The Endangered Species Act (ESA) explicitly prohibits the consideration of economic impacts in making the decision to designate a species as “endangered.” However, consideration of such factors is allowed in the designation of “critical habitat” for that species, with the listing agency to address economic, national security and other impacts before designating critical areas, and allowing exclusion of areas where the benefits of exclusion exceed the benefits of designation, and exclusion will not result in the species’ extinction.

Under a new rule effective October 30, 2013 the Fish and Wildlife Service and NOAA Fisheries will be required to publish for public comment a draft economic analysis at the time they propose critical habitat. In addressing the magnitude of the impact, a continuing issue has been how to distinguish between impacts that occur from the listing itself, as opposed to those that result from the designation of critical habitat.  

The approach that has been taken by the agencies has been to consider those burdens that are imposed simply by virtue of the listing as “baseline” and not take them into account in considering whether to list an area as critical habitat. However, the 10th Circuit Court of Appeals in New Mexico Cattle Growers Association v. U.S. Fish and Wildlife Service, had held that this “baseline” approach essentially rendered the economic analysis meaningless, and instead required the agencies to take a “coextensive approach,” i.e. the impact of critical habitat designation should account for impacts that might have resulted to that area from the listing decision itself.

The Ninth Circuit, however, in a decision in 2010, addressed both approaches, and rejected the coextensive approach as too narrow, adopting instead the “baseline” approach. Arizona Cattle Growers’ Association v. Salazar. In 2011, the U.S. Supreme Court denied certiorari on the Arizona Cattle Growers’ decision.

The practical implications of the 9th Circuit’s decision, which was incorporated into the new federal regulation, are readily apparent, but may not be as extreme as some have predicted. It is certainly true that just as the use of the coextensive approach magnifies the impact of a critical habitat designation, the use of the “baseline” rule will minimize it.

However, a recent example suggests that in practice, the conclusion of the 10th Circuit that use of the baseline approach renders economic analysis meaningless may not be justified. In a draft environmental assessment published August 12, 2013 for critical habitat for the Gunnison Sage-Grouse, the FWS included an economic analysis of the impacts of the designation, split between baseline and incremental costs by unit of habitat for the period 2013-2032. For some units, the baseline costs and incremental costs were nearly equal; in others, including the largest single unit, the incremental costs were estimated at less than 10% of the total costs. For the total area designated, however, the incremental cost was approximately 28% of the total cost of listing and critical habitat designation.