Government Issues Final Rule On Economic Impact Analyses For Endangered Species Act Habitat Designations

Lawrence Liebsman is a Partner in our Washington office.

Melanie Sengupta is an Associate in our San Francisco office.

Incremental Approach Could Spark Land Use Controversies

Because of its huge impact on land use, the designation of critical habitat is one of the most controversial and heavily litigated areas of the Endangered Species Act (ESA), as seen with the designation of millions of acres to protect the habitat of the spotted owl, the California Fairy Shrimp and the piping plover. While the ESA explicitly prohibits consideration of economic impacts when determining whether to list a species, it requires consideration of the economic impacts when designating critical habitat.

On August 28, 2013, the U.S. Fish and Wildlife Service (FWS) and National Marine Fisheries Service (NMFS) (collectively, the Services) issued a final rule resolving a long-standing dispute regarding how they should analyze economic impacts of critical habitat designation.

The rule — which takes effect on October 30, 2013 — could substantially affect important land use activities by codifying the use of an "incremental approach" adopted by the U.S. Court of Appeals for the Ninth Circuit and several federal district courts. That approach considers only the additional economic burden of designation over and above the listing of the species. The new rule flatly rejects the co-extensive approach advanced by the U.S. Court of Appeals for the Tenth Circuit, which considers the total economic burden from both the listing and the actual designation.

Background

The purpose of the ESA is to protect listed species and conserve their ecosystems. Because habitat destruction and degradation contribute to the decline of listed species, the ESA created tools to enable the Services to conserve listed species. One such tool requires the Services to designate critical habitat concurrently with the listing of a species. 16 U.S.C. §1533(a)(3); 50 C.F.R. §414.12(a). "Critical habitat" is the "specific areas within the geographical areas occupied by the species . . . . on which are found those physical or biological features (I) essential to the conservation of the species and (II) which may require special management considerations or protection . . . ." 16 U.S.C. §1532(5)(a)(i).

Based on the best scientific and commercial data available, the Services must consider the probable economic impacts of critical habitat designation and weigh the benefits of inclusion versus exclusion of...