The Endangered Species Act: Consideration of Economic Factors

CRS Report for Congress
The Endangered Species Act:
Consideration of Economic Factors
Updated April 15, 2003
Pamela Baldwin
Legislative Attorney
American Law Division

Congressional Research Service ˜ The Library of Congress

The Endangered Species Act: Consideration of
Economic Factors
Summary
The Endangered Species Act (ESA) provides for the listing and protection of
species that are found to be “endangered” or “threatened” — species that might
become extinct. 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 take individuals incidental to an otherwise lawful
proposed action, or an exemption for the proposed action is obtained. Unauthorized
taking of a listed species can result in civil or criminal penalties. These prohibitions
and potential penalties can affect various activities, including development and use
of land, with attendant economic impacts. Therefore, the extent to which likely
economic impacts can be taken into account under the ESA has generated interest
and discussion.
The determination of whether a species should be listed as endangered or
threatened must be based “solely on the basis of the best scientific and commercial
data available.” (“Commercial data” here refers to trade data.) The data that may be
considered at the listing stage may include facts related to a species’ population,
habitat, distribution, etc., as well as threats to its continued survival, but must not
include economic factors.
However, economic factors may be, and in some instances must be, considered
in devising responses to the listing of a species — e.g., in the designation of critical
habitat, in the process for obtaining an exemption for a particular proposed action
from the prohibitions of the ESA, and in the development of the recovery plan for a
listed species. Economic factors also play less direct roles in the permitting
processes.
Parts of the ESA relate to commercial importation and trade in listed species.
This report does not address those issues, but rather discusses the ESA generally,
aside from the commercial context, and how some of its provisions relate to the
consideration of economic factors. It will be updated as circumstances warrant.

Contents
In troduction ......................................................1
Background ......................................................2
The Listing Process................................................3
Designation of Critical Habitat.......................................5
Exemptions ......................................................6
Recovery Plans....................................................9
ESA Provisions with Less Direct Economic Effects.......................9

The Endangered Species Act: Consideration
of Economic Factors
Introduction
The Endangered Species Act (ESA)¹ provides for the listing and protection of
species that are found to be “endangered” or “threatened” — species that need
conservation efforts because they might become extinct. 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 take individuals
incidental to an otherwise lawful proposed action, or unless an exemption for the
proposed action is obtained. Unauthorized taking of a listed species can result in
civil or criminal penalties. These prohibitions and potential penalties can affect
various activities, including the use and development of land, with attendant
economic impacts. Therefore, the extent to which likely economic impacts can be
taken into account under the ESA has been of interest. Some parts of the act relate
to importation and commercial trading in listed species.² This report does not
address those issues, but discusses the ESA generally and how some of its
provisions, aside from the commercial context, relate to the consideration of
economic factors. It will be updated as circumstances warrant.
Background
The ESA defines an “endangered species” as any species which is “in danger
of extinction throughout 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 under the provision of this chapter would present
an overwhelming and overriding risk to man.” This language 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 future throughout
all or a significant portion of its range.”
The Secretary of the Interior (with respect to terrestrial species) and the
Secretary of Commerce (with respect to anadromous fish and certain other marine
species) decide whether to list a species as endangered or threatened. The listing of

¹ Act of December 28, 1973, P.L. 93-205, 87 Stat. 884, codified at 16 U.S.C. §§ 1531 et seq.
² Note too that § 10(b) of the ESA and 50 C.F.R. § 17.23 provide for “hardship exemptions”
in some instances involving subsistence use or where a person had a contract to sell
individuals of a listed species that predated the listing of that species and the person would
suffer economic hardship if the contract were not carried out.

