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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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similar things, although that is not the only reasonable interpretation of those terms (50 C.F.R. § 17.3).16 But even taking those terms as identical, it could still make sense for Congress to simultaneously call for no economic analysis when listing species yet meaningful economic analysis when designating critical habitat. If Congress felt that economic factors are important but should be done at a later stage, it would make sense to exempt listing from economic analysis, but call for it in critical habitat designation.17 One could easily imagine definitions of jeopardy and adverse modification that differ in levels of protection, which types of species are targeted, or other substantive differences.

The ESA calls for the agencies to designate critical habitat concurrently with the listing of species unless it is “essential to conservation” to list the species “promptly” or critical habitat is This avoids the need to perform economic analysis before listing, which might be important when we want to quickly give species protection, such as after an imperiled species has just been discovered and is under great threat.18 Once species have some protections in place, Congress may have wanted the agencies to then turn to economic factors. Under this reading of the ESA, when imperiled species are discovered they are quickly listed and receive legal protections while the agencies engage in scientific research to determine the conservation needs of the species. The FWS and NMFS then decide where to designate critical habitat taking economic factors into consideration.

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analysis when designating critical habitat in favor of short-cut environmental standards.

However, Sinden’s interpretation fails to give full effect to Congress’s call for economic analysis. The language that she cites as “evidencing Congress’s conscious decision to choose prompt agency action over regulatory perfection” (p.196) is in a portion of the statute that describes a one-year delay in implementation of the law to give the FWS and NMFS an opportunity to achieve success in meeting the statutory deadlines for critical habitat designation (16 U.S.C. § 1533(b)(6)(C)(ii)). Thus, the charge that the FWS “must publish a final regulation based on such data as may be available at the time” (16. U.S.C.

§ 1533(b)(6)(C)(ii)) is not strong evidence that Congress intended for the agencies to always prefer regulatory speed to regulatory effectiveness. Following the principle that courts should interpret statutory terms “in connection with... the whole statute,” (Dada “not then determinable” (16 U.S.C. § 1533(c)(6)(C)). In practice, designation of critical habitat usually occurs after listing.

This was essentially the situation with the snail darter fish that held up operation of the Tellico Dam in Tennessee Valley Authority.

v. Mukasey, 554 U.S. 1, 2 (2008)) it is natural to read language in that portion of the statute about a one-year delay as describing how the agencies should proceed during the one-year delay. Taking language from that portion of the statute and applying it to other sections of the ESA is stripping it of the context of commanding agencies on how to implement the law during its nascent year.

Additionally, the language describing the process for critical habitat designation is very similar to the language that describes the listing process for species.19 When considering this language within the whole act, there is a conflict if the language indicates Congress’s intent for short-cut economic analysis of critical habitat designation, which is Sinden’s preferred interpretation, but Congress uses the same language to show there should be no role for economic analysis in the listing process. Courts have consistently read the language in the listing process to mean economics has no role in the listing decision, so it would be incongruous to have very similar language used as a signal for short-cut economic analysis.

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benefit analysis is a better way to give effect to the intent of Congress to use economic tools as a factor in the decision to designate critical habitat. As discussed above, the current agency interpretation using the incremental approach does not lead to economic analysis being a meaningful factor in critical habitat decisions because the results of the methodology are always estimates of costs that are relatively low administrative costs weighed against approximately zero benefits. Without variation across proposed regulations, the current cost-benefit analysis does not offer insights into which Compare 16 U.S.C. § 1531(b) (listing species) with 16 U.S.C. § 1533(b)(6)(C)(ii) (critical habitat).

regulations best fit social preferences. It is unlikely that Congress intended this result when they called for economic analysis. Instead, Congressional intent points to a need for more accurate economic analysis. I define accurate economic analysis as a methodology that weights the expected costs of regulation against the expected benefits of regulation in a way that reflects social preferences. By measuring costs and benefits using estimates of how much people trade off environmental amenities for other things like money, the agency is able to pursue regulatory policies that best reflect the values of society.

E. How to Measure the Increment Accurate economic analysis requires a way to measure the costs and benefits of critical habitat designation in relation to the protections against take and jeopardy that come from the listing of species. The current agency methodology assumes that the increment of protection for critical habitat is essentially zero because the adverse modification protection completely overlaps with either the Section 7 protection against jeopardy, the Section 9 protection against take, or both (78 Fed. Reg. 53,058 (2013)).

However, there are other ways to measure the increment of protection from adverse modification that would give meaning to the language Congress included in the ESA to consider economic factors of critical habitat designation.

1. Non-Overlapping Protection of Adverse Modification Courts have hypothesized (Cape Hatteras Access Pres. Alliance v. Dep't of Interior, 344 F. Supp. 2d 108, 130 (D.D.C. 2004)), and the FWS has acknowledged (U.S.

FWS 2011), that there can be scenarios in which critical habitat designation provides protections for species that would not come from jeopardy and take protections. When areas are considered “essential to the conservation” of listed species (16 U.S.C. § 1532(5)(A)(ii)), but those areas are not currently inhabited by the species, there may be an increment of protection added by designating that land as critical habitat. FWS and NMFS acknowledge this possibility in economic analyses (U.S. FWS 2012a; U.S. NMFS 2013), but then generally avoid designating any land that is not currently occupied by the species. By doing this, the agencies are able to pay tribute to the idea that Congress intended for meaningful economic analysis of critical habitat designation, but argue that it does not apply in this particular designation. But as this appears to have become standard procedure for the agencies (U.S. FWS 2011, 2012a, 2012b, 2014; U.S. NMFS 2013), Congressional intent for economic analysis of critical habitat designation is still not being met by meaningful agency action.

