[Senate Hearing 108-348]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-348

                        ENDANGERED SPECIES ACT: 
                        CRITICAL HABITAT ISSUES

=======================================================================

                                HEARING

                               before the

                      SUBCOMMITTEE ON FISHERIES, 
                          WILDLIFE, AND WATER

                                 OF THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                                   ON

    TO REVIEW FEDERAL REGULATIONS WITH RESPECT TO CRITICAL HABITAT 
             DESIGNATIONS UNDER THE ENDANGERED SPECIES ACT


                               __________

                             APRIL 10, 2003


                               __________


  Printed for the use of the Committee on Environment and Public Works


92-372              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
____________________________________________________________________________
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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                      one hundred eighth congress
                             first session

                  JAMES M. INHOFE, Oklahoma, Chairman
JOHN W. WARNER, Virginia             JAMES M. JEFFORDS, Vermont
CHRISTOPHER S. BOND, Missouri        MAX BAUCUS, Montana
GEORGE V. VOINOVICH, Ohio            HARRY REID, Nevada
MICHAEL D. CRAPO, Idaho              BOB GRAHAM, Florida
LINCOLN CHAFEE, Rhode Island         JOSEPH I. LIEBERMAN, Connecticut
JOHN CORNYN, Texas                   BARBARA BOXER, California
LISA MURKOWSKI, Alaska               RON WYDEN, Oregon
CRAIG THOMAS, Wyoming                THOMAS R. CARPER, Delaware
WAYNE ALLARD, Colorado               HILLARY RODHAM CLINTON, New York

                Andrew Wheeler, Majority Staff Director
                 Ken Connolly, Minority Staff Director
                                 ------                                

             Subcommittee on Fisheries, Wildlife, and Water

                   MICHAEL D. CRAPO, Idaho, Chairman
JOHN W. WARNER, Virginia             BOB GRAHAM, Florida
LISA MURKOWSKI, Alaska               MAX BAUCUS, Montana
CRAIG THOMAS, Wyoming                RON WYDEN, Oregon
WAYNE ALLARD, Colorado               HILLARY RODHAM CLINTON, New York

                                  (ii)




                            C O N T E N T S

                              ----------                              
                                                                   Page

                             APRIL 10, 2003
                           OPENING STATEMENTS

Crapo, Hon. Michael D., U.S. Senator from the State of Idaho.....     1
Inhofe, Hon. James M. Inhofe, U.S. Senator from the State of 
  Oklahoma.......................................................  3, 7
Murkowski, Hon. Lisa, U.S. Senator from the State of Alaska......     5
Thomas, Hon. Craig, U.S. Senator from the State of Wyoming.......     9

                               WITNESSES

Douglas, Craig, attorney, Smith, Robertson, Elliott & Glenn LLP..    22
    Prepared statement...........................................    69
Kightlinger, Jeffrey, General Counsel, Metropolitan Water 
  District of Southern California................................    17
    Prepared statement...........................................    45
    Responses to additional questions from Senator Crapo.........    58
Kostyack, John F., Senior Counsel, National Wildlife Federation..    18
    Prepared statement...........................................    61
Manson, Hon. Craig, Assistant Secretary for Fish, Wildlife and 
  Parks, U.S. Department of the Interior.........................     6
    Prepared statement...........................................    36
    Responses to additional questions from:
        Senator Crapo............................................    40
        Senator Jeffords.........................................    43
Snape, William J. III, vice president and general counsel, 
  Defenders of Wildlife..........................................    24
    Prepared statement...........................................    72
Sunding, David L., Professor, University of California at 
  Berkeley.......................................................    21
    Prepared statement...........................................    66
    Responses to additional questions from:
        Senator Crapo............................................    68
        Senator Inhofe...........................................    68

                          ADDITIONAL MATERIAL

Letters:
    Canadian Embassy.............................................    85
    General Accounting Office....................................    85
Report, Transboundary Species, General Accounting Office.........    88
Statements:
    American Farm Bureau Federation..............................    77
    Center for Biological Diversity..............................    73
    National Association of Homebuilders.........................    80
    Western Urban Water Coalition................................55, 57

                                 (iii)

  

 
            ENDANGERED SPECIES ACT: CRITICAL HABITAT ISSUES

                              ----------                              


                        THURSDAY, APRIL 10, 2003

                                       U.S. Senate,
               Committee on Environment and Public Works,  
            Subcommittee on Fisheries, Wildlife, and Water,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:30 a.m. in 
room 406, Senate Dirksen Building, Hon. Michael D. Crapo 
[chairman of the committee] presiding.
    Present: Senators Crapo, Inhofe, and Thomas.

 OPENING STATEMENT OF HON. MICHAEL D. CRAPO, U.S. SENATOR FROM 
                       THE STATE OF IDAHO

    Senator Crapo. Good morning. The Subcommittee on Fisheries, 
Wildlife, and Water will come to order.
    Today we are going to be receiving testimony on the 
designation of critical habitat under the Endangered Species 
Act. And it's been quite some time since the subcommittee has 
been focused on the Endangered Species Act and related issues. 
It's been almost 4 years since we have taken up the issue of 
critical habitat designation.
    In the spring of 1999, the late Senator John Chafee, who 
was the chairman of the Environment and Public Works Committee, 
and really a true leader on environmental issues, along with 
then-Secretary Bruce Babbitt, Senator Domenici and myself 
worked out a bill to reform the critical habitat provisions in 
the Endangered Species Act. That bill, S. 1100, improved the 
efficiency and effectiveness of critical habitat designation 
while also protecting habitat for listed species.
    We reported S. 1100 out of committee with no opposition. 
And unfortunately, the bill encountered difficulties before the 
full Senate and no companion bill was ever introduced in the 
House.
    The reason I mention S. 1100 is that issues around the 
Endangered Species Act have become so polarized and 
intransigent that I suspect there is not a whole lot of 
confidence among stakeholders that Congress has the political 
will to fix problems. I don't believe that's the case with the 
issue of critical habitat designation. A strong, bipartisan 
record has been built over the last several years.
    Former Fish and Wildlife Service director Jamie Clark 
testified before this committee in May 1999 as follows: ``We 
firmly believe that attention to and protection of habitat is 
paramount to successful conservation actions and to the 
ultimate recovery and delisting of listed species. However, in 
25 years of implementing the ESA, we have found that 
designation of official critical habitat provides little 
additional protection to most listed species, while it consumes 
significant amounts of scarce conservation resources.''
    In addition, former Secretary Bruce Babbitt authored an 
``op-ed'' for the New York Times in April 2001 in which he 
defended the Bush Administration for the manner in which it was 
trying to address the significant number of court orders for 
designating critical habitat in the face of too few financial 
resources and biological priorities far more important than the 
designation of critical habitat. Mr. Babbitt wrote: ``These 
uncertainties undermine public confidence in one of our most 
important and successful environmental laws. That's why during 
my tenure as Secretary of the Interior, I repeatedly asked 
congressional leaders to write budget restrictions that would 
prevent money from important endangered species programs from 
being siphoned off into premature critical habitat map making. 
This request was denied every year.''
    The Bush Administration now proposes something similar. Mr. 
Babbitt went on to say that legislative reform by Congress, 
rather than putting restrictive language in the budget, was the 
way to fix the problem. I couldn't agree more.
    My point is that problems with the Endangered Species Act 
have not been limited to a Democratic administration or a 
Republican Administration. Clearly, significant difficulties in 
implementing the Endangered Species Act have confronted the 
agencies responsible for carrying out one of our Nation's most 
powerful environmental laws irrespective of who's in charge. 
And the problems continue to worsen.
    Just a few weeks ago, Fish and Wildlife Service Director 
Steve Williams testified before this subcommittee with respect 
to the Service's fiscal year 2004 budget request. Before their 
budget request was even printed, the Service became subject to 
additional court orders and other unanticipated judicially 
enforceable deadlines, rendering the budget request inadequate.
    Congress is failing its responsibility to conserve and 
recover listed species by allowing court ordered critical 
habitat designations that admittedly have very few conservation 
benefits to devour more than half of the budget for listing new 
species every year. I sincerely hope that this subcommittee and 
the full Environment and Public Works Committee has the will to 
work together to address this and some of the other very 
serious problems with the Endangered Species Act.
    [The prepared statement of Senator Crapo follows:]

  Statement of Hon. Michael D. Crapo, U.S. Senator from the State of 
                                 Idaho

    Good morning. The Subcommittee on Fisheries Wildlife, and Water 
will come to order. Today, the subcommittee will be receiving testimony 
on the designation of critical habitat under the Endangered Species 
Act. It has been quite some time since the subcommittee has focused on 
Endangered Species Act related issues and it has been almost precisely 
4 years since we have taken up the issue of critical habitat 
designation.
    In the Spring of 1999, the late Senator John Chafee, who was 
chairman of the Environment and Public Works Committee and a true 
leader on environmental issues, along with then Secretary Bruce Babbitt 
Senator Domenici and myself got together and worked out a bill to 
reform critical habitat. That bill, S. 1100, improved the efficiency 
and effectiveness of critical habitat designation while also protecting 
habitat for listed species. We reported S. 1100 out of committee with 
no opposition. Unfortunately, the bill encountered difficulties before 
the full Senate and no companion bill was ever introduced in the House.
    The reason I mention S. 1100 is that issues around the Endangered 
Species Act have become so polarized and intransigent that I suspect 
there is not a whole lot of confidence among the stakeholders that 
Congress has the political will to fix the problems. I don't believe 
that is the case with the issue of critical habitat designation.
    A strong, bi-partisan record has been built over the last several 
years. Former Fish and Wildlife Service Director Jamie Rappaport Clark 
testified before this committee in May 1999 regarding S 1100:
    ``We firmly believe that attention to, and protection of habitat is 
paramount to successful conservation actions and to the ultimate 
recovery and delisting of listed species. However, in 25 years of 
implementing the ESA, we have found that designation of ``official'' 
critical habitat provides little additional protection to most listed 
species, while it consumes significant amounts of scarce conservation 
resources.''
    Former Secretary Bruce Babbitt authored an op-ed for the New York 
Times in April 2001 in which he defended the Bush Administration for 
the manner in which it was trying to address the significant number of 
court orders for designating critical habitat in the face of too few 
financial resources and biological priorities far more important than 
the designation of critical habitat. Mr. Babbitt wrote:
    ``These uncertainties undermine public confidence in one of our 
most important and successful environmental laws. That is why during my 
tenure as interior secretary I repeatedly asked congressional leaders 
to write budget restrictions that would prevent money for important 
endangered-species programs from being siphoned off into premature 
``critical habitat'' map-making. This request was denied every year. 
The Bush Administration now proposes something similar.''
    Mr. Babbitt goes on to say that legislative reform by Congress, 
rather than ``putting restrictive language in the budget,'' was the way 
to ``fix the problem.'' I couldn't agree more.
    My point is that problems with the Endangered Species Act have not 
been limited to a Democratic Administration or a Republican 
Administration. Clearly, significant difficulties in implementing the 
Endangered Species Act have confronted the agencies responsible 
carrying out one of our nation's most powerful environmental laws, 
irrespective who is in charge, and the problems continue to worsen.
    Just a few weeks ago, Fish and Wildlife Service Director Steve 
Williams testified before this subcommittee with respect to the 
Service's fiscal 2004 budget request. Before their budget request was 
even printed the Service became subject to additional court orders and 
other unanticipated judicially enforceable deadlines rendering the 
budget request inadequate.
    Congress is failing its responsibility to conserve and recover 
listed species by allowing court-ordered critical habitat designations, 
that admittedly have very few conservation benefits, to devour more 
than half of the budget for listing new species each year.
    I sincerely hope that this subcommittee and the full Environment 
and Public Works Committee has the will to work together to address 
this and some of the other very serious problems with the Endangered 
Species Act.
    Senator Crapo. At this point I would like to recognize our 
chairman of the full committee, Senator Inhofe. I welcome you 
here, Mr. Chairman.