a species triggers certain duties for federal agencies 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 Service respectively)
if a proposed action may affect a listed species. This consultation will determine if
the proposed action is likely to jeopardize the continued existence of a species or
destroy or adversely modify habitat of a species determined by the Secretary to be
critical.³ If so, the Secretary is to suggest reasonable and prudent alternatives to the
proposed action that would avoid jeopardizing the listed 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” is elaborated on in regulations to include
destruction of habitat severe enough to actually kill or injure wildlife by significantly
impairing essential behavioral patterns, including breeding, feeding, or sheltering.⁵
Current regulations 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 taking prohibitions are allowed as a result of
either the consultation process under § 7 of the act, or under the § 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, or pursue the exemption process provided under the
ESA to exempt that activity (not the species) from the penalties of the act.
This report will discuss the role of economics in the listing of species,
designation of critical habitat, 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 must be based on several factors that relate to the surviving numbers of
a species and threats to its continued existence, but do not include a consideration of
the economic effects of listing.⁷ While the origins of threats to a species may be

³ 16 U.S.C. § 1536(a) and (b).
⁴ 16 U.S.C. § 1532(19).
⁵ 50 C.F.R. § 17.3.
⁶ 50 C.F.R. § 17.31.
⁷ 16 U.S.C. § 1533(a)(1) states that the Secretary by regulation shall “determine whether any
species is an endangered species or a threatened species because of any of the following
factors:
(A) the present or threatened destruction, modification, or curtailment of its habitat or
range;
(continued...)

caused by development or other economic activities, listing determinations are
expressly to be made “solely on the basis of the best scientific and commercial data
available.” The word “solely” was added in the 1982 amendments to the act⁸ to
clarify that the determination of endangered or threatened status was intended to be
made without reference to extraneous conditions such as economic factors. The
committee reports elaborated on this point and also state that “commercial data”
refers to trade data:
... The principal purpose of the amendments to Section 4 is to ensure that
decisions pertaining to the listing and delisting of species are based solely upon
biological criteria and to prevent non-biological considerations from affecting
such decisions. To accomplish this and other purposes, Section 4(a) is amended
in several instances....
Section 4(b) of the Act is amended in several instances by Section 1(a)(2) of
H.R. 6133. First, the legislation requires that the Secretary base his
determinations regarding the listing or delisting of species “solely” on the basis
of the best scientific and commercial data available to him. The addition of the
word “solely” is intended to remove from the process of the listing or delisting
of species any factor not related to the biological status of the species. The
Committee strongly believes that economic considerations have no relevance to
determinations regarding the status of species and intends that the economic
analysis requirements of Executive Order 12291, and such statutes as the
Regulatory Flexibility Act and the Paperwork Reduction Act not apply. The
Committee notes, and specifically rejects, the characterization of this language
by the Department of the Interior as maintaining the status quo and continuing
to allow the Secretary to apply Executive Order 12291 and other statutes in
evaluating alternatives to listing. The only alternatives involved in the listing of
species are whether the species should be listed as endangered or threatened or
not listed al all. Applying economic criteria to the analysis of the alternatives
and to any phase of the species listing process is applying economics to the
determinations made under Section 4 of the Act and is specifically rejected by
the inclusion of the word “solely” in this legislation.
Section 4(b) of the Act, as amended, provides that listing shall be based solely
on the basis of the best “scientific and commercial data” available. The
Committee 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 economic⁹
considerations in the process of listing a species.
The conference report confirms that it was the intent of both chambers that
economic factors not play a role in the listing of species for protection.

⁷ (...continued)
(B) overutilization for commercial, recreational, scientific, or educational purposes;
(C) disease or predation;
(D) the inadequacy of existing regulatory mechanisms; or
(E) other natural or manmade factors affecting its continued existence.”
⁸ P.L. 97-304, 96 Stat. 1411.
⁹ H.Rept. 97-567 at 19-20 (1982).

