The Endangered Species Act: Consideration of Economic Factors
Released: 2003-04-15T00:00:00

Introduction

The Endangered Species Act (ESA) (1) provides for the listing and protection of species that are found tobe "endangered" or "threatened" -- species that need conservation efforts because they might becomeextinct. The listing of a species as endangered triggers the prohibitions in the act against "taking"(killing or harming) individuals of the protected species, unless a permit is obtained to takeindividuals incidental to an otherwise lawful proposed action, or unless an exemption for theproposed action is obtained. Unauthorized taking of a listed species can result in civil or criminalpenalties. These prohibitions and potential penalties can affect various activities, including the useand development of land, with attendant economic impacts. Therefore, the extent to which likelyeconomic impacts can be taken into account under the ESA has been of interest. Some parts of theact relate to importation and commercial trading in listed species. (2) This report does not addressthose issues, but discusses the ESA generally and how some of its provisions, aside from thecommercial context, relate to the consideration of economic factors. It will be updated ascircumstances warrant.

Background

The ESA defines an "endangered species" as any species which is "in danger of extinctionthroughout all or a significant portion of its range." Excepted from this definition, however, are"species of the Class Insecta determined by the Secretary to constitute a pest whose protection underthe provision of this chapter would present an overwhelming and overriding risk to man." Thislanguage appears to recognize the economic or health threats that some insects present. A"threatened" species is one likely to become an endangered species within the foreseeable futurethroughout all or a significant portion of its range."

The Secretary of the Interior (with respect to terrestrial species) and the Secretary ofCommerce (with respect to anadromous fish and certain other marine species) decide whether to lista species as endangered or threatened. The listing of a species triggers certain duties for federalagencies and applicants for federal permits, authorizations, or funding to consult with the Secretary(in practice either the Fish and Wildlife Service or the National Marine Fisheries Servicerespectively) if a proposed action may affect a listed species. This consultation will determine ifthe proposed action is likely to jeopardize the continued existence of a species or destroy oradversely modify habitat of a species determined by the Secretary to be critical. (3) If so, the Secretary is tosuggest reasonable and prudent alternatives to the proposed action that would avoid jeopardizing thelisted species.

Listing a species as endangered also means that the prohibitions of the ESA regarding the"taking" of endangered species apply. "Taking" means to harass, harm, pursue, hunt, shoot, wound,kill, trap, capture, or collect, or to attempt to engage in any such conduct. (4) The meaning of "harm" iselaborated on in regulations to include destruction of habitat severe enough to actually kill or injurewildlife by significantly impairing essential behavioral patterns, including breeding, feeding, orsheltering. (5) Currentregulations provide that unless a special rule has been promulgated for a threatened species,threatened species shall receive the same protections as endangered species. (6) Exceptions to the takingprohibitions are allowed as a result of either the consultation process under Â§ 7 of the act, or underthe Â§ 10 provisions that allow "incidental take permits" to be issued.

If a development or activity cannot be modified so that it avoids jeopardizing a listed species,the person or agency proposing the action must either desist, risk penalties for unlawful takes, orpursue the exemption process provided under the ESA to exempt that activity (not the species) fromthe penalties of the act.

This report will discuss the role of economics in the listing of species, designation of criticalhabitat, the exemption process, and the development of recovery plans.

The Listing Process

The determination of whether a species should be listed as endangered or threatened mustbe based on several factors that relate to the surviving numbers of a species and threats to itscontinued existence, but do not include a consideration of the economic effects of listing. (7) While the origins of threatsto a species may be caused by development or other economic activities, listing determinations areexpressly to be made "solely on the basis of the best scientific and commercial data available." Theword "solely" was added in the 1982 amendments to the act (8) to clarify that thedetermination of endangered or threatened status was intended to be made without reference toextraneous conditions such as economic factors. The committee reports elaborated on this point andalso state that "commercial data" refers to trade data:

... The principal purpose of the amendments to Section4 is to ensure that decisions pertaining to the listing and delisting of species are based solely uponbiological criteria and to prevent non-biological considerations from affecting such decisions. Toaccomplish this and other purposes, Section 4(a) is amended in severalinstances....