2. Adverse Modification Protection in Isolation The New Mexico Cattle Growers’ court required FWS to measure costs and benefits of critical habitat even if those costs and benefits occurred concurrently through the protections for listed species. This essentially asks the agencies to pretend that jeopardy and take protections do not exist and measure how critical habitat designation affects behavior. There are two major challenges to this approach. First, measuring the costs and benefits of a proposed action in a vacuum goes against the White House guidance to measure costs and benefits of a proposed action against a baseline of what would occur if that action were not taken (OMB 2003). As such, methodology for economic analysis of critical habitat designation would differ in a major way from the methodologies used when performing economic analysis of other major agency actions.

The second major challenge to measuring costs and benefits of critical habitat in isolation is that it would be hard to implement. Species are always listed prior to or concurrently with critical habitat designation, so there are no examples of areas with the adverse modification protection but not the jeopardy and take protections. This makes it impossible to directly measure how the adverse modification protection in isolation affects behavior in the real world. The FWS has attempted to satisfy the New Mexico Cattle Growers’ court by augmenting the standard economic analysis of critical habitat designation with additional information about the estimated costs and benefits of the “baseline,” namely the jeopardy and take protections that come with listing the species (U.S. FWS 2014). By doing this, FWS has been able to satisfy the court’s requirement to provide a broader picture of the costs and benefits of ESA protections while continuing to focus on the incremental analysis it uses in other circuits. After promulgating the 2013 rule specifying the incremental method as the preferred approach to economic analysis, the FWS may stop providing the additional detail for costs and benefits of baseline regulations (U.S. FWS 2014). With the legal and practical challenges associated with measuring the effects of critical habitat in isolation, it is unlikely that this methodology will reemerge in the near future.

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A third way to measure the increment of protection for critical habitat is to estimate how much adverse modification protection will affect behavior by looking at empirical evidence of how people respond to critical habitat designation. As discussed above, people care about critical habitat designation in ways that suggest there are realworld consequences to these actions. When engaging in Section 7 consultations for the ESA, the FWS and NMFS estimate what indirect effects the action may have on listed species. Indirect effects are things that are “reasonably certain to occur” because of an action (U.S. FWS 1998). So if the Federal Highway Administration is consulting with the FWS about building a new highway that will run near habitat for an endangered frog, the agencies estimate how much the frog will be directly affected by construction of the road and indirectly affected by development that is spurred by the creation of the new road.

Likewise, agencies are charged with estimating indirect effects that are “reasonably foreseeable” to occur because of proposed actions as part of the NEPA review process (CEQ 2014). Indirect effects include “growth-inducing effects and other effects related to induced changes in the pattern of land use, population density or growth rate, and related effects on air and water and other natural systems, including ecosystems” (40 C.F.R. § 1508.8). For example, when the U.S. Forest Service proposes to lease a plot of land for a new ski area, the agency considers how the induced growth of new hotels, retail buildings, and housing outside of Forest Service land will affect nearby environmental amenities.

Since FWS and NMFS already engage in analysis that looks at what can be reasonably expected to occur because of an action when they engage in Section 7 consultations and NEPA reviews, the agencies already have expertise in making these predictions. Estimating the indirect effects of critical habitat designation does not pose the same methodological challenges that plague the critical habitat in isolation analysis because there are real-world examples of areas that first have only listing protections and then add the adverse modification protection. In fact, economists have already used situations like these to estimate how critical habitat affects behavior (Zabel & Paterson 2006; List et al. 2006). As discussed in Section V, these estimates can be used as a starting point for measuring the increment of protection that comes from critical habitat designation.

With accurate measurements of costs and benefits using an increment of protection based on how people respond to critical habitat designation, economic analysis can serve as the escape valve that Congress likely had in mind in the wake of the Tellico Dam experience. In addition to following with the intent of Congress, more accurate economic analysis can improve over the current approach by leading toward more effective ESA regulations.

III. Accurate Economic Analysis can Lead to More Effective Regulations In this section, I argue that accurate cost-benefit analysis can help achieve winwin results by allowing for more conservation of endangered species while also lowering burdens on regulated parties. I draw from guidance published by the Office of Information and Regulatory Affairs, an office in the White House that specializes in economic analysis, and examine economic analyses of environmental laws performed by other agencies such as the Environmental Protection Agency.

A. Economic Analysis to Promote Effective Regulations Economic analysis, often in the form of cost-benefit analysis, has the potential to make regulations more effective by encouraging regulations that have larger benefits with smaller costs. Both Republican and Democratic presidents have endorsed the idea that economic analysis is an important tool at promoting effective regulation. Cost-benefit analysis was originally introduced by the Reagan administration and has been utilized by every administration since. President Clinton issued Executive Order 12,866 calling for cost-benefit analysis of all major federal agency actions whenever it is possible (58 C.F.R. 51,735 (1993)). Cost-benefit analysis of proposed regulations can ensure that the expected benefits are large enough to justify the expected costs. There is not a strict rule that regulations must have positive net benefits, but it is seen as an indication of how effectively a proposed rule will achieve its regulatory goals.

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