Section 2 of the Conference substitute amends section 4 of the Act in several
ways. The principal purpose of these amendments is to ensure that decisions in
every phase of the process pertaining to the listing or delisting of species are
based solely upon biological criteria and to prevent non-biological considerations¹⁰
from affecting such decisions.
The Committee of Conference (hereafter the Committee) adopted the House
language which requires the Secretary to base determinations regarding the
listing or delisting of species “solely” on the basis of the best scientific and
commercial data available to him. As noted in the House Report, economic
considerations have no relevance to determinations regarding the status of
species and the economic analysis requirements of Executive Order 12291, and
such statutes as the Regulatory Flexibility Act and the Paperwork Reduction Act,
will not apply to any phase of the listing process. The standards in the Act
relating to the designation of critical habitat remain unchanged. The requirement
that the Secretary consider for listing those species that states or foreign nations¹¹
have designated or identified as in need of protection also remains unchanged.
Therefore, the act makes it clear that the decision as to whether a species is
endangered or threatened is to be a scientific one in which economic factors do not
play a part. Once this determination has been made, however, economic
considerations may be, and in some instances must be, considered in analyzing what
actions may be taken. This process has been analogized to making a diagnosis of
whether a patient has cancer solely on medical grounds, but later considering
economic 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 which process economic factors are not to play a part, economic factors
expressly are to be considered in the designation of critical habitat for species.
Concurrently with determining a species to be endangered or threatened, the
Secretary “to the maximum extent prudent and determinable” is to designate the
critical habitat of the species.¹²
When the Secretary designates critical habitat, the Secretary must take into
consideration the economic impacts of doing so:

¹⁰ H.Rept. 97-835 at 19 (1982).
¹¹ Ibid., at 20.
¹² 16 U.S.C. § 1533(a)(3). The reference to prudence reflects the fact that it is necessary to
take into account whether designating the habitat of a listed species would result in
specimen collecting or other public intrusion into that habitat to the detriment of the species.
The word “determinable” refers to whether it has been possible factually to determine the
extent of the critical habitat. If the facts relevant to the designation of critical habitat are not
yet available, the Secretary may postpone designation for an additional year. Eventually,
habitat is to be designated to the maximum extent it is prudent to do so.

on the basis of the best scientific data available and after taking into
consideration the economic impact, and any other relevant impact, of specifying
any particular area as critical habitat. The Secretary may exclude any area from
critical habitat if he determines that the benefits of such exclusion outweigh the
benefits of specifying such area as part of the critical habitat, unless he
determines, based on the best scientific and commercial data available, that the
failure to designate such area as critical habitat will result in the extinction of the¹³
species concerned.
Therefore, although economic factors are not to be considered in the listing of
a species as endangered or threatened, economic factors must be considered when
deciding whether and where to designate critical habitat, and some habitat areas may
be excluded from designation based on such concerns, unless the failure to designate
the habitat would result in the extinction of the subject species.
The significance of designating critical habitat is debatable. The Fish and
Wildlife Service has asserted that designation does not add substantially to the
protections afforded listed species, critical habitat designations are inordinately
expensive compared to listing determinations, and that the agency would prefer not
to use scarce resources to designate critical habitat. In fact, critical habitat has been
designated for less than one fourth of listed species. On the other hand, modification
of critical habitat may trigger § 7 consultation, may affect a finding of “harm,” and
may facilitate development of recovery plans.¹⁴
Exemptions
Federal agencies and non-federal persons may seek to have a particular action
exempted from the penalties for taking endangered or threatened species in order to
allow an activity or project to proceed even if that activity or project would destroy
individuals of a listed species and might even jeopardize the continued existence of
that species.
As originally enacted, the act was an absolute prohibition against activities that
would jeopardize endangered species. When the prospective impoundment of water
behind the nearly completed Tellico dam threatened to eradicate the only known
population of the snail darter (a small fish), the Supreme Court concluded that the
“plain language” of the act at that time mandated that the dam not operate.
Concededly, this view of the Act will produce results requiring the sacrifice of
the anticipated benefits of the project and of many millions of dollars in public
funds. But examination of the language, history, and structure of the legislation