 OPENING STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM 
                     THE STATE OF OKLAHOMA

    Senator Inhofe. Thank you very much. I appreciate the fact 
that you're getting onto this. When you were talking about how 
long we've had these problems, people have lost faith that we 
can correct them, I think you can. I have every faith in you. 
So I appreciate your holding this hearing.
    In Oklahoma, we have seen firsthand the need to revise the 
critical habitat process of the Endangered Species Act. Five 
years ago when the Fish and Wildlife Service listed the 
Arkansas River shiner, I raised the issue of the economic 
impact of that action. At a minimum, local communities have the 
right to know what impact an endangered species is going to 
have. I remember we had a hearing on that, and they had some 
pretty persuasive evidence. It costs the average farmer along 
some 1,000 miles of the Canadian about $700 a year to comply.
    When the Fish and Wildlife designated critical habitat the 
economic impact was again raised as an issue. Now the Fish and 
Wildlife is being sued by a coalition of 18 groups from 4 
States because they failed to list them the first time. The 
Arkansas River shiner is just one example of dozens of cases 
where the Fish and Wildlife Service is currently being 
inundated with lawsuits over critical habitat. The result is 
literally paralysis by litigation. This is detrimental to both 
the public and to the endangered species, because it means that 
the agency's scarce resources are stretched even thinner. Only 
the most high profile problems get any attention. Other duties, 
such as Section 7 consultations, are neglected, making the ESA 
that much more of a burden on private citizens. The lawyers 
seem to be the only ones coming out ahead on this thing.
    The critical habitat litigation isn't just a problem for 
private citizens. As a member of the Armed Services Committee, 
and having chaired the Senate Armed Services Committee on 
Readiness, I've heard many times how endangered species have 
affected the activities in our military ranges. Endangered 
species are found on a number of military bases across the 
country, such as the Air Force Academy in Colorado, the Trebles 
Meadow jumping mouse, the Fort Hood Texas, the golden sheet 
warbler and the black capped virio, at Fort Bragg as well as 
Camp Lejeune, you have the red cockaded woodpecker, Fort McCoy, 
Wisconsin, the Carner blue butterfly, Camp Pendleton, some 17 
listed species.
    Speaking of Camp Pendleton, we're down now, depending on 
how some of this legislation comes out, to where we might be 
restricted to using only about half of it. As I understand, in 
terms of the miles of shoreline, only a small fraction can 
actually be used by the services because of some of this 
habitat.
    So all these things are going to have to be considered. I 
hope that we'll be able to really resolve these problems that 
others have not been able to resolve. I have every faith that 
with the combination of Mr. Manson and you, Senator Crapo, that 
we'll get that done.
    Senator Crapo. Well, thank you very much, Mr. Chairman. I 
just want to say here on the record while we have the 
opportunity that it's a privilege to serve with you as the 
chairman. I have appreciated working with you ever since we 
served in the House together. I look forward to doing the same 
at this point.
    Senator Inhofe. Let me also mention something I mentioned 
to Mr. Manson, that I always thought if the Republicans got in 
charge we'd run things better. So we wouldn't have the 
conflicting committee hearings. Since John Warner is one of the 
senior members of this committee and I'm one of the senior 
members of the Senate Armed Services Committee, in spite of 
that, we still have coinciding times for our meetings. So I 
have to be up there at 10 o'clock o'clock for an Armed Services 
hearing.
    Senator Crapo. We understand that. In fact, we were talking 
before the hearing about the fact that, maybe it's just because 
of the war and some of the other things, but the pace up here 
has gotten to where we're running between hearings left and 
right. In that context, Senator Murkowski, who wanted to be 
here, has provided us with a statement that she wants to have 
inserted into the record, which we will do without objection.
    [The prepared statement of Senator Murkowski follows:]

Statement of Hon. Lisa Murkowski, U.S. Senator from the State of Alaska

    Thank you, Mr. Chairman. I want to begin by saying I'm very 
grateful that you are willing to address this issue in the 
subcommittee. It is one that has desperately needed attention for many 
years.
    While the subcommittee has jurisdiction to address all of the 
issues surrounding the Endangered Species Act, it does not normally 
deal with marine fisheries. However, in Alaska, by far the most 
damaging experience we've had with critical habitat issues has involved 
just that.
    As you may know, my State's largest private industry is the fishing 
industry, which occurs almost exclusively in salt water. In recent 
years, with salmon prices down, the mainstay of many towns and villages 
has become the fishery for Alaska pollock, and for similar species such 
as Pacific cod.
    In many cases, these fisheries occur in the same waters that are 
used by the Steller sea lion, a listed marine mammal species in the 
jurisdiction of the National Marine Fisheries Service.
    To make a long story short, the threat of litigation forced the 
Service to designate critical habitat without adequate information, and 
from that designation came a lawsuit that has done untold millions of 
dollars of damage to the economy of the State, and to the lives of the 
people who depend on fishing and in the end, has done nothing to 
improve the sea lion population.
    That lawsuit suggested that because fishing is a human activity 
occurring in sea lion habitat, and fishermen catch fish that sea lions 
are known to eat, it must be a foregone conclusion that fishing has an 
effect on sea lions. As it ran its course, it forced managers to adopt 
incredibly burdensome and impossibly complicated fishing closures and 
related regulations, even though there was and is absolutely no proof 
that fishing has any effect on the sea lion population. In fact, there 
are plenty of strong indications that fishing is NOT at fault for the 
problems of the sea lion population.
    But the facts of the case didn't matter. What mattered was the law 
a law that has been interpreted so that nothing less than absolute 
proof can demonstrate that a human activity is harmless, while even the 
vaguest of unproven suspicion is accepted as a basis for draconian 
restrictions.
    In the case of our sea lions, it now seems far more likely that 
they were affected not by fishermen, but by a natural cycle in the 
environment of the North Pacific which scientists call the Pacific 
Decadal Oscillation. That is Mother Nature's doing, not man's.
    The ancient Greeks had a term ``hubris.'' Very loosely defined, it 
means when man gets too big for his britches. In our case, the britches 
in question are being worn by Mother Nature, and we are not nearly big 
enough to fill them.
    The current law is flawed, and deeply so. It carries a presumption 
of man's guilt that requires that action be taken against activities 
that may actually be harmless, or even beneficial. It requires no 
scientific proof to indict and absolute proof to rebut.
    Currently, we in Alaska are waiting for what may be round two the 
Fish and Wildlife Service is considering whether to list Alaska sea 
otters, whose population has fallen dramatically in recent years. If 
sea otters are listed, you can be absolutely sure that there will be 
groups waiting in the wings to file a lawsuit if a critical habitat 
designation is not made right away. And, although the Service has made 
it clear that it believes predation by killer whales is the likely 
cause of the sea otters' problems, not fishing or any other human 
activity, you can also bet that those same groups will be eager to file 
a lawsuit to shut down any other activity they may find distasteful, 
whether or not there is any evidence that it is part of the problem.
    While I accept that the Endangered Species Act was adopted with the 
very best of intentions, and I support those intentions wholeheartedly, 
it would be foolish to suggest that it cannot be improved. The critical 
habitat provisions would be a good place to start.
    Senator Crapo. And as other members may be able to find the 
opportunity to slip in, we will give them an opportunity to 
make an opening statement when they arrive. But at this point, 
I believe we will just proceed with the witnesses. Our first 
panel is the Honorable Craig Manson, who is the Assistant 
Secretary for Fish, Wildlife and Parks of the U.S. Department 
of Interior. Mr. Manson, you may proceed with your testimony.

 STATEMENT OF HON. CRAIG MANSON, ASSISTANT SECRETARY FOR FISH, 
      WILDLIFE AND PARKS, U.S. DEPARTMENT OF THE INTERIOR

    Mr. Manson. Thank you very much, Mr. Chairman.
    Mr. Chairman, Senator Inhofe, I appreciate this opportunity 
to testify on the state of the U.S. Fish and Wildlife Service's 
Endangered Species program as it relates to the designation of 
critical habitat.
    Let me begin by saying that the Department of Interior and 
the U.S. Fish and Wildlife Service are committed to improving 
the efficiency and effectiveness of the Endangered Species Act, 
and to achieving the primary purpose of the Act, which is the 
recovery of threatened and endangered species. We also believe 
that conservation of habitat is vitally important to the 
successful recovery and delisting of species.
    For several years, the Service has been subject to 
litigation over its implementation of Section 4 of the ESA, the 
portion of the Act which relates to listing and designation of 
critical habitat. Underlying these lawsuits is the proper 
allocation of limited funds appropriated by Congress to carry 
out the numerous petition listings, listing regulations, and 
critical habitat designations mandated under the rigorous 
deadlines in Section 4.
    The Service now faces a Section 4 program in chaos, not due 
to agency inertia or neglect, but due to limited resources and 
a lack of scientific discretion to focus on those species in 
greatest need of conservation. Section 4 of the ESA has strict 
non-discretionary deadlines and for many years the Service has 
been unable to comply with all of them within available 
appropriations.
    Private litigants have therefore repeatedly sued the 
Service because it has failed to meet these non-discretionary 
deadlines. These lawsuits have subject the Service to an ever-
increasing series of court orders, compliance with which now 
consumes nearly the entire listing program budget. This leaves 
the Service with little ability to prioritize its activities, 
to direct scarce resources to the listing program actions most 
urgently needed to conserve species.
    In addition, many of these critical habitat decisions have 
fostered a second round of litigation in which those who fear 
adverse impacts from critical habitat designations challenge 
those designations. The cycle of litigation appears endless, is 
very expensive and in the final analysis provides relatively 
little protection to listed species.
    Extensive litigation has shown that the courts cannot be 
expected to provide either relief or an answer, because they 
are equally constrained by the strict language of the ESA. A 
number of courts are now recognizing the obvious: that there is 
a conflict between the ESA and the listing program 
appropriation. Simply put, the listing and critical habitat 
program is now operated in a first to the courthouse mode, with 
each new court order taking its place at the end of an ever-
lengthening line. We are no longer operating under a rational 
system that allows us to prioritize resources to address the 
most significant biological needs.
    It is already clear that the next Administration will also 
be affected. Because even at this point, critical habitat 
budgets into the fiscal year 2008 are being dedicated to 
compliance with existing court orders. In short, litigation 
over critical habitat has hijacked our priorities. The listing 
program's limited resources and staff time are being spent 
responding to an avalanche of lawsuits and court orders focused 
on critical habitat designations. We believe that this time 
could be better spent focusing on those actions that benefit 
species, through improving the consultation process, the 
development and implementation of recovery plans, and voluntary 
partnerships with States and private landowners.
    Most important, our efforts to respond to listing 
petitions, to propose listing of critically imperiled species, 
and to make final determinations on existing proposals, are 
being significantly delayed. There are species not yet listed 
where litigation support has and will continue to consume much 
of our funding resources. Absent some measure to allow for a 
rational prioritization of the work load, based on a 
consideration of resources available, the strict deadlines have 
instead led to our current untenable situation where high 
priority actions may be indefinitely delayed.
    It cannot be overstated that managing the Endangered 
Species program through litigation is ineffective in 
accomplishing the purposes of the ESA. The present system for 
designating critical habitat is broken. It provides little real 
conservation benefit for most species, consumes enormous agency 
resources and imposes huge social and economic costs. Rational 
public policy demands serious attention to this issue in order 
to allow our focus to return to true conservation efforts.
    In the past, this committee has proposed legislation which 
the previous Administration supported to move critical habitat 
designations to the recovery phase of the ESA. We recognize 
that this is one of a number of potential solutions by which 
the Congress could address this difficult problem. We welcome 
the opportunity to work with the committee to craft a solution 
that meets with wide approval.
    Mr. Chairman, this concludes my prepared testimony. I would 
be happy to respond to any questions that you or any of the 
other members may have at this time.
    Senator Crapo. Thank you very much, Mr. Manson.
    We will turn first to Chairman Inhofe for questions.
    Senator Inhofe. I appreciate that, and I will have to be 
going to the Armed Services meeting. But I want to get into 
just two things. You talked about how your hands are tied, the 
problems you're having right now with litigation. By the way, I 
would like to have my entire statement entered into the record, 
because I didn't get into a lot of detail that I didn't read.
    Senator Crapo. Without objection.
    [The prepared statement of Senator Inhofe follows:]

   Statement of Hon. James M. Inhofe, U.S. Senator from the State of 
                                Oklahoma

    I'd like to thank Chairman Crapo for holding a hearing on this 
important topic. In Oklahoma, we have seen first hand the need to 
revise the critical habitat processes of the Endangered Species Act. 
Five years ago when the Fish and Wildlife Service (FWS) listed the 
Arkansas River Shiner, I raised the issue of the economic impact of 
that action. At a minimum, local communities have a right know what 
impact an endangered species is going to have. When the FWS designated 
critical habitat, the economic impact was again raised as an issue. 
Now, the FWS is being sued by a coalition of 18 groups from 4 States 
because they failed to listen the first time.
    The Arkansas River Shiner is just one example of dozens of cases. 
The Fish and Wildlife Service is currently being inundated with 
lawsuits over critical habitat. The result is literally paralysis by 
litigation. This is detrimental to both the public and endangered 
species as it means that the agency's scarce resources are stretched 
even thinner. Only the most high profile problems get any attention. 
Other duties, such as Section 7 consultations, are neglected, making 
the ESA that much more of a burden on private citizens. Lawyers seem to 
be the only ones benefiting from the current situation.
    But critical habitat litigation isn't just a problem for private 
citizens. As a member of the Armed Services Committee I have heard many 
times how endangered species affect the activities of our military. 
Endangered Species are found on a number of military bases across the 
country.
    For example:

      Air Force Academy, Colorado--Preble's meadow jumping 
mouse
      Fort Hood, Texas--golden-cheeked warbler and black-capped 
vireo
      Fort Bragg, North Carolina--red-cockaded woodpecker
      Fort McCoy, Wisconsin--Karner blue butterfly
      Camp Pendleton, California--17 listed species\1\
---------------------------------------------------------------------------
     \1\Bald Eagle, Brown Pelican, California least tern, Coastal 
California Gnatcatcher, Least Bell's Vireo, Light-footed Clapper Rail, 
Southwestern Willow Flycatcher, Western Snowy Plover, Pacific Pocket 
Mouse, Stephens' Kangaroo Rat, Southern Steelhead Trout, Tidewater 
Goby, Arroyo Toad, Riverside Fairy Shrimp, San Diego Fairy Shrimp, San 
Diego Button-Celery, Spreading Navarretia, and Thread-Leaved Brodiaea.

