call for analysis of the additional protections of critical habitat designation over the protections afforded to listed species under other provisions. Species listed as endangered or threatened are protected by Section 9 of the ESA from “take” by any person or organization and by Section 7 from “jeopardy” by actions involving federal agencies. To take a species is to “harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct” (16 U.S.C. § 1532(19)), which the agencies have interpreted to include habitat destruction (50 C.F.R. § 17.3). The protection against jeopardy means that agency actions must not be “likely to jeopardize the continued existence of any endangered species or threatened species” (16 U.S.C. § 1536(a)(2)). The FWS and NMFS consider these protections to be the baseline since economic factors are not supposed to be considered at that listing stage.

Critical habitat adds a protection that federal agencies may not engage in “adverse modification of habitat... that is deemed to be critical” (16 U.S.C. § 1536(a)(2)). As defined by the agencies in regulations, the prohibitions on take and jeopardy almost completely overlap with the adverse modification protection of critical habitat (50 C.F.R.

§ 17.3). With these definitions, any action that would be considered adverse modification of habitat under Section 7 would either be considered jeopardy under Section 7, take under Section 9, or both. Under this interpretation of the statute, economic analysis implemented using an “incremental” approach that looks at the benefits and costs of the added protections of critical habitat over the protections that come with listing as endangered or threatened (50 C.F.R. § 424.19), does not lead to high estimates of benefits and costs.

As a practical matter, the incremental approach leads to a narrow concept of costs and benefits because there is usually no additional increment of legal protection for critical habitat that was not already covered by the take and jeopardy protections of listing. Costs are usually limited to the administrative costs of handling critical habitat.

Benefits are negligible and often left unquantified, but when quantified are usually zero.

From a logistical standpoint, this allows the FWS and NMFS to avoid using extensive agency resources on economic analysis.

The incremental approach to cost-benefit analysis was challenged in New Mexico Cattle Growers Association v. U.S. Fish & Wildlife Service, prompting the Tenth Circuit to review the FWS’s interpretation of the call for economic analysis in the ESA (248 F.3d 1277 (10th Cir. 2001)). In New Mexico Cattle Growers, the Tenth Circuit threw out the agency’s incremental approach for taking too narrow of a view of the costs and benefits of critical habitat. According to the New Mexico Cattle Growers court, the narrow costs and benefits implied by the incremental approach went against Congress’ intent for the FWS to use economic analysis for critical habitat designation. The FWS interpretation was not afforded substantial deference because the policy had not been implemented through notice-and-comment rulemaking. The Tenth Circuit instead held that “Congress intended that the FWS conduct a full analysis of all of the economic impacts of a critical habitat designation, regardless of whether those impacts are attributable co-extensively to other causes” (248 F.3d at 1285).

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Ninth Circuit upheld FWS’s use of the incremental approach as a permissible reading of the ESA (378 F.3d 1059 (9th Cir. 2004)). Like the New Mexico Cattle Growers court, the Ninth Circuit did not give substantial deference to the agency’s interpretation. However, when the Gifford Pinchot court interpreted the ESA, it found the incremental approach to be a permissible reading of the statute’s call for economic analysis. So judicial reviews of the agency interpretation of economic analysis in the ESA have gone both ways, leading to a patchwork of permissible economic analysis for endangered species that would require different methodologies in Arizona and New Mexico.14

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promulgated a joint rule in 2013 officially interpreting the ESA using the incremental approach with narrowly defined costs and benefits (78 Fed. Reg. 53,058 (2013)). The new method was promulgated by notice-and-comment rulemaking, so it should receive deference under Chevron v. Natural Resources Defense Council, which stands for the idea that courts must defer to reasonable agency interpretations when those Arizona is in the Ninth Circuit, so the FWS would be allowed to use the incremental approach there. New Mexico is in the Tenth Circuit, so the FWS would not be allowed to use the incremental approach in the neighboring state. This could be especially troubling for the FWS and NMFS with species like the Southwestern willow flycatcher that has critical habitat spanning these circuit splits.

interpretations are made with the force of law. This means that the New Mexico Cattle Growers case would likely come out differently if brought today because the court would give substantial deference to the agency’s interpretation now that the incremental approach has gone through notice-and-comment rulemaking (National Cable v. Brand X Internet Services, 545 U.S. 967, 980 (2005)). If courts consider the incremental approach to be a reasonable interpretation of the ESA, the policy will likely pass judicial review going forward. Although the FWS and NMFS have used rulemaking to interpret the ESA to call for economic analysis using the incremental approach, that does not have to be the end of the discussion; there are multiple perspectives on the interpretation and the agencies could opt to promulgate new rules with different interpretations in the future.

C. Interpretations by Commentators Various commentators outside the agencies and courts have also interpreted the ESA’s call for economic analysis of critical habitat designation. Many environmental advocates have interpreted the economic analysis provision along the lines of the incremental approach and have applauded the evasion of more involved cost-benefit analysis. Sinden (2003) argues that the lack of economic analysis in the ESA is one of the law’s strengths at protecting the environment. In this view, the incremental approach allows the agencies to bypass costly analysis that is often a hurdle for new regulations to cross. Resources that would have to be spent on putting prices on things that are inherently valuable for their own sake can instead be used to “put boots on the ground” actively conserving listed species.