Section 4(b) of the Act is amended in several instancesby Section 1(a)(2) of H.R. 6133. First, the legislation requires that the Secretary base hisdeterminations regarding the listing or delisting of species "solely" on the basis of the best scientificand commercial data available to him. The addition of the word "solely" is intended to remove fromthe process of the listing or delisting of species any factor not related to the biological status of thespecies. The Committee strongly believes that economic considerations have no relevance todeterminations regarding the status of species and intends that the economic analysis requirementsof Executive Order 12291, and such statutes as the Regulatory Flexibility Act and the PaperworkReduction Act not apply. The Committee notes, and specifically rejects, the characterization of thislanguage by the Department of the Interior as maintaining the status quo and continuing to allow theSecretary to apply Executive Order 12291 and other statutes in evaluating alternatives to listing. Theonly alternatives involved in the listing of species are whether the species should be listed asendangered or threatened or not listed al all. Applying economic criteria to the analysis of thealternatives and to any phase of the species listing process is applying economics to thedeterminations made under Section 4 of the Act and is specifically rejected by the inclusion of theword "solely" in this legislation.

Section 4(b) of the Act, as amended, provides thatlisting shall be based solely on the basis of the best "scientific and commercial data" available. TheCommittee did not change this information standard because of its interpretation of the word"commercial" to allow the use of trade data. Retention of the word "commercial" is not intended,in any way, to authorize the use of economic considerations in the process of listing a species. (9)

The conference report confirms that it was the intent of both chambers that economic factorsnot play a role in the listing of species for protection.

Section 2 of the Conference substitute amends section4 of the Act in several ways. The principal purpose of these amendments is to ensure that decisionsin every phase of the process pertaining to the listing or delisting of species are based solely uponbiological criteria and to prevent non-biological considerations from affecting such decisions. (10)

The Committee of Conference (hereafter theCommittee) adopted the House language which requires the Secretary to base determinationsregarding the listing or delisting of species "solely" on the basis of the best scientific and commercialdata available to him. As noted in the House Report, economic considerations have no relevanceto determinations regarding the status of species and the economic analysis requirements ofExecutive Order 12291, and such statutes as the Regulatory Flexibility Act and the PaperworkReduction Act, will not apply to any phase of the listing process. The standards in the Act relatingto the designation of critical habitat remain unchanged. The requirement that the Secretary considerfor listing those species that states or foreign nations have designated or identified as in need ofprotection also remains unchanged. (11)

Therefore, the act makes it clear that the decision as to whether a species is endangered orthreatened is to be a scientific one in which economic factors do not play a part. Once thisdetermination has been made, however, economic considerations may be, and in some instancesmust be, considered in analyzing what actions may be taken. This process has been analogized tomaking a diagnosis of whether a patient has cancer solely on medical grounds, but later consideringeconomic factors in determining appropriate treatment once the patient has been diagnosed.

Designation of Critical Habitat

In contrast to the process for listing a species as needing the protections of the ESA, in whichprocess economic factors are not to play a part, economic factors expressly are to be considered inthe designation of critical habitat for species. Concurrently with determining a species to beendangered or threatened, the Secretary "to the maximum extent prudent and determinable" is todesignate the critical habitat of the species. (12)

When the Secretary designates critical habitat, the Secretary must take into consideration theeconomic impacts of doing so:

on the basis of the best scientific data available and aftertaking into consideration the economic impact, and any other relevant impact, of specifying anyparticular area as critical habitat. The Secretary may exclude any area from critical habitat if hedetermines that the benefits of such exclusion outweigh the benefits of specifying such area as partof the critical habitat, unless he determines, based on the best scientific and commercial dataavailable, that the failure to designate such area as critical habitat will result in the extinction of thespecies concerned. (13)

Therefore, although economic factors are not to be considered in the listing of a species asendangered or threatened, economic factors must be considered when deciding whether and whereto designate critical habitat, and some habitat areas may be excluded from designation based on suchconcerns, unless the failure to designate the habitat would result in the extinction of the subjectspecies.