    The science and economic analysis that is incorporated into 
critical habitat designations will have as big an impact on national 
defense as it will on economic development.
    Ultimately, designating critical habitat should be based on 
objective and credible scientific data and take into consideration the 
economic impact of critical habitat. Regrettably, this is rare under 
the current process. To often, a species is listed without enough data 
to even corroborate that the population is teetering on the brink of 
extinction. Nearly half of all the species that have been taken of the 
endangered species list, were taken off because the original data was 
in error.
    In addition to inaccurate data, the economic analysis required by 
the statute has been equally deficient.
    It is abundantly clear that a complete environmental and economic 
analysis is absolutely necessary before critical habitat is designated. 
It's time for the FWS to examine and revise their regulations to ensure 
that critical habitat is properly designated. Until that happens, the 
battle of litigation will only continue to frustrate both economic 
development and species preservation.
    Senator Inhofe. But have you come out with specific 
legislative solutions that you are going to be recommending to 
us to relieve us from this problem?
    Mr. Manson. I think there are a number of possibilities, 
Senator Inhofe. We're prepared to discuss a wide range of those 
possibilities with the committee.
    Senator Inhofe. I wanted to ask you also, because it's a 
little confusing to me, I know under the Clean Air Act, we're 
actually precluded from using cost consideration, if you talk 
about cost benefit analysis. Now, it's my understanding that 
when it comes to the actual listing, you are not to use cost, 
but in the declaration of a critical habitat, you are supposed 
to use cost.
    Now, those two things happened at the same time. Kind of 
clarify that for me.
    Mr. Manson. I can. In listing a species, as you say, we are 
not supposed to take economic considerations into that 
decision. Critical habitat determinations, we are allowed to 
consider the economic impact or any other relevant factor in 
determining whether to designate critical habitat.
    Now, critical habitat generally under Section 4 is 
generally to be designated at the time of listing or within a 
year after listing. That's not happened for the most part for a 
variety of reasons. One reason is in the past the Service has 
taken the attitude that critical habitat adds very little to 
the protection of a species, and thus for the most part found 
it not prudent to designate critical habitat.
    And now we have this tremendous backlog of species without 
critical habitat, and the courts have for the most part taken 
away our ability to find it not prudent on the basis that we 
have in the past. So we are complying with those court orders. 
We are taking into account the economic impact of the critical 
habitat designation.
    Senator Inhofe. You're aware of course that the 
Administration has either four or five proposals that I 
strongly support that address the problem of environmental 
encroachment on our training ranges. Only one, I believe, of 
those, has to do with endangered species, but it has to do with 
your INRMs. Would you kind of give us your opinion as to how 
they work or don't work or what your feeling is about their 
use, as opposed to the critical habitat designations?
    Mr. Manson. I strongly support the notion that the INRM 
plan on military bases that addresses species can serve as an 
adequate surrogate for critical habitat. In fact, in my view, 
there are a number of circumstances where the INRM may be 
superior to the designation of critical habitat. And the reason 
for that is that the INRM represents a series of real 
management actions and real management activities agreed to 
between the Fish and Wildlife Service and the military and the 
relevant State fish and game agency, to provide for true 
conservation of those species, whereas the designation of 
critical habitat does not provide for real management actions.
    Senator Inhofe. So you're saying that there are cases, or 
is it more of a general statement that you are offering more 
protection to a species with an INRM than you would be with a 
designation?
    Mr. Manson. In my view, that would be the situation in most 
cases.
    Senator Inhofe. In most cases. That's very interesting. 
Thank you, Mr. Chairman. That's very good evidence and 
discussion to have. Because we're going to be pursuing this in 
a couple of committees. I appreciate your input very much.
    Senator Crapo. Thank you very much.
    Senator Thomas, did you want to make an opening statement 
at this point?

 OPENING STATEMENT OF HON. CRAIG THOMAS, U.S. SENATOR FROM THE 
                        STATE OF WYOMING

    Senator Thomas. Mr. Chairman, no, not really. I just wanted 
to come by and begin to show you I appreciate your having these 
meetings. As you know, I'm very much interested, Mr. Secretary, 
in endangered species and the process used for listing and for 
the recovery. Much of it has been very difficult for us. In 
Wyoming we have listings that are made, I think, without 
substantial and enough scientific information. We have listings 
then that go on forever and we don't ever seem to be coming to 
an end. Some of them do not have designations as to what the 
area ought to be, and as in the grizzly bear thing, just keep 
wanting them further and further.
    So I just again wanted to make the point that it seems to 
me the basis issue we have to deal with even with respect to 
critical habitat is to have a better basis of scientific 
information, locations, numbers, sub-species problems and all 
that in the listing process, and then have a recovery plan. We 
still have this astounding number of species that are listed 
and relatively few that have ever recovered. I really think 
it's time that whatever the problems are that we ought to be 
really narrowing down so that our focus becomes on recovery 
rather than listing.
    I guess I just continue to kind of make the same point. But 
we continue to have the same problem. So that's really my 
point, Mr. Chairman.
    Senator Crapo. Thank you very much.
    I'm going to continue with questioning now, if you'd like 
to do a round of questioning before or after me, that's fine. I 
have to go to, as usual, another hearing here.
    Mr. Manson, would you tell me how many court cases have 
been brought dealing with critical habitat since 1998? Do you 
have any information on that?
    Mr. Manson. I don't have information since 1998. I can get 
that for you. I can tell you what the current state is as of 
today.
    Senator Crapo. If you would, please.
    Mr. Manson. As of today we have about 31 pending lawsuits 
and we have a number of notices of intent to sue. The exact 
number since 1998 we will research and we'll be able to provide 
that to you.
    Currently the notices of intent to sue as of the end of 
last month amount to 26, intent to sue. But in addition to 
that, we've got 158 backlogged critical habitat actions as 
well.
    Senator Crapo. What is a backlogged critical habitat 
action? That's where there isn't yet litigation?
    Mr. Manson. No, that's an action where there's been 
litigation and we are, it's in the pipeline to have a 
designation made pursuant to an order.
    Senator Crapo. That's 158. So basically you have 158 cases 
where you are now through the litigation but working on the 
backlog.
    Mr. Manson. Right.
    Senator Crapo. You have 31 pending suits and then did you 
give me a number of notices?
    Mr. Manson. Twenty-six notices.
    Senator Crapo. Twenty-six notices.
    Do you have any information about how much in attorney fees 
and to whom the Department has paid money with regard to this 
litigation?
    Mr. Manson. I don't have an exact figure for you. I can 
provide that to the committee.
    Senator Crapo. If you would, I'd appreciate it.
    Can you give me a feel for the budget impact of this 
litigation? If you have actual numbers, I'd appreciate that, or 
if you have percentages or portions of the budget that have had 
to be diverted into this, or what portion of your budget do you 
utilize to spend on this litigation, that kind of analysis, 
could you share that with me?
    Mr. Manson. I can tell you this, and we can certainly 
provide you a more complete analysis, I can tell you this, that 
in the listing program for fiscal year 2003, we had about $9 
million in that listing program. Almost all of that is devoted 
to responding to critical habitat or other listing litigation.
    At the current rate, we will probably use all of that up 
before the end of the fiscal year, some time in the early 
summer we will have exhausted that amount of money.
    Senator Crapo. And if that money were not being used in 
litigation, where it be utilized? Where would you put it?
    Mr. Manson. It would be utilized for looking at higher 
priority listing actions. We'd be determining on a biological 
basis, not on a litigation basis, which actions ought to have 
priority.
    Senator Crapo. Would that involve additional resources for 
development of recovery plans and the like?
    Mr. Manson. The recovery budget is a different line item. 
But surely we could certainly use the personnel that are 
devoted to these activities and make better use of their time 
toward recovery. Certainly if we didn't have as many of these 
actions and if we weren't using all of the listing budget, we 
certainly could find ways to use that money in the recovery 
process.
    Senator Crapo. In terms of the personnel under your 
supervision, can you give me a feel for what percentage of them 
spend their time on litigation, as opposed to what percentage 
spend their time on other aspects of the administration of the 
Act?
    Mr. Manson. I have not considered that on a percentage 
basis, but I can certainly find that out for you.
    Senator Crapo. Would it be a pretty sizable percentage?
    Mr. Manson. It's a sizable percentage of the folks in the 
endangered species program, yes.
    Senator Crapo. I know that one question which we probably 
ought to talk about is there may be, I haven't heard this yet, 
but I'm guessing that one response to this might be, we'll just 
put more money in it, we'll have Congress put more money in the 
budget so that we can have all the people we need for recovery 
actions and all the people in process that we need for other 
aspects of implementation of the Act and still have lots of 
people for litigating.
    If we had an unlimited budget, and we had an agreement from 
all parties that we could just pick the right time and place to 
designate critical habitat, so that litigation wasn't a 
concern, money for litigation wasn't a concern, and impact on 
other administrative actions with regard to the Act weren't a 
concern, where should we put in the process for the best 
recovery effort for species, where should the timing of the 
designation of critical habitat occur?
    Mr. Manson. There are a number of possibilities. In S. 
1100, for example, it was placed in the recovery arena. That 
seems to make a lot of sense, because after all, we are talking 
about, statutorily the language is essential to the 
conversation of the species. We think of conservation in terms 
of recovery. As Senator Thomas was saying, recovery is where 
our focus ought to be. That is the real purpose of the Act. The 
Act is not intended to be perpetual hospice care for species.
    Senator Crapo. So if you had your way, and you could in the 
interest of the species place the timing of the designation of 
critical habitat, you'd put it at the recovery process?
    Mr. Manson. I certainly would, that would be very high on 
the list. That would probably be the top choice for a place to 
put it.
    Senator Crapo. All right. Thank you. I'll withhold for a 
moment, and Senator Thomas, if you have any questions at this 
point, I'd be glad to turn to you.
    Senator Thomas. Yes, again, in a very broad sense, to sort 
of give us a feel of, in terms of moving toward recovery, what 
do you think is the most important change we could make?
    Mr. Manson. Well, probably one of the most important 
changes we could make to reemphasize the recovery aspect of it, 
is frankly what we've been talking about today, and that is to 
do something to relieve the Service of the burden of critical 
habitat at an early stage of the process, to eliminate the 
litigation, to relieve the budgetary pressure on the resources. 
All of those things would be important to get the focus back on 
recovery.
    Senator Thomas. When you made a listing of a species, at 
the same time it seems to me it's appropriate to have, at least 
in a broad sense, a general recovery plan, does that 
necessitate having a specific critical habitat area?
    Mr. Manson. Well, you know, it's interesting to me that for 
example, in California, where I am from, California in 1983 
adopted a State endangered species act that was largely modeled 
on the Federal Endangered Species Act. And the focus in that 
State endangered species act was on recovery, just as in the 
Federal Act.
    It's noteworthy that California chose, California has the 
most robust State endangered species act in the country. It's 
notable that in 1983, and since that time, California chose not 
to adopt a critical habitat provision in their State endangered 
species act, which goes to show, I think, that you can focus on 
recovery without having a critical habitat designation in the 
act. There are also a number of other States that have similar 
State endangered species acts with focus on recovery that don't 
require a designation of critical habitat.
    Senator Thomas. California's record of recovery is better 
than the Federal?
    Mr. Manson. Well, I'd have to sit down and make an analysis 
of that. There are species that have been delisted in 
California, just as there are under the Federal Act. But I 
don't know the comparative figures.
    Senator Thomas. That certainly ought to be the goal. I 
guess one of the frustrations about this whole thing is that 
this listing and being carried on as an endangered species 
seems to go on forever. There needs to be some solution. So I'm 
glad you're working at that, and certainly if that's the case, 
Mr. Chairman, that's something maybe we can help do.
    Thank you.
    Senator Crapo. Thank you, Senator Thomas.
    Mr. Manson, I want to go back to a couple of other areas. 
One area that I'd like to get into is the impact or what 
benefit designation of critical habitat brings and at what 
point that benefit is best utilized. Does the inclusion of 
impacts on the critical habitat in the consultation process 
under Section 7(a)(2) provide protection for a listed species 
over and above the jeopardy standard that is already being 
applied?
    Mr. Manson. In my view, it's largely duplicative of the 
existing protections under the Act. There is one circumstance 
in which it may have some marginal additional benefit. And that 
has to do with the adverse modification of critical habitat. 
Now, that situation is in a little bit of flux right now, 
because the Fifth Circuit, in a case a few years ago, ruled 
that the Service was using the wrong standard with respect to 
adverse modification of critical habitat. And the Service is 
working to adopt a new definition of adverse modification of 
critical habitat.
    Now, that only becomes important where there is unoccupied 
habitat designated. And it is the rather unusual case that 
unoccupied habitat is designated as critical habitat. So that's 
why I say, it's only a marginal benefit in most cases. So for 
the most part, the designation of critical habitat is largely 
duplicative of other protections under the Act.
    Senator Crapo. To this point in the questioning, I've 
focused on where we should do the critical habitat designation. 
But I think that at least in terms of getting the issue fleshed 
out, we ought to talk about what some have proposed, which is 
whether the designation of critical habitat itself is 
justified, or whether it causes so much litigation and 
contention that it actually is something that should be taken 
out of the Act and let other standards like the jeopardy 
standard and the like be those that guide us in the recovery of 
species.
    Should critical habitat concepts be removed from the ESA 
because of these factors? Or do you believe that there is a 
place and a point in the Endangered Species Act where they do 
provide sufficient benefit to justify the disruption and 
difficulty that we now experience with them?
    Mr. Manson. The one thing that should be understood is what 
is meant by critical habitat designation, first of all. 
Critical habitat designation does not result in the protection 
of habitat. That's done through other means, under the Act or 
outside the Act, through means other than the designation of 
critical habitat. As I was talking about other State endangered 
species acts, which don't have definitions of critical habitat, 
it seems apparent that it's possible to have an endangered 
species act that protects habitat, which recovers species, 
which protects the conservation of those species without 
designating critical habitat.
    The Act describes critical habitat as those areas which are 
essential to the conservation of the species. And it's possible 
to know and understand what those areas are without the process 
of designating them. For example, there are about 1,260 listed 
species on the Federal list right now. Only about a third of 
them, or less, have designated critical habitat. Yet the other 
two-thirds are being protected, are being conserved, habitat is 
being conserved for them, even without the designation of 
critical habitat.
    So the answer to me is that where we have a process that is 
costly, that causes a great deal of social and economic 
upheaval on the one hand, that results in litigation and 
practically puts a program of the Fish and Wildlife Service 
into receivership, and on the other hand seems to have little 
benefit, then it seems to me that there's a rational public 
policy answer to all of that. And certainly if the Congress 
decided that we could do without it, this Service could carry 
out its mandate under the Act without it.
    Senator Crapo. Thank you. To back up to the line of 
questioning I was following a few moments ago, if instead 
Congress were to change the time at which critical habitat was 
designated to the recovery process, would that significantly 
assist in removing the litigation and resolving a lot of the 
problems that now cause these difficulties within your budget?
    Mr. Manson. I think it would. For one thing, a lot of the 
litigation is driven by the deadline pressures in the Act. And 
that would change that factor quite significantly.
    Senator Crapo. I know that from what I've seen, and I was 
aware of the Fifth Circuit case you talked about and several of 
the other cases that have come down on this issue, but one 
thing that seems to stick out to me is that there is a little 
bit of confusion as to just what critical habitat is under the 
Act. A moment ago, you gave a brief definition of what it was. 
But if I recall correctly, there is some disagreement at least 
in the court system or in other areas as to whether we actually 
know what the Act requires in terms of designating critical 
habitat, what it is that the Act is asking us to do.
    Do you think in the process of addressing this issue that 
Congress should clarify what, if Congress were to keep the 
process of critical habitat in the Act, the designation of 
critical habitat in the Act, regardless of where the timing 
was, do you think it would help if Congress addressed the issue 
of the definition of critical habitat, or do you think that we 
have a sufficient clarification there that we should leave that 
alone?
    Mr. Manson. I think it would be useful. I gave half of a 
definition when I was talking about it earlier. The Act says 
that it is areas on which, which are essential to the 
conservation of the species and which may be in need of special 
management considerations or protection. And those terms are 
not defined in the statute. And it would be of use, I think, 
for Congress to define what is meant by essential to the 
conservation of the species.
    There is a case decided in the district court in Arizona 
that addresses the issue of being in need of special management 
considerations or protection that has clouded the definition 
and has made it difficult for us to definitionally decide what 
is in and what is out, in terms of critical habitat. If that 
case becomes precedent by an appellate court decision, which it 
might, then it would become all the more important for Congress 
to address what is meant by special management considerations 
and which lands are in fact in need of special management 
considerations and protections.
    Senator Crapo. Thank you.
    There are a couple of questions that some of my colleagues 
who weren't able to get here wanted me to ask, so I'm going to 
divert from my line of questioning for a moment and ask a 
couple of these questions so they can get them on the record.
    The first one is, when the Fish and Wildlife Service delays 
designating critical habitat, how much of it is due to the fact 
that the agency doesn't have enough quality information about 
the population size, distribution or biology of a species to 
figure out what specific areas should be included?
    Mr. Manson. Well, certainly that has sometimes been the 
case. I couldn't tell you how often that's been the case. There 
are two, in the statute, two threshold issues. One is whether 
or not critical habitat is prudent and the other whether it is 
determinable. Most of the time in the past, when the Service 
delayed designating it, they felt it was not prudent. Sometimes 
it's been because they felt it was not determinable. And the 
exact, far more because it was not prudent. The exact 
percentages, I'd have to research that.
    Senator Crapo. All right. Thank you.
    Another of the questions is, in terms of designating 
critical habitat, the language in the Endangered Species Act 
suggests that one of the goals of critical habitat is to ensure 
that there is enough habitat protected to ensure that species 
don't go extinct before the Fish and Wildlife Service can begin 
the recovery process, the habitat that species needs to have to 
hang on to survival. Does the Fish and Wildlife Service 
typically have enough quality information about the base 
survival needs to designate critical habitat to fulfill that 
need?
    Mr. Manson. Well, first, I'm not sure I completely agree 
with the premise of the question. But second, at the time that 
a species is listed, and at the time that we would ordinarily 
start looking at critical habitat, sometimes the Service in 
fact does not know enough about habitat issues to understand 
fully what habitat is essential to the conservation of the 
species. They know enough about habitat to know what the 
threats are, which is one thing. But it's a different thing to 
understand what it essential to the conservation of the 
species.
    Senator Crapo. All right, thank you.
    One of the other cases that I want to talk to you about for 
a minute is the New Mexico Cattle Growers Association case in 
the Tenth Circuit, which as you know found that the Fish and 
Wildlife Service's analysis of only incremental economic 
impacts of critical habitat designation above the impacts 
already created by the Endangered Species Act and the Section 7 
jeopardy constraint were unlawful.
    This decision is now almost 2 years old. I'm interested in 
what the Service has done to change the manner in which it 
conducts its economic analysis under the Endangered Species Act 
for critical habitat purposes.
    Mr. Manson. The Service is applying the New Mexico Cattle 
Growers case, and we from a policy perspective are constantly 
refining the guidance that we give the Service in terms of 
applying New Mexico Cattle Growers. It's a learning process, 
quite frankly, because it's a different way of doing business. 
And every critical habitat designation that comes through, I 
think the Service learns a little bit more about how to do 
economic analysis.
    So it's an educational process. It's a process of 
refinement and honing. I think we're getting there.
    Senator Crapo. Is the guidance that you talked about going 
to be published?
    Mr. Manson. At some point, there will be published guidance 
on that, yes.
    Senator Crapo. Currently, the Fish and Wildlife Service is 
required to prepare the appropriate analysis under NEPA for 
designations of critical habitat in areas under the 
jurisdiction of the Court of Appeals for the Tenth Circuit. Is 
the Fish and Wildlife Service considering how to merge this 
with the economic analysis?
    Mr. Manson. That is something that we have talked about. I 
don't have any specific proposals or news about that. It is 
something that is in the think tank stage right now.
    Senator Crapo. Thank you. If you would just wait for one 
moment.
    All right, well, Mr. Manson, in the interest of time, I'm 
going to submit some other questions that I have to you in 
writing. I just wanted to thank you for coming here. We've had 
great support from the Fish and Wildlife Service, both under 
the Clinton Administration and the Bush Administration in terms 
of dealing with this issue. As you said and as I indicated in 
my opening remarks, there has been a tremendous amount of 
agreement between the administrations and people from different 
perspectives on this issue that we have a problem that we need 
to deal with. I'm hopeful that with your help and the help of 
the witnesses we're going to have here today and other 
interested parties we can come together and build a path 
forward where we can all agree that we're going to make an 
improvement for the species, which is the objective of our 
management of this Act.
    So I thank you for your time in coming here today.
    Mr. Manson. Thank you, sir. We are looking forward to 
further working with the committee on this matter.
    Senator Crapo. Thank you very much.
    I'd like to now call up panel No. 2. And while they're 
coming up, I'll announce who they are. On this panel first we 
have Mr. Jeffrey Kightlinger, the General Counsel for the 
Metropolitan Water District of Southern California; Mr. John 
Kostyack, Senior Counsel for the National Wildlife Federation; 
Professor David Sunding, Associate Professor of Agricultural 
and Resource Economics at the University of California at 
Berkeley; Mr. Craig Douglas, who is with Smith, Robertson, 
Elliott & Glenn; and Mr. William Snape, the Vice President and 
General Counsel of the Defenders of Wildlife.
    Gentlemen, we welcome you all here. I did not indicate at 
the outset, which I should have done before the first panel, 
but we always run into a situation on timing here where you've 
got more to say than the time allows. We would like to have you 
have the opportunity to say that, but we also want to have the 
opportunity for the give and take among the panel and with 
questioning.
    So we do have a clock, I can assure you that I and the 
other Senators and our staff will read your written testimony, 
so you don't have to feel that you have to read every word of 
it. We'd like to ask you to summarize your statements. There's 
a clock in front of you that gives you that indication. Then I 
would hope to have a good longer time period for us to get into 
some give and take and discussion of some of the issues that 
I'm sure you will bring up.
    So with that, Mr. Kightlinger, why don't you begin?