¹³ 16 U.S.C. § 1533(b)(2).
¹⁴ See CRS Report RS20263, The Role of Designation of Critical Habitat under the
Endangered Species Act, by Pamela Baldwin.

under review here indicates beyond doubt that Congress intended endangered¹⁵
species to be afforded the highest of priorities.
After this Supreme Court decision, the ESA was amended to include a process
by which economic and other impacts could be reviewed and projects exempted from¹⁶
the restrictions that otherwise would apply. An “Endangered Species Committee”
(Committee), consisting of specified Cabinet officials and one individual from each
affected state reviews applications for exemptions. A federal agency, the Governor
of the state in which an agency action will occur, or a permit or license applicant may
apply to the Secretary for an exemption. The application must describe the
consultation process carried out and provide a statement as to why the proposed
action cannot be modified to conform with the requirements of the statute.
To be eligible for an exemption, the agency concerned and the exemption
applicant must have carried out the consultation processes required under § 7 of the
act in good faith and must have made a reasonable and responsible effort to develop
and fairly consider modifications or reasonable and prudent alternatives to the
proposed action that do not jeopardize the continued existence of a listed 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
determinable within the time provided, refrained from making any irreversible or
irretrievable commitment of resources that would foreclose the formulation or
implementation of reasonable and prudent alternative measures to avoid jeopardizing
the species and habitat in question. These qualifying requirements are to ensure that
the exemption process will be a meaningful one and that the consideration of the
issues will not be preempted by the commitment of resources and preclusion of
alternatives through actions already taken.
The Secretary, in consultation with the other members of the Committee, holds
a hearing on the application and prepares a report. The report reviews whether the
applicant has made any irreversible or irretrievable commitment of resources;
discusses the availability of reasonable and prudent alternatives and the benefits of
each; provides a summary of the evidence concerning whether the action is in the
public interest and is nationally or regionally significant; and outlines appropriate and
reasonable mitigation and enhancement measures which should be considered by the¹⁷
Committee. Economic impacts may play a part in the evaluations of public interest
and national or regional significance, and in the development of mitigation and
enhancement measures.
The Committee then makes a final determination of whether to grant an
exemption. The Committee shall grant an exemption if, based on the evidence, the
Committee determines that:
(i) there are no reasonable and prudent alternatives to the agency action;

¹⁵ Tennessee Valley Authority v. Hill, 437 U.S. 153, 174 (1978).
¹⁶ 16 U.S.C. § 1536(e).
¹⁷ 16 U.S.C. § 1536(g).

(ii) the benefits of such action clearly outweigh the benefits 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 the exemption applicant made any
irreversible or irretrievable commitment of resources prohibited by subsection
(d) of this section [commitments as described above that jeopardize species or¹⁸
critical habitat].
The Committee also must establish reasonable mitigation and enhancement
measures as necessary and appropriate to minimize the adverse effects of an
approved action on the species or critical habitat. These measures must be funded
by the applicant. Again, economic impacts may well 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 the exemption is necessary for reasons of national security.¹⁹ The Committee
may not grant an exemption that the Secretary of State finds would violate a treaty
or other international obligation of the United States.²⁰ The President is authorized
to make exemption determinations for a project for the repair or replacement of a
public facility in a major disaster area if the President determines it is (1) necessary
to prevent the recurrence of the natural disaster and to reduce the potential loss of
human life, and (2) to involve an 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 the extinction of a species that was not the subject of consultation, or was
not identified in the biological assessment and the Committee determines that the
exemption should not be permanent.²²
The costs of required mitigation and enhancement measures specified in an
approved exemption must be included in the overall costs of continuing the proposed
action and the applicant must report annually to the Council on Environmental
Quality on compliance with mitigation and enhancement measures.²³ The obligation
to fund mitigation continues throughout the impacts of the exemption.
The act expressly states that any action for which an exemption is granted is not
to be considered a taking of any endangered species with respect to any activity
necessary to carrying out the exempted action, and that any taking that is in