The significance of designating critical habitat is debatable. The Fish and Wildlife Servicehas asserted that designation does not add substantially to the protections afforded listed species,critical habitat designations are inordinately expensive compared to listing determinations, and thatthe agency would prefer not to use scarce resources to designate critical habitat. In fact, criticalhabitat has been designated for less than one fourth of listed species. On the other hand, modification of critical habitat may trigger Â§ 7 consultation, may affect a finding of "harm," and mayfacilitate development of recovery plans. (14)

Exemptions

Federal agencies and non-federal persons may seek to have a particular action exempted fromthe penalties for taking endangered or threatened species in order to allow an activity or project toproceed even if that activity or project would destroy individuals of a listed species and might evenjeopardize the continued existence of that species.

As originally enacted, the act was an absolute prohibition against activities that wouldjeopardize endangered species. When the prospective impoundment of water behind the nearlycompleted Tellico dam threatened to eradicate the only known population of the snail darter (a smallfish), the Supreme Court concluded that the "plain language" of the act at that time mandated thatthe dam not operate.

Concededly, this view of the Act will produce resultsrequiring the sacrifice of the anticipated benefits of the project and of many millions of dollars inpublic funds. But examination of the language, history, and structure of the legislation under reviewhere indicates beyond doubt that Congress intended endangered species to be afforded the highestof priorities. (15)

After this Supreme Court decision, the ESA was amended to include a process by whicheconomic and other impacts could be reviewed and projects exempted from the restrictions thatotherwise would apply. (16) An "Endangered Species Committee" (Committee), consistingof specified Cabinet officials and one individual from each affected state reviews applications forexemptions. A federal agency, the Governor of the state in which an agency action will occur, ora permit or license applicant may apply to the Secretary for an exemption. The application mustdescribe the consultation process carried out and provide a statement as to why the proposed actioncannot be modified to conform with the requirements of the statute.

To be eligible for an exemption, the agency concerned and the exemption applicant musthave carried out the consultation processes required under Â§ 7 of the act in good faith and must havemade a reasonable and responsible effort to develop and fairly consider modifications or reasonableand prudent alternatives to the proposed action that do not jeopardize the continued existence of alisted species or result in the destruction or adverse modification of critical habitat of such a species. They also must have conducted the required biological assessments and, to the extent determinablewithin the time provided, refrained from making any irreversible or irretrievable commitment ofresources that would foreclose the formulation or implementation of reasonable and prudentalternative measures to avoid jeopardizing the species and habitat in question. These qualifyingrequirements are to ensure that the exemption process will be a meaningful one and that theconsideration of the issues will not be preempted by the commitment of resources and preclusion ofalternatives through actions already taken.

The Secretary, in consultation with the other members of the Committee, holds a hearing onthe application and prepares a report. The report reviews whether the applicant has made anyirreversible or irretrievable commitment of resources; discusses the availability of reasonable andprudent alternatives and the benefits of each; provides a summary of the evidence concerningwhether the action is in the public interest and is nationally or regionally significant; and outlinesappropriate and reasonable mitigation and enhancement measures which should be considered bythe Committee. (17) Economic impacts may play a part in the evaluations of public interest and national or regionalsignificance, and in the development of mitigation and enhancement measures.

The Committee then makes a final determination of whether to grant an exemption. TheCommittee shall grant an exemption if, based on the evidence, the Committee determines that:

(i) there are no reasonable and prudent alternatives tothe agency action;

(ii) the benefits of such action clearly outweigh thebenefits of alternative courses of action consistent with conserving the species or its critical habitat,and such action is in the public interest;

(iii) the action is of regional or national significance;and

(iv) neither the federal agency concerned nor theexemption applicant made any irreversible or irretrievable commitment of resources prohibited bysubsection (d) of this section [commitments as described above that jeopardize species or criticalhabitat]. (18)

The Committee also must establish reasonable mitigation and enhancement measures asnecessary and appropriate to minimize the adverse effects of an approved action on the species orcritical habitat. These measures must be funded by the applicant. Again, economic impacts maywell be a factor in several of these evaluations and measures.