STATEMENT OF JEFFREY KIGHTLINGER, GENERAL COUNSEL, METROPOLITAN 
             WATER DISTRICT OF SOUTHERN CALIFORNIA

    Mr. Kightlinger. Thank you, Mr. Chairman. Good morning.
    My name is Jeff Kightlinger. I am the General Counsel for 
the Metropolitan Water District of Southern California, and I'm 
testifying here today on behalf of the Western Urban Water 
Coalition. The Coalition represents 17 metropolitan areas in 6 
States, covering about 30 million people we serve water to. The 
mission of our agencies is to deliver and develop a high 
quality water supply and a reliable water supply. The 
challenges we face are rapidly growing populations, arid 
conditions in the western United States, and balancing the 
requirements of the Safe Drinking Water Act, the Clean Water 
Act, and the Endangered Species Act.
    I have submitted some detailed testimony specifically on 
critical habitat issues. I'd just like to highlight some of the 
specific issues that are facing our types of agencies in 
meeting these issues.
    The Coalition tries to get very pragmatic and deal with 
responsive solutions to endangered species issues. The most 
significant issue, as touched upon by the testimony of Mr. 
Manson and highlighted by your questions, is of course the 
timing issue: when should critical habitat be designated. Right 
now, the service agencies, their focus is on species, which is 
appropriate, because it is the Endangered Species Act, not the 
critical habitat act.
    So you look at the species first, you determine what 
species should be listed as threatened or endangered, and then 
at that point, simultaneously you're supposed to list the 
habitat. But most of the science, most of the information, most 
of the work has been on looking at the species, not on looking 
at the habitat. So it leads the agencies to what is basically a 
Hobson's choice here, should they designate that habitat based 
on incomplete information, not all the science that they need 
to make a fully informed decision, or should they delay making 
that designation until such time that they develop the 
information.
    The pattern and practice has been to delay that designation 
for a time period, and then work on that as they go along. That 
has led to the lawsuits, the paralysis that you've heard 
testified to today, the number of lawsuits. The courts then 
start setting the priorities of the agencies, because the 
courts have to deal with the Act as written, and the agencies 
don't have the information to designate the habitat, so they 
get directed to do so. You have the court setting the agendas 
and the priorities of the service agencies, and we would submit 
that the courts are not in the best position to do that, 
because they would only have the limited facts put before them 
on that species or that habitat.
    It also leads to significant regulatory burdens placed on 
agencies such as ourselves, because the service agencies in 
response to that end up designating broad swaths of critical 
habitat throughout, without taking a detailed look at where the 
most appropriate habitat or the most important habitat should 
be looked at and designated first. This leads to a significant 
regulatory burden with significant economic costs for those 
involved.
    The issues and the proposed solutions we would suggest, No. 
1, is the timing issue. And that requires amendment of the Act, 
and that is of course, as you're well aware, quite difficult to 
do. But we still believe that that should be a focus. We would 
like to see the timing issue put in the discretion of the 
agencies and pushed back more toward designation of critical 
habitat into the recovery plan process, where people can look 
at habitat. We believe this would lead to development of more 
habitat conservation plans and looking, instead of a species by 
species approach, a broader habitat approach. If the agencies 
had some discretion, that would free up resources from lawsuits 
and we think better direct those resources.
    A couple of other solutions, or proposals we think could be 
looked at, and probably looked at sooner rather than later in 
the more regulatory framework, we'd like to see some more 
definition and clarification of adverse modification. As Mr. 
Manson testified, there have been several cases out there that 
are in potential conflict with each other. We would like to see 
clarification of how habitat modification relates to jeopardy 
recovery standards.
    Another matter that the Administration could detail is, we 
would like to see a detailed methodology for economic analysis 
developed. We think this should be done through a public 
comment process. This should be done as part of regulatory 
action. And that would lead toward a better cost benefit 
analysis, leading to prioritization of habitat. Right now, all 
habitat is treated as equal. There isn't good prioritization 
about which habitat we should focus on first, and that the 
agencies could then respond to, in prioritizing how to save or 
work with that habitat and use less stringent measures for 
other habitats.
    I will halt there, and you have the detailed testimony. 
Thank you.
    Senator Crapo. Thank you very much, Mr. Kightlinger.
    Mr. Kostyack.