¹⁸ 16 U.S.C. § 1536(h).
¹⁹ 16 U.S.C. § 1536(j).
²⁰ 16 U.S.C. § 1536(i).
²¹ 16 U.S.C. § 1536(p).
²² 16 U.S.C. § 1536(h).
²³ 16 U.S.C. § 1536(l).

compliance with the terms and conditions specified in a written statement issued by
the Secretary after the consultation process is not to be considered a taking of the
species concerned. In other words, the penalties that normally apply to the taking of
an endangered or threatened species do not apply to takings resulting from exempted
actions.
There have been only a very few exemption applications filed and only two
exemptions granted (one was in re the Grayrocks dam and the other was to approve
13 timber sales sought by the Bureau of Land Management in the Department of the
Interior, but this latter exemption request was withdrawn before the completion of
appeals). One application was denied (in re the Tellico dam, which was later allowed
by Congress to proceed); one was dismissed as premature (in re the proposed Pittston
oil refinery in Maine); and two others were withdrawn before Committee
consideration.
One commentator has speculated that the low number of exemption applications
may in part be because the process is rigorous, but also because the incentive to
negotiate compromises is strong.
The main reasons for the low number of applications probably include the small
number of jeopardy opinions issued, the stringent substantive standards for the
grant of an exemption, and the complexity of the process. A likely additional
factor is that most institutions, public or private, recognize that merely by
seeking an exemption they risk being perceived as hostile to endangered species
conservation. As long as public support for conservation is believed to be high,²⁴
there is an incentive to compromise and avoid the need for an exemption.
Another factor may be that the harm to a species resulting from an exempted
action must be taken into account in reviewing other proposed actions that also may
affect that species; more vigorous conservation actions may be necessary elsewhere
to compensate for the exempted harm in order 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 will assist the species in recovering to the point that the protection of the
ESA is no longer needed. To the extent practicable, the Secretary is to develop
recovery plans for those species that are most likely to benefit from such plans,
“particularly those species that are, or may be, in conflict with construction or other
development projects or other forms of economic activity;...” Recovery plans are to
set goals for the conservation and survival of the species and set out objective,
measurable criteria that would result in a determination that the species could be
removed from listing. A recovery plan is also to contain “estimates of the time
required and the cost to carry out those measures needed to achieve the plan’s goal

²⁴ Michael Bean and Melanie Rowland, T^HEE^VOLUTI^{ON OF}N^ATI^ONALW^IL^D^L^IF^EL^AW, 264-

265 (3d Ed. 1998).

and to achieve intermediate steps toward that goal.”²⁵ Economic impacts may play
a role in the development of and choosing among recovery measures. Although all
options must achieve 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 on species that have been proposed for listing and
informal consultation is available with respect to preliminary project planning for
actions that may affect a listed species. Both of these processes may assist with
development of economic projects and activities so as to avoid both ESA conflicts
and the expense of modifying actions later on. In addition, certain administrative
actions afford landowners and developers greater certainty in moving forward with²⁶
development activities. These rules, combined with other agency policies and
guidelines for improved processing of permit applications, have been seen by many
as facilitating economic activities and development otherwise affected by the ESA

²⁵ 16 U.S.C. § 1533(f).
²⁶ See the “No surprises” rule and policy (63 Fed. Reg. 8859 (February 23, 1998) (50 C.F.R.
§ 17.22(b)(5)), which limits the changes the government can require a landowner to make
to habitat conservation plans that are the basis for § 10 incidental take permits, and the “Safe
harbor” agreements rule and policy (64 Fed. Reg. 32706 (June 17, 1999) (50 C.F.R. §
17.22(c)), which allows a landowner to make beneficial habitat improvements to land and
later return to initial baseline conditions without penalties.