Sinden (2003) prefers that the FWS and NMFS use “short-cut environmental standards” for economic analysis so cost-benefit analysis does not have to play a role in the ESA. Examples of short-cut methods include feasibility standards and limited balancing tests found in the Clean Air Act and Clean Water Act. She argues that Congress intended these short-cut methods in lieu of formal cost-benefit analysis. The ESA calls for “consideration of economic factors” and also charges the FWS and NMFS to consider “other relevant factors... based on such data as may be available at the time” (16 U.S.C. § 1533(b)(6)(C)(ii)). Sinden reads this language as evidence of Congressional intent to give the agencies implementing the law substantial flexibility in how they engage in economic analysis of critical habitat designation so that the agencies can act quickly. Sinden feels that formal economic analysis uses a lot of resources and is often used as an excuse for administrative paralysis, so she prefers an ESA that retains an element of absolutist methods to acheive its goals.

In a similar vein, Souder (1993) traces the use of economic analysis for ESA regulations and proposes that critical habitat designation should go through the public comment process spelled out in the National Environmental Protection Act (NEPA). He argues that this public involvement is preferable to formal cost-benefit analysis of endangered species regulations because estimates of the values of endangered species are difficult to pin down, so more direct appeals to public opinion on the matter can be a better way for agencies to determine whether proposed policies fit with society’s preferences. There is now a circuit split on the issue with the Tenth Circuit requiring NEPA analysis of critical habitat designation (Catron County v. FWS, 75 F.3d 1429, 1433 (10th Cir.1996)), and the Ninth Circuit not requiring it (Douglas Cty. v. Babbitt, 48 F.3d 1495 (9th Cir.1995)).

D. The Closest Fit to Congressional Intent The current agency interpretation takes the prohibition on economic analysis for listing of species as a signal to start the economic analysis of critical habitat designation from a baseline with the species already listed and protected through those legal mechanisms. But the relationship between listing species and designating critical habitat is more complex than the few lines of text that describe them in the ESA. Designating critical habitat is required for listed species to the “maximum extent prudent and determinable” (16 U.S.C. § 1533(a)(3)(A)). Despite overlaps in the legal protections as outlined by FWS and NMFS regulations, in practice designating critical habitat has bite.

When a draft map of critical habitat for the golden-cheeked warbler in Central Texas was leaked by the San Antonio Express-News, there was a public outcry (Needham 1994). Although the golden-cheeked warbler had already been listed for some years and was protected against take and jeopardy, private landowners staged a protest at the state capital to express their displeasure with having their lands designated as critical habitat. Although the adverse modification protection only applies to activities that involve a federal agency, private landowners care about their lands being included in maps of critical habitat (Mann & Plummer 1995). Public responses to critical habitat designation are not limited to this instance; parties regularly file lawsuits relating to critical habitat, either trying to force FWS and NMFS to designate habitat for particular species, or challenging designations when they do take place. If critical habitat designation really had no bite, it seems unlikely that parties would be willing to incur the litigation costs of pursing these suits if the outcomes would not matter.

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the designation of critical habitat causes changes in behavior in the real world. For example, Zabel and Paterson (2006) find a 37% decrease in applications for building permits on land in California that had been designated as critical habitat. List et al. (2006) estimate that properties that are included in critical habitat around Tucson, Arizona experience a 22% decline in property values.

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factors” in the critical habitat designation process, it is unlikely that the added requirement was intended to be a hollow bureaucratic hurdle. If Congress intended economic analysis the way the FWS and NMFS interpret it, then the requirement to consider economic factors becomes surplusage because an economic analysis that weighs no benefits against almost no costs for all proposed critical habitat designations does not provide helpful insight into any of those designations. When there is no variation across proposed designations, there is nothing informative about whether some proposals are preferable to others. Additionally, the same section of the ESA authorizes the agencies to exclude areas from critical habitat when “the benefits of such exclusion outweigh the benefits of specifying such area as part of the critical habitat” (16 U.S.C. § 1533(b)(2)).

If FWS and NMFS always estimate costs and benefits to be near zero, it is difficult for the agencies to ever have estimates of benefits and costs of critical habitat that can justify excluding areas from critical habitat, as Congress intended by including that provision.15 § 1533(b)(2) may also allow for FWS and NMFS to exclude areas from critical habitat for non-economic reasons, such as national security, although the section uses language about benefit tradeoffs in ways that suggest Congress was thinking about economics. The exclusions do not apply when it will result in extinction of the species.

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intended to amend the ESA by adding a method to address the important tradeoff between conservation and economic development. The requirement to consider economic factors when designating critical habitat can serve, like the “God squad,” as an escape valve from drastic outcomes like the Tellico Dam.

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designation under the ESA can be discerned by considering the context of the 1978 amendments to the ESA and the timeline of agency actions. In the wake of Tennessee Valley Authority, Congress was explicit about economic analysis not playing a role in the listing process that, as described above, affords protections of species against take and against agency actions that involve jeopardy. At the same time, Congress was explicitly calling for economic analysis of critical habitat designation, which affords protection against agency actions that may adversely modify habitat.

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