The Endangered Species Act and Critical Habitat Designation: An Integrated Biological and Economic Approach

The Endangered Species Act of 1973, as amended, assigns the U.S. Fish and Wildlife Service the responsibility for listing species of plants and animals in the United States whose existence is either threatened or endangered. After a species is listed, the Service is responsible for, among other things, developing recovery plans, reviewing proposed federal actions to ensure that they do not compromise recovery efforts, and designating critical habitat. The designation of critical habitat for endangered species involves reallocation of resources. This paper sets forth the methodology and results from two case studies that measured the economic impacts of designating critical habitat. The case studies vary in regional scope. The first study incorporates seven states along a 2200 mile stretch of the Colorado River and its major tributaries and focuses on six endangered fishes. A second study analyzes two endangered fishes in a two county study region in Utah and Nevada through which the Virgin River flows. The methodology utilized in both case studies was to measure the impacts of designating critical habitat and involves the following steps: (1) determining how the biological needs of endangered fish will affect the allocation of resources among river users; (2) assessing the direct economic impacts of resource reallocations on river users; and (3) using a set of applied general equilibrium models of the affected region in order to capture all of the direct and indirect effects of resource reallocations. Approaching the estimation of the impacts of designating critical habitat in this fashion insures that all actions taken on behalf of the endangered species will be captured in the analyses as a reallocation of resources. This insures that impacts are inclusive of negative as well as positive effects that stem from the reallocation process. The principle results of the two case studies are that sectoral impacts are both positive and negative. The sub-regional impacts for both case studies are not distributed evenly. The regional impacts, whether positive or negative, are small relative to a baseline level of economic activity representing no actions taken on behalf of the fishes. The national efficiency effects as determined in the Colorado study are effectively zero for the designation of critical habitat.