    STATEMENT OF JOHN F. KOSTYACK, SENIOR COUNSEL, NATIONAL 
                      WILDLIFE FEDERATION

    Mr. Kostyack. Good morning, Mr. Chairman. Thank you for the 
opportunity to testify today.
    I would like you to know at the outset we're at the 30th 
anniversary year now of the Endangered Species Act. We have a 
lot to celebrate. Many species that were plummeting toward 
extinction today have been stabilized and many others are on 
the path to recovery.
    Yet at the same time, there are species, too many species, 
that are not yet on the path to recovery. Scientists tell us 
the No. 1 reason for that is habitat, habitat loss, 
fragmentation, degradation. We need to do a better job of 
protecting habitat.
    Critical habitat is one of the most important features of 
the Endangered Species Act to address the habitat issue. In my 
written testimony I go into much more depth than I will have 
time for right now to lay out the various reasons why critical 
habitat is so important. Real briefly, it serves an important 
educational function. It protects habitats that otherwise would 
not be protected by other features of the Endangered Species 
Act. And it has a clear mandate for the Federal agencies.
    Now, I would be the last to argue that implementation of 
critical habitat has gone well over the years. We've had a lot 
of problems. I just recently co-authored a law review article 
to get into this. So I've been following it pretty closely. I'd 
like to walk through about seven suggestions for how we can 
improve the process.
    First, the services have to do a better job of defining 
which lands and waters are essential to species conservation. 
The Act sets forth a three step process for designating 
critical habitat. The first step is the inclusion process, 
where habitats essential to the conservation of species are 
identified. The second part is the economic impact analysis. 
And the third part is the exclusion process where you can look 
at the economic impacts and determine if the benefits of 
exclusion outweigh the benefits of inclusion.
    Unfortunately, the services have short-circuited that 
process and have excluded many, many millions of acres of 
important habitat in the first step. The one example I can give 
you is the Mexican spotted owl situation, where the Fish and 
Wildlife Service excluded over 90 percent of known owl 
locations from critical habitat, in the definitional process of 
what is critical habitat, the first step. These are areas where 
the logging industry held sway, where protection was needed. 
There was never any cost benefit analysis of that.
    So that needs to be fixed. There needs to be new guidance 
and the services need to be directed to make that key 
determination, inform the public which habitats are essential 
for the conservation of the species.
    Second is, change the timing of the designations. I would 
agree with the comments that have been made up to now that we 
can get better science into the designation of critical habitat 
if the timing were changed to align with the preparation of the 
recovery plan. I was around during the discussions over S. 
1100, in fact, I testified back then. At the time when the bill 
was first introduced, we made some suggestions of how to 
improve the bill.
    The committee was actually quite helpful in bringing all 
the interest groups together and making some key changes. And 
in the end, it was a bill that we could support. And in 
essence, it provides for deadlines for both recovery plans and 
critical habitat, and aligned those deadlines. Perhaps equally 
important, it provided for the cleanup of the backlog of 
critical habitat designations. So a similarly targeted approach 
to improving the process would be welcome today.
    Third, there needs to be guidance on the economic impact 
analysis. We've had major problems, particularly with the 
Administration's adoption of the controversial New Mexico 
Cattle Growers ruling out of the Tenth Circuit. That ruling, 
inconsistent with the Endangered Species Act, has expanded the 
economic impact analysis to go way beyond looking at the 
impacts of critical habitat. Looking at the impacts of critical 
habitat alone are costly enough. Expanding the process even 
further is a major mistake.
    And to add insult to injury, during the reevaluation of all 
these economic impacts, the Administration has pulled back on 
protection of species. And that is causing major problems for 
our listed species. At a minimum, the Administration should 
begin a rulemaking process to discuss how to do economic impact 
analysis.
    Fourth, there needs to be some kind of limit on the 
exclusions from critical habitat. The Administration has 
signaled that it is embarking on a major expansion of this 
third step in the critical habitat process where habitats that 
have already been deemed to be essential to the conservation of 
the species are excluded from the critical habitat designation. 
It's extremely misguided, in our opinion, to be pushing for all 
the Department of Defense lands to be excluded from critical 
habitat. The INRMPs are not an adequate substitute. In fact, we 
have an inspector general report out of the Defense Department 
that says we don't even have data on whether or not these 
INRMPs are being implemented.
    So it's a worrisome trend on the part of the Administration 
to basically open the doors wide and to exclude all kinds of 
habitat from the critical habitat designation without setting 
any standards. We need some standards to be set.
    Fifth, the adverse modification definition in the 
regulations needs to be revised. The Sierra Club v. Fish and 
Wildlife Service case was quite eloquent in laying out the 
reasons. In the past, under this regulation, adverse 
modification has been limited only to situations where an 
action would affect both recovery and the short term survival 
of species. That's not what the Act says. Critical habitat is 
to deal with situations where the recovery of the species by 
itself is impacted, and the Administration 2 years after the 
issuance of that ruling, over 2 years, still has not responded. 
It needs to fix this problem.
    Sixth, the public needs to be educated better about 
critical habitat. There is so much confusion about this aspect 
of the law. I would cite a New York Times article, March 17th, 
2003, where developers claim that the proposed habitat 
designation for the pygmy owl in southern Arizona would 
effectively bar development of 1.2 million acres of private, 
developable land in the Tucson area. This assertion, 
unfortunately pretty typical in the critical habitat debate, is 
way out of line with reality.
    There is no effect of a critical habitat designation on 
private land unless a Federal permit or Federal funding is 
involved. And even in those cases where there is a Federal 
action on private land, it doesn't mean that the development is 
stopped. It means that a consultation happens.
    So these kinds of statements in the media essentially 
claiming that the world is going to come to an end as a result 
of critical habitat need to be responded to. The Administration 
has an obligation to build public support for the Endangered 
Species Act, not to allow the Act to be undermined.
    Seventh, I guess I'll make this my final recommendation, 
perhaps the most important one. The funding situation does need 
to be addressed. So many of these problems can be avoided, the 
train wrecks can be avoided if the Congress would simply 
appropriate sufficient money to designate critical habitat and 
carry out the other basic functions of the Act.
    I will leave it there, Senator, and be happy to answer any 
of your questions.
    Senator Crapo. Thank you very much, Mr. Kostyack.
    Mr. Sunding.

    STATEMENT OF DAVID L. SUNDING, PROFESSOR, UNIVERSITY OF 
                     CALIFORNIA AT BERKELEY

    Mr. Sunding. Mr. Chairman, I appreciate the opportunity to 
speak with you today about the economic impacts of critical 
habitat designation. As you mentioned, I am a professor of 
natural resource economics at UC Berkeley.
    For the last 2 years, I have worked with colleagues and 
students to understand the effects of environmental permitting 
on the process of urban growth and development. As part of this 
larger research program, I've had the opportunity to consider 
the economic impacts of critical habitat designation. Critical 
habitat designation imposes costs on private and public 
entities alike. The most obvious aspect of cost is the direct 
out of pocket expense required to complete the Section 7 
consultation process.
    Sources of cost to the applicant include hiring outside 
consultants and attorneys, to assist with the consultation 
process, and also the applicant's own staff resources. Another 
direct cost of Section 7 consultation is that the Service may 
require additional mitigation above that required by the action 
agency. Adding the cost of Section 7 consultation to the cost 
of mitigation, the direct out of pocket cost of Section 7 
consultation can be substantial, running to several thousand 
dollars per house in the case of some single family housing 
projects.
    The third type of economic impact resulting from critical 
habitat designation is that the Section 7 consultation process 
may also force project developers to redesign their project to 
avoid modification of certain areas deemed to be critical 
habitat. This project redesign typically reduces the output of 
the project.
    Because critical habitat designation increases the cost of 
development and reduces the level of project output, it has the 
potential to alter regional markets for housing, commercial 
space and other types of development. In particular, critical 
habitat designation can increase market prices for these goods 
and result in large losses to consumers.
    Critical habitat designation can also delay completion of 
projects. Project delay is a pure loss affecting both producers 
and consumers. Delay affects project developers by pushing out 
project receipts further into the future. Delay affects 
consumers in that they must postpone enjoyment of the project 
output. For example, if the project in question is to construct 
a school, then parents and students must wait to use the new 
facilities. If the project is to construct new homes, then 
homeowners must live temporarily in a less than optimal 
location, perhaps having to commute longer distances during 
this waiting period.
    Critical habitat designation is essentially an ad hoc tax 
on development applied to areas where a particular species 
happens to live or is deemed to have the potential to live. 
This tax is applied, again, to public and private projects 
alike, and can be quite large, in fact, easily reaching in 
excess of a million dollars per acre of critical habitat 
conserved. Given the magnitude of this disincentive, it is 
really not stretching the point to say that critical habitat 
designation can literally change the shape of urban areas and 
another class of economic impacts results.
    A natural question to ask here is whether by limiting 
growth in certain areas critical habitat designation pushes 
development to areas more distant from the city center, away 
from jobs, shopping areas, schools and other amenities. If the 
effect of critical habitat designation is to force relocation 
to areas further out on the urban fringe, there can be some 
important regional and indirect consequences of designation as 
well. For example, if critical habitat designation forces 
consumers to locate further from their jobs, then designation 
may increase traffic congestion and commute times and may 
contribute to regional problems of sprawl and air pollution.
    A final point that I'd like to make is that critical 
habitat designation can imposes costs beyond the Section 7 
process and even beyond the Federal nexus. One concern here is 
that development is subject to numerous regulatory processes 
carried out by Federal, State and local authorities. If land is 
designated as critical habitat by the Fish and Wildlife 
Service, this designation may affect the way the project is 
treated by other agencies through what economists would call a 
signaling effect.
    Another concern is that designation of critical habitat can 
impose costs on developers even if their project is not in 
critical habitat at all. The Fish and Wildlife Service defines 
critical habitat in such a way that some time and expense is 
needed to determine whether a parcel is actually included or 
not. Thus, developers can spend money just to determine they 
are not in critical habitat at all.
    I'll conclude my oral remarks there. Again, I thank you for 
the opportunity to address the committee, and will be happy to 
answer any questions.
    Senator Crapo. Thank you, Mr. Sunding.
    Mr. Douglas.

     STATEMENT OF CRAIG DOUGLAS, ESQUIRE, ATTORNEY, SMITH, 
               ROBERTSON, ELLIOTT & GLENN, L.L.P.

    Mr. Douglas. Good morning, Mr. Chairman. I appreciate the 
opportunity to be here today with you, Assistant Secretary 
Manson and the other panelists to discuss critical habitat in a 
forum where we're all interested in finding solutions that work 
for the species and the people that live amongst them.
    I am from Austin, Texas, and my firm represents clients 
across the country that are engaged in a wide variety of 
industries in connection with both regulatory compliance and 
litigation under the Endangered Species Act. Chairman Inhofe 
mentioned the river shiner case, and my firm represents that 
coalition of 18 agricultural and ranching associations and 
water supply agencies that are challenging the designation of 
critical habitat for the Arkansas River shiner in Oklahoma, 
Texas, New Mexico and Kansas. That case is currently pending in 
the Federal district court in New Mexico.
    If there is a theme to our practice, it is that you can be 
an advocate for economic development and the protection of 
species and that you can be a strong advocate for conservation 
and property rights. That is what we try to bring to the table. 
In my view, critical habitat has proven to be sort of a 
peculiar regulatory device. I agree with the Service in that 
given the other tools provided by the ESA and other programs, 
the designation of critical habitat in most instances does not 
result in appreciable benefit to the species.
    However, the one aspect of critical habitat that has been 
consistent is the cost that comes with it, the cost to affected 
land owners, the cost to the impacted communities and cost to 
the Service in terms of draining its limited resources. I will 
not tread on the same ground that was ably covered by Judge 
Manson, but I must say this. To me this is a very simple 
proposition. When you consider all of the things that we could 
be doing to protect and foster the recovery of endangered 
wildlife, and you consider all the time and energy that we're 
spending arguing over critical habitat in the courts, it seems 
very clear that the critical habitat component of the ESA must 
be addressed by Congress.
    We supported S. 1100 during the 106th Congress and would 
support similar legislation if it were refiled by this 
Congress. Until reform is achieved, however, efforts to resolve 
this crisis are going to be limited by the parameters of 
current law. That is not to say there are no options within the 
existing framework, but ultimately the cycle of litigation and 
related drain on the Service's resources can only be remedied 
by statutory, rather than regulatory, reform.
    In the meantime, I think that an interim solution would be 
a shift of the regulatory focus of critical habitat in a way 
that might bring it more into line with what Congress 
originally intended when it adopted the ESA, which is a tool to 
regulate impacts on specific areas that are truly essential to 
the conservation of the species. Essential is a key word in the 
statutory definition of critical habitat that I think gets lost 
in the shuffle.
    The means to accomplish this shift is already available 
through what I call the Section 4(b)(2) balancing test that was 
recently resuscitated by the New Mexico Cattle Growers case. 
Section 4(b)(2) requires the Service to base a designation on 
the best scientific data available and to take into 
consideration the economic impact and any other relevant impact 
of specifying a particular area as critical habitat.
    In defining critical habitat, I believe that Congress used 
the word essential for a reason. Critical habitat is not 
defined as all of the land and water that could be conceivably 
used in an effort to ensure conservation. The word essential 
carries with it a but for connotation. If these lands are not 
designated, conservation will not be possible. As Secretary 
Manson said, critical habitat is not supposed to be a perpetual 
hospice care for species, and I believe that critical habitat 
should be thought of as more part of the minimum essential 
building block for recovery.
    For several years, my clients have been faced with critical 
habitat designations that did not seem to take the concept of 
essential into account. It is my belief that prior to the 
Cattle Growers case, there was no procedural Governor being 
used that forced the Service to focus on the essential part of 
the critical habitat definition. The river shiner case is one 
example. This led, in our view, to the designation of 1,150 
river miles and nearly 90,000 acres of adjacent riparian zones 
across four States, was ill considered and not justifiable 
under the law.
    A similar situation occurred in Arizona, where a large 
portion of the critical habitat designation that was referenced 
earlier for the pygmy owl covers an area in northwest Tucson 
that is among the most valuable and desirable land for 
development that is among the least valuable areas for the 
owls' recovery. In both of these cases, the cost of designation 
in terms of potentially lost economic development 
opportunities, reduced property values, clouded entitlement, 
effects on existing operations and property and water rights, 
far outweighs the benefits to the species.
    Just this week, however, the Administration provided an 
example of how a faithful application of the balancing test can 
work. There are nine species of cave dwelling invertebrates 
that exist solely within the confines of Bear County, Texas 
near San Antonio and the Texas hill country. The original 
critical habitat designation for those nine species covered 
about 9,500 acres.
    After the proposal came out, the Service made a concerted 
effort to consider not just the potential economic impacts of 
the proposal, but also many other things that I believe fall 
within the catch-all all other relevant factors prescribed by 
the statute. The end result was that a designation was 
published in the Federal Register this week, on Tuesday, that 
encompasses in total only 1,500 acres, which is a substantial 
reduction from the proposal. I believe that this is proof that 
the balancing test can work.
    I apologize for going over the limit, and I will answer any 
questions you may have.
    Senator Crapo. Thank you very much, Mr. Douglas.
    Mr. Snape?

