On August 23rd, Fish and Wildlife Service (FWS) and National Marine Fisheries Service (NMFS) jointly issued a final rule requiring draft economic impact analyses to be issued along with proposed critical habitat designations, limiting the types of economic impacts that may be considered when making such designations. The final rule interpreting the Endangered Species Act (ESA) will take effect on October 30th.

The rule engendered controversy during its development regarding how economic impacts of critical habitat designations would be calculated. The agencies opted to isolate costs associated with critical habitat designations, rather than basing calculations on the cumulative impact of the underlying listing as well as the critical habitat designation. The agencies’ incremental approach to economic impact calculations is expected to result in smaller impact estimates than cumulative impact calculations would produce.

The incremental approach will result in economic impact analyses that ignore the underlying costs of listing a species under the ESA when undertaking a critical habitat designation. This will make many critical habitat designations look misleadingly cost-effective, and cloak the overall costs on landowners, industry, and the government of listing species under the ESA.

With assistance from Andrew McNamee