Federal Wildlife Agencies Issue Final Rule Adopting "Incremental" Approach To Economic Impact Analyses Conducted For Critical Habitat Designations Under The Endangered Species Act

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On August 28, 2013, the U.S. Fish and Wildlife Service (FWS) and the National Marine Fisheries Service (NMFS) issued a final rule (pdf) adopting an “incremental” approach to preparing an economic impact analysis required for a critical habitat designation under the Endangered Species Act (ESA). As a practical matter, this assessment will primarily consist of analyzing the cost of the time other federal agencies must take to consult with the wildlife agencies before authorizing activities within critical habitat. The analysis will largely ignore the underlying costs of listing a species under the ESA. In other words, for areas considered to be occupied by a listed species, the cumulative economic impacts of critical habitat designations, such as reduced water supplies and increased development costs, will be considered “baseline” effects.

The rule rejects the cumulative approach adopted by the U.S. Court of Appeals for the Tenth Circuit in New Mexico Cattlegrowers Association v. FWS, 248 F.3d 1277, 1285 (10th Cir. 2001), which required the agencies to analyze “all of the impacts of a critical habitat designation, regardless of whether those impacts are attributable coextensively to other causes.” Rather, the rule codifies the incremental or “baseline” approach adopted by the U.S. Court of Appeals for the Ninth Circuit in Arizona Cattle Growers Association v. Salazar, 606 F.3d 1160, 1173 (9th Cir. 2010). Specifically, the rule states: “To determine the incremental impacts of designating critical habitat, the Services [shall] compare the protections provided by the critical habitat designation (the world with the particular designation) to the combined effects of all conservation-related protections for the species and its habitat in the absence of the designation of critical habitat (the world without designation, i.e., the baseline condition including listing).”

The rule also allows the wildlife agencies to describe economic impacts qualitatively, which is intended to “provide clarity, promote predictability and reduce uncertainty, and to codify established interpretation, practices, and prevailing case law.” Opponents of the rule, however, argue that allowing qualitative assessments will result in less thorough, less robust analyses of economic impacts.

The rule also requires the agencies to release a draft economic analysis at the same time they release a proposed critical habitat rule. Under current regulations, promulgated in 1984, FWS would prepare an economic analysis only after issuing a proposed rule designating critical habitat. NMFS already issues an economic analysis with a proposed designation; the new rule codifies this practice. According to the agencies, both transparency and public input will be improved if the public has access to both the scientific analysis and the draft economic analysis at the same time.

The rule is in response to a February 2012 presidential memorandum directing FWS and NMFS to revise applicable regulations to “provide that the economic analysis be completed and made available for public comment at the time of publication of a proposed rule to designate critical habitat.” The agencies issued a proposed rule on August 24, 2012, which was open for public comment for a total of 150 days. The rule will become effective October 30, 2013.

Nossaman has extensive experience advising clients on issues involving critical habitat designations, including with respect to the economic impact analyses at issue in the new rule. See, e.g., Building Industry Legal Defense Foundation v. Norton, 231 F. Supp. 2d 100 (D.D.C. 2002) (invalidating and vacating designation of critical habitat for the arroyo southwestern toad and Riverside fairy shrimp); Building Industry Association of Southern California v. Norton, Civ. No. 01-07028 (C.D. Cal. 2001) (granting FWS motion to remand critical habitat designation for coastal California gnatcatcher and San Diego fairy shrimp to comply with New Mexico Cattlegrowers).