STATEMENT OF WILLIAM J. SNAPE, III, VICE PRESIDENT AND GENERAL 
                 COUNSEL, DEFENDERS OF WILDLIFE

    Mr. Snape. Thank you, Mr. Chairman.
    As you have heard this morning, Mr. Chairman, there are so 
many issues that emanate from a discussion of the critical 
habitat provisions in the Endangered Species Act. And as I 
begin my remarks, I'm going to try to concentrate on three main 
issues, given the time constraints.
    I think overall, I have good news. And that is, for the 
most part, with a couple of significant exceptions, I have 
agreed with what has been said on this particular panel. If 
there is bad news, it is that I think there are some 
significant omissions and clarifications that I would like to 
make. I'll talk about those in my three points. And I want to 
thank particularly John Kostyack who gave very sound testimony, 
and it makes my job easier.
    On the benefits of critical habitat, I guess ultimately I 
just fundamentally disagree that there are no benefits to 
critical habitat. That doesn't mean that critical habitat helps 
each species equally. I don't believe that either. For example, 
we're very involved with pygmy owl conservation in southern 
Arizona. What has happened in southern Arizona is that pygmy 
owl habitat protection has become in many ways, not totally, 
but in many ways a catalyst, a surrogate, almost, for a much 
broader conservation plan that protects upwards of 100 species.
    Thus when you talk about the benefits and the costs of 
protecting the pygmy owl and its critical habitat, I think 
you've got to talk about all the benefits. I think Mr. Sunding 
only really had it half correct. The reality is that the pygmy 
owl critical habitat in southern Arizona helps protect open 
space, which drives property values up near that open space, 
and it saves localities significant infrastructure costs from 
new fire houses, new roads, new utilities. And it helps a lot 
with water conservation in limiting out of control growth in 
southern Arizona, which is, as you know, quite dry.
    There have been economic studies that bear these economic 
benefits out, and I think the Senator would be very much helped 
by taking a look at some of these different studies. Because I 
think what you're really hearing on the issue of ecological 
economics and economic analysis under the critical habitat 
provision is that ecological economics is a growing discipline, 
and there is a lot of good thinking going on right now, but I'm 
not sure that we have all the calculations down pat. I 
appreciated Mr. Manson's comments that, indeed, they're working 
on that.
    So, point No. 1 is that I think, for at least some species, 
critical habitat unquestionably helps listed species, and 
indeed may help the local economics as well. Many local 
officials in southern Arizona support strong pygmy owl 
conservation.
    The second point I want to make is that I think the New 
Mexico Cattle Growers' Association judgment is wrongly decided, 
and I think it's wrongly decided in a way that will harm the 
very economic interests that are now supporting it. The 
fundamental reason I think it is incorrectly decided is that it 
creates a second baseline of economic analysis that goes 
against even OMB's recitation of how these types of economic 
studies should be undertaken. Because what it now does is say, 
``Don't just look at the cost of critical habitat; look at the 
cost of critical habitat and listing in doing these economic 
analyses.'' I think that's the wrong way to go.
    I think the confusion, and the reason why the court decided 
the case the way they did is that the Federal Government has 
been deciding these critical habitat decisions under the wrong 
standard. They have basically said that jeopardy and adverse 
modification are the same standard. Therefore, if you're 
treating them as the same standard, the economic analysis is 
going to show no appreciable impact.
    So I think the problem with Cattle Growers is the standard 
that was being used to differentiate between jeopardy and 
adverse modification. The solution, I think, went overboard and 
I think is going to harm everybody. In fact, I think we're 
going to waste a lot of time and money doing complicated 
economic analyses that will really help no one in the real 
world. That is my take on what's going to happen as a result of 
Cattle Growers. And we're already beginning to see it right 
now.
    I have 1 minute to go to make my third point, and that is, 
giving two more examples of species that could very much 
benefit by critical habitat, and that right now do not have 
critical habitat protection. One is the Sonoran pronghorn in 
southern Arizona. Less than 20 individuals, or about 20 
individuals are left on the U.S. side of the border. We may see 
the extirpation of this species within the next several years.
    And the other species, Senator, I picked from your home 
State, Idaho. That's the woodland caribou. As you may know, 
there are less than 20 woodland caribou on the U.S. side of the 
border. The woodland caribou clearly needs all the help it can 
get. It is an old growth forest obligate species.
    The point I want to end with on woodland caribou and the 
sort of creative thinking and ``outside-the-box thinking'' I 
think we need to do in critical habitat. I think the woodland 
caribou protection in the United States is very relevant to an 
issue that you may not think has a lot to do with critical 
habitat the U.S./Canada Softwood Lumber Agreement. The reality 
is that Canada is cutting down its its forests in woodland 
caribou habitat at a rate that is harming U.S. efforts to 
protect this species.
    The only way, in my opinion, that you're going to deal with 
that economic dispute that's now underway is to have some sort 
of commonality with regard to the conservation baseline that 
the two countries are undertaking, and perhaps as outlandish as 
it might initially seem, a binational critical habitat proposal 
for this type of species, which would solve both economic and 
environmental problems. On that sort of dream note, I will end 
my testimony. I thank you, Mr. Chairman.
    Senator Crapo. Thank you, Mr. Snape. I'm sure you saw me 
smiling when you brought up the soft wood lumber agreement. 
I've just been appointed by the majority leader to be the co-
chairman on the Senate side of the Canada-U.S. 
interparliamentary group or whatever it is which will be 
meeting this year to deal with a number of issues, not the 
least of which will be the Canadian soft wood lumber agreement. 
If your suggestion can help us resolve that issue, I'm going to 
look at it very hard.
    Let me just toss out, I want to try to get into a couple of 
specific questions with each of you, but I also would like to 
get some interplay between the members of the panel on the 
overall issues here. But let me throw out a question at the 
outset to see whether we have some consensus building here. 
There's a lot of issues, obviously. But the core issue for the 
timing question of the designation of critical habitat it seems 
to me is one, from what I've heard, may not be one in which 
there's a lot of conflict. Is there any disagreement among the 
panelists as to whether it would be beneficial to allow the 
Service discretion in the timing of the designation of critical 
habitat? Would anyone disagree with a statutory change allowing 
that? Mr. Snape?
    Mr. Snape. Mr. Chairman, like some of the groups that have 
already spoken, we also supported S. 1100 at the time it was 
introduced and discussed by this committee. The only point I 
would make about that particular bill and on the issue of 
timing is that the ``deal'' that we struck there was very 
closely negotiated. So if we were indeed going to go back to 
that, every word and semicolon mattered.
    But with that caveat, no, I think that would be a rational 
and helpful change.
    Senator Crapo. Mr. Kostyack?
    Mr. Kostyack. Two comments. One is, part of the deal, the 
package, was to deal with the backlog. Because one thing you 
don't want is to create a set of deadlines for critical habitat 
where the newly listed species actually leapfrog ahead of all 
those other species that have been waiting attention. That's a 
subtlety that will need to be dealt with.
    The other comment I would make is that although we 
certainly support pushing back the deadline, giving the Service 
complete discretion on when to designate would be problematic. 
In fact, the deadlines were put in the Act in 1978, 5 years 
after the initial enactment of the Endangered Species Act, 
because for the first 5 years, there were no deadlines and 
virtually no critical habitat was being designated.
    I think we know what happens when there are no deadlines 
whatsoever, we just need to adjust them and give the Service a 
little more time to get the science together.
    Senator Crapo. Thank you. Anybody else want to pitch in on 
that?
    Mr. Snape. We agree with that.
    Senator Crapo. OK, thank you. I don't want to complicate 
matters, but I do want to--maybe it's just my curiosity wants 
to explore something. Mr. Kostyack, you actually brought up in 
the hearing we had three or 4 years ago. And you may recall in 
your testimony back in May 1999 that you referenced the concept 
of survival habitat, which was a notion that had come up, I 
don't know where it originated with it, but I associate it with 
the National Academy of Sciences National Research Council, 
which had studied this issue and had come up with the notion 
that--I'm probably going to do a bad job of characterizing the 
issue.
    But if I understand what they were saying, it was that 
there were some benefits to critical habitat designation. There 
were also some serious problems with the timing and the way it 
was being done. And that perhaps we could create another 
concept called survival habitat, which would be more narrowly 
defined at an earlier stage and would identify sort of the core 
areas protected for survival, as opposed to what we are dealing 
with now in the critical habitat arena.
    I know at that time you were kind of positive about that 
concept, Mr. Kostyack. Would you like to discuss that today and 
tell us whether we should leave that alone and go with what 
we've got, or the consensus we're building, or whether that's 
something we ought to look at?
    Mr. Kostyack. I think it is something we ought to look at, 
if we can build consensus around it. The notion of survival 
habitat is, it does take several years after the listing of a 
species, which by the way is really not, a listing is not 
focused on recovery. A listing is focused on threats, how 
threatened is the species, do we need to give it immediate 
attention. So there is a lot of scientific work that needs to 
be done after the listing of a species. And I would argue, two 
or 3 years during the process of recovery planning is also the 
time to figuring out what habitats are going to be needed for 
recovery.
    Now, in that interim period, what we don't want to have is 
major setbacks for the species, so basically we're boxing 
ourselves into a corner and limiting our options. So what can 
we do about protecting the habitat where there is broad 
scientific consensus, just to keep the species at its status 
quo, to prevent further slippage? Can we at least all get a 
consensus around this sort of core, basic habitat that there is 
no dispute about?
    And then the tougher questions the scientists will need to 
resolve over that, say, 3 year period is, all right, to achieve 
true recovery, for which many species means restoring it to 
habitats where they're not found today they're in a severely 
depleted state, oftentimes, by the time they're listed--the 
tougher questions the scientists will have to wrestle with over 
the 3 year period is, what are going to be the recovery 
habitats. The survival habitats are a narrower concept I think 
you can get more immediate scientific consensus around.
    Senator Crapo. Anybody else want to jump in on this? Mr. 
Kightlinger.
    Mr. Kightlinger. Yes, Mr. Chairman. Our testimony had been 
about prioritizing habitat. We think that's a way of 
reconciling this survival habitat concept with what occurred in 
the New Mexico Cattle Growers Association case, where you can 
look at an economic analysis, try to do that cost benefit, and 
try to pick what's that essential habitat that we can look at 
first. It's the same kind of concept, and we'd like to see some 
developments there.
    Senator Crapo. Mr. Douglas?
    Mr. Douglas. I tend to agree with Mr. Kostyack on some 
level. I think we may have some disagreements about the scope 
of the habitat that may be necessary. But I do think that the 
concept of survival habitat is more appropriate for the 
regulatory context of listing and take, which is really based 
on threats, as he said, where the current notions of habitat 
preservation probably are more appropriately resolved in the 
recovery phase.
    Senator Crapo. Mr. Snape?
    Mr. Snape. Mr. Chairman, I have two contextual comments. 
One is that if you did have a survival habitat process and a 
recovery, or a critical habitat process, you are creating two 
processes on habitat, which you can argue is not a good idea.
    Senator Crapo. Believe me, I understand that.
    [Laughter.]
    Mr. Snape. But the ultimate point I want to make is that 
the reason I like thinking this way, however you decide to deal 
with it from a legislative or regulatory point of view, is that 
it does focus on what I think needs attention for purposes of 
administering the Act right now, which is ``survival'' versus 
``recovery.'' Senator Thomas was talking about this, and the 
Yellowstone grizzly is a good example. Is that a population 
that we are just letting hang on and survive, or is it actually 
recovering. Well, scientists are disagreeing right now about 
that, and we've already talked about how that tension plays out 
in the Section 7 context.
    So if we could actually more rationally talk about the 
concepts of survival and recovery in the Act, I think 
everyone's expectations would at least be a little bit more 
explicit. I think some of the conflicts under the Act occur 
because some people are talking about recovery and some people 
are talking about survival, and there's a little talking past 
each other. I think that happens in the critical habitat 
provision.
    Senator Crapo. Thank you. You have pointed out, I was 
almost reluctant to bring it up, because to bring up another 
concept to put into the Endangered Species Act, I'm sure, 
brings shivers down the spines of some of the people who are 
concerned about its complexity at this point. On the other 
hand, there is a clear issue there, as to whether we can gain 
some benefit from some focusing of what we are trying to 
achieve at the respective stages of the implementation of the 
Act.
    So I think it at least deserves some discussion. But we 
certainly do not want to create more complexity that would not 
help us facilitate and eliminate some of the problems that we 
are dealing with.
    Mr. Kightlinger, you mentioned in your testimony the cost 
effectiveness framework for economic analysis of critical 
habitat. Could you explain a little more how that cost 
effectiveness framework would work, in your opinion?
    Mr. Kightlinger. We think what there probably should be is 
a public comment rulemaking process, so that people could get 
in and really get a methodology and a framework for how we 
analyze the economic impacts of this, that isn't really 
available today. That would hopefully then lead toward, we 
think, something along the lines of, and maybe we kind of 
agree, introducing new concepts is going to be difficult at 
this stage, but something where you can start prioritizing 
habitat, prioritizing, just setting priorities for the 
agencies, and doing that on an established process where you 
really do a cost benefit analysis, you really look at the 
impacts and the orderly way of what the impacts of designating 
habitat are we think could lead to a more cost effective 
approach.
    Senator Crapo. If I understand what you're saying 
correctly, that would not require legislation. That could be 
something that the Agency implements through rulemaking or 
otherwise.
    Mr. Kightlinger. That's right. We think either the 
Administration could do that of its own or certainly be 
directed by the legislature to do so.
    Senator Crapo. Mr. Snape, do you want to comment on that?
    Mr. Snape. I want to follow up on that, because I think I 
largely agree. In fact, there's been some recent research 
lately, that shows that it's arguable that the economic 
analysis we're now doing ``we'' being the U.S. Government, and 
Americans, under the U.S. Endangered Species Act is more 
onerous and more complex than what Congress intended in 1978.
    What she did, this Temple University professor, is look at 
the economic analyses that were required of other environmental 
statutes in the mid to late 1970's when these amendments were 
being drafted. That was well before the sort of formalized cost 
benefit analysis had come into fashion the way it is now. One 
could argue quite seriously that we have indeed gone overboard 
with our economic analysis, not in terms of getting accurate 
information. I think we all want that, but in terms of spending 
a lot of time and money creating telephone book analyses that 
no one reads and everyone fights about. It may be that we need 
to ask more fundamental questions about what we want the 
economic analysis to answer and be less focused on the sort of 
volume and formality that we seem to have inserted into the 
process. I'd be curious what Mr. Sunding thinks about that.
    Senator Crapo. Mr. Sunding.
    Mr. Sunding. Yes, thank you. I think I actually largely 
agree with that comment. The economic analyses that the 
Service, or more accurately the Service's consultants tend to 
produce on these critical habitat designations are voluminous. 
They're quite large and quite detailed.
    But to some extent I think they miss the point. 
Methodological problems aside, their aggregate analyses of the 
entire critical habitat and the entire set of economic impacts 
that result, they miss this point that the purpose of the 
economic analysis, at least as I understand it, is to help us 
prioritize. This land should be in, this land should be out 
because the economic impacts are just too onerous and the 
benefit to the species doesn't rise to the level that that land 
should be included.
    So yes, I think there is a lot of scope to change the way 
we do the economic analysis.
    Senator Crapo. Mr. Sunding, could you tell me what you 
think the Fish and Wildlife Service's guidance on the economic 
impact analysis ought to look like?
    Mr. Sunding. Actually, I don't know if you know this or 
not, but I've actually worked with the Service to help them.
    Senator Crapo. I didn't know that, but that's good, that's 
helpful.
    Mr. Sunding. Right. And I guess we'll see what the outcome 
of that process is. I was engaged as one of, I believe two peer 
reviewers on a draft protocol for economic analysis.
    And I'm sorry, your question was?
    Senator Crapo. The question is, what would you think that 
their guidance ought to look like? What should it be?
    Mr. Sunding. Well, I've outlined in my oral and my written 
testimony a number of types of economic impacts that can result 
from critical habitat designation. I suppose as a threshold 
matter I'd like to see a comprehensive analysis of those 
different types of impacts. The Service right now tends to 
focus on what I would characterize as being the most obvious or 
direct out of pocket impacts, just the cost of going through 
the Section 7 consultation process. What they tend to miss in 
general is the outcome of the Section 7 consultation process, 
the reduction in the size of the project, and the attendant 
market impacts and regional impacts.
    The Service also, I think, recognizes but hasn't yet come 
to grips with the concept of delay. If you talk to people in 
the field, and I'm sure Mr. Kightlinger can verify this, if you 
talk to people in the field who have to deal with critical 
habitat designation, I think they'll tell you that one of the 
real problems with it is that it delays completion of the 
project. And that can impose very large costs on public 
