The Ninth Circuit Court of Appeals recently clarified the proper approach to be applied in analyzing the economic impacts of designating critical habitats for endangered or threatened species under the Endangered Species Act (ESA). In Arizona Cattle Growers’ Association v. Salazar, the Court found that the U.S. Fish and Wildlife Service (FWS) properly applied a "baseline" approach in designating approximately 8.6 million acres of Federal land as critical habitat for the Mexican Spotted Owl. The Court also found that the FSW properly interpreted “occupied” as including not only areas where owls are found, but areas where owls are likely to be present as well. See, previous blog dated June 21, 2010.

A decision to list a species as endangered or threatened is made without reference to the economic effects of the decision. In contrast, an agency must consider the economic impacts of designating critical habitat in any particular area. Under the baseline approach used by the FWS, any economic impacts of protecting a species that will occur regardless of the critical habitat designation, such the economic impacts imposed by listing the species, are treated as part of the regulatory “baseline” and are not factored into the economic analysis of effects of the critical habitat designation.

Relying on the Tenth Circuit’s decision in New Mexico Cattle Growers’ Ass’n. v U.S. Fish & Wildlife Service, Arizona Cattle Growers’ Association argued that FWS was required to apply a “co-extensive” approach, under which any economic burden imposed by the designation must be considered in the economic analysis, even if that same burden was imposed by listing the species and exists even if the area were not designated.

The Ninth Circuit expressly rejected the Tenth Circuit “co-extensive” approach, stating “. . . the economic analysis of the critical habitat designation is exactly what it sounds like and is not intended to incorporate the burden imposed by listing the species.” [In New Mexico Cattle, the Tenth Circuit held that the baseline approach is impermissible under the ESA.] The conflict between the Ninth and Tenth Circuit decisions could set the stage for review by the U.S. Supreme Court under that Court’s Rule 10, where “a United States court of appeals has entered a decision in conflict with the decision of another United States court of appeals on the same important matter.”