An exemption must be granted for an agency action if the Secretary of Defense finds theexemption is necessary for reasons of national security. (19) The Committee may not grant an exemption that the Secretaryof State finds would violate a treaty or other international obligation of the United States. (20) The President isauthorized to make exemption determinations for a project for the repair or replacement of a publicfacility in a major disaster area if the President determines it is (1) necessary to prevent therecurrence of the natural disaster and to reduce the potential loss of human life, and (2) to involvean emergency situation which does not allow the ordinary procedures to be followed. (21)

An exemption is permanent unless the Secretary finds that the exemption would result in theextinction of a species that was not the subject of consultation, or was not identified in the biologicalassessment and the Committee determines that the exemption should not be permanent. (22)

The costs of required mitigation and enhancement measures specified in an approvedexemption must be included in the overall costs of continuing the proposed action and the applicantmust report annually to the Council on Environmental Quality on compliance with mitigation andenhancement measures. (23) The obligation to fund mitigation continues throughout theimpacts of the exemption.

The act expressly states that any action for which an exemption is granted is not to beconsidered a taking of any endangered species with respect to any activity necessary to carrying outthe exempted action, and that any taking that is in compliance with the terms and conditionsspecified in a written statement issued by the Secretary after the consultation process is not to beconsidered a taking of the species concerned. In other words, the penalties that normally apply tothe taking of an endangered or threatened species do not apply to takings resulting from exemptedactions.

There have been only a very few exemption applications filed and only two exemptionsgranted (one was in re the Grayrocks dam and the other was to approve 13 timber sales sought bythe Bureau of Land Management in the Department of the Interior, but this latter exemption requestwas withdrawn before the completion of appeals). One application was denied (in re the Tellicodam, which was later allowed by Congress to proceed); one was dismissed as premature (in re theproposed Pittston oil refinery in Maine); and two others were withdrawn before Committeeconsideration.

One commentator has speculated that the low number of exemption applications may in partbe because the process is rigorous, but also because the incentive to negotiate compromises is strong.

The main reasons for the low number of applicationsprobably include the small number of jeopardy opinions issued, the stringent substantive standardsfor the grant of an exemption, and the complexity of the process. A likely additional factor is thatmost institutions, public or private, recognize that merely by seeking an exemption they risk beingperceived as hostile to endangered species conservation. As long as public support for conservationis believed to be high, there is an incentive to compromise and avoid the need for an exemption. (24)

Another factor may be that the harm to a species resulting from an exempted action must betaken into account in reviewing other proposed actions that also may affect that species; morevigorous conservation actions may be necessary elsewhere to compensate for the exempted harm inorder to recover the species in question. This fact also may make exemptions less desirable.

Recovery Plans

Once a species is listed, the Secretary is to develop a recovery plan for that species that willassist the species in recovering to the point that the protection of the ESA is no longer needed. Tothe extent practicable, the Secretary is to develop recovery plans for those species that are most likelyto benefit from such plans, "particularly those species that are, or may be, in conflict withconstruction or other development projects or other forms of economic activity;..." Recovery plansare to set goals for the conservation and survival of the species and set out objective, measurablecriteria that would result in a determination that the species could be removed from listing. Arecovery plan is also to contain "estimates of the time required and the cost to carry out thosemeasures needed to achieve the plan's goal and to achieve intermediate steps toward that goal." (25) Economic impacts mayplay a role in the development of and choosing among recovery measures. Although all options mustachieve recovery, the most cost-effective option may be selected.

ESA Provisions with Less Direct Economic Effects

Other ESA provisions may involve economic factors less directly than those discussed above,especially as implemented administratively. Permit applicants may confer on possible impacts onspecies that have been proposed for listing and informal consultation is available with respect topreliminary project planning for actions that may affect a listed species. Both of these processes mayassist with development of economic projects and activities so as to avoid both ESA conflicts andthe expense of modifying actions later on. In addition, certain administrative actions affordlandowners and developers greater certainty in moving forward with development activities. (26) These rules, combinedwith other agency policies and guidelines for improved processing of permit applications, have beenseen by many as facilitating economic activities and development otherwise affected by the ESA.