agencies and private developers who are doing projects.
    But also on consumers. It may be the case that you have a 
thousand unit housing project that gets cut down to 900 units 
as a result of a Section 7 consultation process. That imposes 
one kind of cost.
    But the other kind of cost is that all the 900 units that 
do get built get delayed by some period of time. And what we've 
found in our theoretical and our empirical work is that those 
delay costs can be very large. In many case, they're the major 
component of all the economic costs from critical habitat 
designation.
    Senator Crapo. I wanted to shift back, I'm looking at some 
of my notes here, but Mr. Douglas, I noticed in your testimony 
the strong focus on trying to identify the essential habitat 
that we're dealing with. In the context of the, what are we 
calling it, the survival habitat, do you think that that 
concept fits in the same vein as to what you were trying to get 
at?
    Mr. Douglas. I do. I think that the point I was trying to 
make and maybe didn't do so quite clearly was that the 
balancing test that's currently in the statute can be used as 
sort of an interim solution to get some control over the 
current litigation crisis, in that if the Service uses that 
test to really focus on only what is essential to the 
conservation of the species, it can narrow the scope of 
critical habitat designations and maybe reduce the field of 
things that we're fighting about.
    A lot of these lawsuits, the responsive lawsuits by the 
regulated community that I represent were filed because the 
Service is kind of caught in this loop, they have a short 
amount of time to designate critical habitat, so you get this 
shotgun designation that covers hundreds of thousands of acres, 
it's not very focused. They don't have the time to look at the 
science correctly, they don't have time to consider the 
economic impacts adequately.
    If that balancing test is faithfully employed and the 
Service has the time to really go through the steps of the 
process and do it right, then what you see is perhaps what 
happened with the Bear County cave bugs earlier this week. 
There were a couple of extensions to the comment period that 
were necessary, that were agreed to. But ultimately, they were 
able to perform those tasks in a manner that allowed them to 
consider the problem more deliberately than they're able to 
when they're forced to do it by litigation. I think that 
getting down to the essentials, whether it's in the context of 
critical habitat now or survival habitat, as you say, would be 
a very important tool process for them to follow.
    Senator Crapo. Mr. Kostyack.
    Mr. Kostyack. If I could pick up on this, both the previous 
witnesses have indicated that the solution potentially is 
simply to go through the 4(b)(2) economic analysis process and 
address sort of the substantive impacts of critical habitat. As 
long as they are laying out on the table, what would be the 
impacts of critical habitat and then exclude habitats based on 
sort of the practical economic effects of that, then we 
potentially have a solution.
    I've got a hitch in that, which is, we have this Sierra 
Club v. Fish and Wildlife Service case out there. And until the 
Service responds to that ruling and tells the world what 
adverse modification of critical habitat means, none of these 
economic impact analyses, all of them are going to continue to 
be subject to litigation, because we have this confusion out 
there, the Service is actually saying two different things at 
once. It says, on the one hand, we're going to expand economic 
impact analysis, talk about the impacts of critical habitat, at 
the same time, it's making this argument that well, critical 
habitat really doesn't mean anything, it's duplicative.
    You can't have it both ways. The Sierra Club v. Fish and 
Wildlife Service case makes it, I think, abundantly clear, 
adverse modification of critical habitat is a standard that 
means something more than jeopardy. Until the Service responds 
to that ruling and says, the ruling is either right or wrong 
and here's our analysis, to go through the economic impact 
analysis and talk about what critical habitat does, it's kind 
of a waste of time. Or at least it's going to create more 
confusion than it solves.
    So I think the first step the Service needs to do is tell 
us what adverse modification of critical habitat means, in 
their view.
    Senator Crapo. Is this something that could be resolved by 
agency action, or does Congress need to step in and define 
this?
    Mr. Kostyack. Well, it all depends on what the Service 
says. I think that yes, it can be solved by agency action. The 
Service needs to engage in a rulemaking right now. They have 
right now potentially two different rules. If you're in the 
Fifth Circuit, they cannot apply the existing regulation of 
adverse modification. If you're outside the Fifth Circuit, then 
you have discretion to do one or the other.
    But what would make perfect sense would be to initiate a 
rulemaking at this point.
    Senator Crapo. Mr. Snape.
    Mr. Snape. Senator, I would agree with John and raise the 
additional point that it really does depend on the species for 
what these economic analyses and what this adverse modification 
standard are going to look like. I think that's why, I'm not 
saying Congress should or should not, but Congress would find 
it difficult to adequately deal with an issue that at this 
point in time really does look different in every instance.
    By way of example, and I just want to slightly disagree 
with my colleague to my immediate right, Mr. Douglas, but just 
to give you how this plays out in real world, there are about 
18 pygmy owls left in southern Arizona right now, maybe a 
couple hundred in Mexico, but 18 adult pygmy owls in Arizona 
right now. About half of those owls are in northwest Tucson, 
which Mr. Douglas has said in his testimony today is not a big, 
important pygmy owl place.
    Well, he and I obviously disagree as to how essential 
northwest Tucson is for the pygmy owl. But I think what's 
really happening when we disagree is that in the back of his 
mind, in the back of a lot of people's mind, they're saying, 
``That land's very expensive. It's worth a lot. We could make a 
lot of money developing that land.'' And that's really where 
the tension is right now, and it's not a tension over the 
Endangered Species Act, although that's how it's playing itself 
out. It's a tension in southern Arizona between the Home 
Builders, who obviously have a stake in this battle, versus the 
planners, who are trying to make some sense over Tucson not 
becoming another Phoenix.
    And that's how these fights take place--with not a lot of 
individuals left, and with us fighting over the last scraps of 
habitat that by that point in time almost by definition are 
essential to the conservation of that species. And again, maybe 
reasonable people could agree to disagree. But I just want to 
point this out as an example that these are not easy questions 
sometimes, and they do not lend themselves to clear economic 
analysis as to what's even really best for the people of that 
State.
    Senator Crapo. Mr. Douglas, do you want to defend yourself 
there?
    Mr. Douglas. Absolutely. I think Mr. Snape is missing one 
point. And true, my clients are sitting there, and they're 
affected by this designation of critical habitat, and they're 
looking at a bottom line. That's their perspective. What other 
perspective would anybody expect them to have?
    But it's a lot more complex than just economics. It's an 
important factor in the process. It goes with that other, what 
I call a catch-all category, all other relevant factors. The 
decisions that are being made in northwest Tucson are not just 
about economics. They're about these other relevant factors. 
That is a highly urbanized area.
    I think it's not ultimately valuable for the long term 
recovery of the owl, because the number of owls there, there's 
only one adult female, maybe four or five adult males, maybe 
fewer than that. And there's no opportunity for that area ever 
to become the kind of place where the owl could recover, that 
would significantly contribute to its recovery. That's where we 
disagree. It's not just about economics, it's about other 
things, too.
    One final point in the vein that Mr. Snape was discussing, 
he talks about how it plays into the decisions of local 
planners and what they're trying to do, and how the 
informational value of critical habitat includes perhaps the 
protection of other species and what it's led to in southern 
Arizona with the Sonoran plan. That's where we get into a 
fundamental disagreement about the purpose of the Endangered 
Species Act. This is not an ``uber-zoning'' law. The Fish and 
Wildlife Service is not responsible for regulating land use. 
They're responsible for regulating endangered species. I think 
it's inappropriate and unlawful to use the Endangered Species 
Act as a land use control tool.
    Senator Crapo. Do you want to take a shot at that?
    Mr. Snape. I will only say succinctly that the leading 
purpose, the first stated purpose of the Endangered Species 
Act, is to protect the ecosystems upon which listed species 
depend. I could say other things, but I'll just leave it at 
that.
    Senator Crapo. We don't want to start a boxing match here, 
because we have so much common ground we've identified already, 
and we want to keep focused on that. At the risk of, well, does 
anybody else want to comment on anything we've talked about so 
far? I've got another area I want to jump into.
    I guess I just want to get into this one, not necessarily 
because it's something that we'll be focusing on in the 
legislation, I guess we could. But obviously the amount of 
litigation is one of the issues that has raised significant 
concerns about whether we're best utilizing our resources for 
the administration of the Act. In that context, the issue of 
the citizen suit provisions of the Endangered Species Act have 
been brought up.
    Section 11(g) provides, I guess that's 16 U.S.C. 1540(g), 
for that reference, creates a private cause of action to enjoin 
violations of the critical habitat provisions and other 
provisions of the Endangered Species Act, and allows attorney 
fees in successful suits. And there has been the observation 
made that these citizen suit provisions are being utilized by 
groups that want to bring critical habitat lawsuits not so much 
because of the effort to protect the species or to further the 
best administration of the Act, but because there's a very high 
likelihood of prevailing and obtaining attorney fees.
    So I guess the hard question to be asked is, do we need to 
do something about the high prevalence of litigation by 
addressing the citizen suit provisions, either the attorney fee 
provisions or the availability of these easy lawsuits to file 
with regard to the Endangered Species Act? Mr. Snape? I saw 
hands go up on the whole panel here.
    Mr. Snape. I don't think so, and let me give you three 
reasons and perspectives why that is, and I'll do so briefly. 
First, S. 1100 would deal with what I think the ultimate 
problem here is, setting a rational time line for the backlog. 
Ultimately, that's what S. 1100 sought to do and would have 
done. I think what you're seeing with the litigation is that a 
lot of species are deserving of critical habitat and because of 
the resource crunch aren't getting it. The way you deal with 
that is to cut a deal. A deal, I might add, similar to what 
Secretary Norton cut with the Center for Biological Diversity, 
hardly can inside the beltway group, on multiple listings about 
a year and a half ago. It can be done if we put our attention 
to it. I'd say that about the backlog.
    The second thing I'd say is that I know I'm personally 
involved in four lawsuits right now where I'm on Mr. Manson's 
side. I've become a defendant intervenor in cases where 
industry is suing against critical habitat. So I don't know how 
many of his numbers included industry suits, but they are 
growing and have done so since the Bush Administration took 
office. So it's not just environmental groups bringing these 
suits.
    The third thing, and it ties everything together is that we 
would very much appreciate having a discussion with Mr. Manson 
and Steve Williams and the whole team over there, and at 
Commerce as well--for the marine species and on their 
priorities under the Act. I mean, I talked to you about the 
woodland caribou, which has less than 20 individuals on the 
U.S. side of the border. As far as I can tell, that is not yet 
a super-high priority at the Department of Interior. I would 
take their lecture on prioritization a little bit more 
seriously if indeed it was accompanied with their own 
prioritization scheme. Ultimately, though, I agree with Mr. 
Manson that we have to agree on how to spend scarce resources. 
We can't spend resources fighting about that. Ultimately, I'm 
sure that's what you're getting at there are other perspectives 
here.
    Senator Crapo. Why don't we just go from right to left, 
anybody who wants to pitch in on this. Mr. Douglas.
    Mr. Douglas. I don't question the motives of interest 
groups that file these suits under the Endangered Species Act. 
I think their motives are pure. I've certainly never been 
involved in any case where I thought that there was a profit 
motive for filing a case because you could recover your fees.
    That having been said, I think it is ironic in that the 
Fish and Wildlife Service is currently at least partially 
crippled by litigation and the Federal Government is funding a 
lot of these lawsuits. If you want to at least make the 
process, I don't want to say harder, but at least make it such 
that before you file a lawsuit, you'd better be real thoughtful 
about it, and in the event that the ability to recover fees 
might be more of an enticement to go ahead or less of a barrier 
to go ahead, then you might make it, making it a little harder 
to recover fees might slow it down just a little bit.
    If that can't occur, then I think it ought to be a little 
more equitable. I know that the perception is that industry 
groups are better funded or well funded and they have a harder 
time recovering their fees. So at the risk of spitting in the 
trough, I don't want to make it too hard for some of my clients 
to be able to recover as well.
    I agree with Mr. Snape wholeheartedly, for a change, that 
we should not alter the provisions that allow private parties 
access to the courts under the ESA. I too, within the last 12 
months, have been intervenor on the side of the Fish and 
Wildlife Service in a lawsuit, and I would not have had the 
opportunity to do that and help them defend an agency action, 
actually we've done this twice in the last year, but for that 
provision of the ESA. So I don't think that that needs to be 
altered.
    Senator Crapo. OK. Mr. Kostyack.
    Mr. Kostyack. Well, I'll just try to pick up on points that 
have not yet been made, because I agree with most of the 
comments that have been made on this question.
    First of all, I think it's important, Senator, for you to 
understand that there are two different types of Endangered 
Species Act lawsuits. Only some of these lawsuits are brought 
pursuant to the ESA citizen suit provision. Those are the 
deadline cases. A high percentage of the cases, and I think an 
increasing number of the cases, are brought pursuant to the 
Administrative Procedure Act, which has no attorney fee 
provision, by the way.
    Senator Crapo. Right.
    Mr. Kostyack. So maybe you understood this already, I 
didn't mean to suggest you didn't, but the point that ought to 
be understood is, if you're looking at the citizen suit 
provision, then you're really talking about deadline cases. I 
think that really is where the heart of the problem is. I don't 
think Congress wants to even contemplate going down the road of 
limiting the ability to sue over arbitrary and capricious 
Government action. Because obviously both sides of this debate 
use that quite a lot.
    On the citizen suit deadline provisions, obviously there 
has been a problem. We've had a lot of litigation. And it's 
created a backlog and it has affected the Service's ability to 
set its own priorities. How do we solve that problem? Does it 
require Congress to intervene, or can it be solved by the 
Administration? I would argue that the Administration has it 
easily within its authority to solve this problem today, or 
within a matter of weeks.
    We've talked about this over a number of years, and I 
really think we can make this happen, which is simply a matter 
of sitting down with the various groups, interest groups on 
both sides, laying out its own prioritization schedule, and my 
guess is the interest groups would defer to the services and 
their expertise on that issue.
    If they were able to do that and lay down all these 
critical habitat designations that are in the pipeline and come 
up with their own prioritization schedule, get everybody to 
sign on the bottom line and simply say, we will abide by this 
prioritization schedule, and we will all support you, the 
Administration, to go to Congress to get the funding to get 
this critical habitat designation process completed, this 
problem would be over. We have devoted enormous resources from 
the Government, not just paying attorneys fees, but the 
Government's own resources in terms of its own lawyers, staff 
biologists, agency directors preparing affidavits. It is really 
absurd.
    But it is not a problem that is unsolvable. In fact, the 
solution has been staring at us for years, and it really just 
requires a few individuals willing to roll up their sleeves and 
make it happen.
    Senator Crapo. Mr. Kightlinger.
    Mr. Kightlinger. Yes, Mr. Chairman. Most of the points have 
already been made. Our view, at least in the Endangered Species 
Act field is that most of this litigation is driven less by 
fees and more on this prioritization issue, which is a point 
others have made. It's different, and we have a law in 
California, Proposition 65, we call it, which requires warning 
labels about cancer causing substances to be slapped on 
virtually everything. That has generated a whole spate of 
lawsuits. That is really all about attorneys fees, primarily, 
more than it is about getting labels on glasses of water.
    But I don't see that so much in the Endangered Species Act 
field. It's been the prioritization and the timing issues. We 
think if those are addressed, you'll see a ratcheting down of 
the lawsuits.
    Senator Crapo. All right, thank you.
    All right, gentlemen, I'm through with my questions. I have 
more questions, but I have also run out of time. Actually, I 
like it when not a lot of the other members show up, because I 
get to ask more questions.
    [Laughter.]
    Senator Crapo. I would appreciate it if, as we cull through 
some of our paperwork here, if we find things we wish we would 
have asked, if you would respond in writing if we can submit 
some information to you. I want to just say thank you to all of 
you for your testimony and your interest in and support of our 
efforts to find a path forward here. I'm very pleased that we 
have been able to find what seems to be some common ground on 
which we can hopefully build another path forward, and get past 
the road block we ran into in the Senate last time and get this 
done.
    As you know, I'm planning to go beyond the hearing stage 
and develop legislation on this. We want this to be bipartisan, 
and we want it to be supported broadly. One of the reasons that 
we have focused on this issue first is not only because it's 
one of the more significant issues that we are dealing with on 
the Endangered Species Act, but it's one of those where we have 
the ability to find some common ground and build the support to 
get something done.
    So I most importantly appreciate your willingness to help 
us achieve that objective. And with that, this hearing is 
concluded.
    [The prepared statement of The American Farm Bureau 
Federation, submitted for the record, follows:]
    [Whereupon, at 11:22 a.m., the subcommittee was adjourned, 
to reconvene at the call of the chair.]
    [Additional statements submitted for the record follow:]

 Statement of Craig Manson, Assistant Secretary for Fish and Wildlife 
                 and Parks, Department of the Interior

    Mr. Chairman, I appreciate this opportunity to testify today on the 
state of the U.S. Fish and Wildlife Service's Endangered Species 
program as it relates to critical habitat designations.
    Let me begin by saying that the Department of the Interior 
(Department) and the U.S. Fish and Wildlife Service (Service) are 
committed to achieving the primary purpose of the Act the recovery of 
threatened and endangered species, and improving the efficiency and 
effectiveness of the Endangered Species Act (ESA). We also believe that 
conservation of habitat is vitally important to successful recovery and 
delisting of species.
    Designation of critical habitat has been a source of controversy 
and challenge for many years. As I will point out in this testimony, 
simply seeking additional funding for this program is not the solution. 
The Department and the Congress must work together to determine how to 
get the most value for species conservation out of the Federal 
resources devoted to the endangered species listing program.

Background
    For well over a decade, encompassing four separate Administrations, 
the Service has been embroiled in a relentless cycle of litigation over 
its implementation of Section 4 of the ESA. The underlying premise of 
those cases has been a dispute between the Service and numerous private 
litigants over the proper allocation of the limited funds appropriated 
by Congress to carry out the numerous petition findings, listing rules, 
and critical habitat designations mandated under the rigorous deadlines 
in Section 4. The Service now faces a Section 4 program in chaos not 
due to agency inertia or neglect, but due to limited resources and a 
lack of scientific discretion to focus on those species in greatest 
need of conservation.
    For many years the Service has been unable to comply with all of 
the non-discretionary deadlines imposed by Section 4 of the ESA for 
completing mandatory listing and critical habitat (listing program) 
actions within available appropriations. The majority of private 
litigants have therefore repeatedly sued the Service because it has 
failed to meet these non-discretionary deadlines. These lawsuits have 
subjected the Service to an ever-increasing series of court orders and 
court-approved settlement agreements, compliance with which now 
consumes nearly the entire listing program budget. This leaves the 
Service with little ability to prioritize its activities to direct 
scarce listing resources to the listing program actions most urgently 
needed to conserve species.
    Moreover, the accelerated schedules that often result have left the 
Service with almost no ability to confirm the scientific data in its 
administrative record before making decisions on listing and critical 
habitat proposals, without risking noncompliance with judicially 
imposed deadlines. Finally, it has fostered a second round of 
litigation in which those who fear adverse impacts from critical 
habitat designations challenge those designations. This cycle of 
litigation appears endless, is very expensive, and in the final 
analysis provides relatively little additional protection to listed 
species.
    Extensive litigation has shown that the courts cannot be expected 
to provide either relief or an answer, because they are equally 
constrained by the strict language of the ESA. The Department of 
Justice has defended these lawsuits and sought to secure relief from 
the courts to allow the Service to regain the ability to prioritize the 
listing program according to biological need. Almost universally, the 
courts have declined to grant that relief. In 1999, the U.S. Court of 
Appeals for the Tenth Circuit held that the Administrative Procedure 
Act, 5 U.S.C. Sec. 706, does not afford district courts with the 
discretion to refrain from ordering the Service to complete listing and 
critical habitat actions immediately when an absolute statutory 
deadline is being violated. Following that decision, no district court 
has deferred to the Service's system of prioritization and refrained 
from issuing an order where a deadline is at issue. We have twice 
appealed decisions to the U.S. Court of Appeals for the Ninth Circuit 
in an attempt to obtain a ruling that the courts have discretion to 
decline to issue an injunction when the Service has failed, due to 
resource constraints, to comply with a listing program deadline. Both 
attempts have been unsuccessful thus far.
    Nevertheless, a number of courts are now recognizing the obvious 
that there is a conflict between the ESA and the listing program 
appropriation, and that Congress has the ability to resolve this 
conflict. For example, last year Judge Paul Kelly ordered the Service 
to make an overdue petition finding within 30 days. Judge Kelly stated 
in his opinion in Center for Biological Diversity v. Norton, No. CIV 
01-0258 PK/RLP (ACE), however, that:

  The court recognizes that the Secretary is caught in a quandary. 
    Without sufficient funding or a change in the tasks required by 
    Congress, the Service cannot fulfill the myriad of mandatory 
    listing duties. . . . Lawsuits follow, requiring the Service to 
    spend a greater portion of its already insufficient budget on 
    litigation support. . . . More lawsuits will inevitably follow 
    unless Congress recognizes the problem it has created and acts to 
    solve the problem, either by appropriating additional funds, 
    amending the time limits or by giving the Secretary the discretion 
    to prioritize her workload. Until Congress does, tax dollars will 
    be spent not on or protecting species, but on fighting losing 
    battle after losing battle in court. The solution to this problem 
    lies not with the courts, but with Congress.

    Other courts have agreed with Judge Kelly. Simply put, the listing 
and critical habitat program is now operated in a ``first to the 
courthouse'' mode, with each new court order or settlement taking its 
place at the end of an ever-lengthening line. We are no longer 
operating under a rational system that allows us to prioritize 
resources to address the most significant biological needs. I should 
note that it is a direct result of this litigation that we have had to 
request a critical habitat listing subcap in our appropriations request 
the last several fiscal years in order to protect the funding for other 
ESA programs.
    The tension between the requirements of the listing program and 
resources is not new. It is already clear that the next Administration 
will be affected, because even at this point, critical habitat budgets 
into Fiscal Year 2008 are being dedicated to compliance with existing 
court orders and court-approved settlement agreements.
    In short, litigation over critical habitat has hijacked our 
priorities. The Service's listing program's limited resources and staff 
time are being spent responding to an avalanche of lawsuits, and court 
orders focused on critical habitat designations. We believe that this 
time could be better spent focusing on those actions that benefit 
species through improving the consultation process, the development and 
implementation of recovery plans, and voluntary partnerships with 
States and private landowners.
    In the past, this committee has proposed legislation, which the 
previous Administration supported, to move critical habitat 
designations to the recovery phase of the ESA. We recognize that this 
is one of a number of potential solutions by which Congress could 
address this difficult problem. We welcome the opportunity to work with 
the committee to craft a solution that meets wide approval.
    As I previously noted, this is not a new problem. In previous 
testimony before this committee, then-Director Jamie Clark noted that 
in 25 years of implementing the ESA, the Service had found that the 
designation of statutory critical habitat provided little additional 
protection to most listed species, while consuming significant amounts 
of scarce conservation resources. It was based on these beliefs that 
the Service found in most cases designation of critical habitat ``not 
prudent'' under the ESA.
    Like Clark, we believe that listing also invokes the Section 4 
recovery planning process, the Section 9 protective prohibitions of 
unauthorized take, Section 6 funding to the States, and Section 7 
Federal agency responsibilities. The Service believes that it is these 
measures that may make the difference between extinction and survival 
for many species.
    Most important, our efforts to respond to listing petitions, to 
propose listing of critically imperiled species, and to make final 
listing determinations on existing proposals are being significantly 
delayed. There are species not yet listed in Regions or geographic 
locations where litigation support has and will continue to consume 
much of our funding resources. For example in Hawaii, a single court 
order remanded 245 ``not prudent'' critical habitat determinations.
    Congress added the strict deadlines to the ESA to ensure that 
listing actions are completed in a timely manner. However, absent some 
measure to allow for a rational prioritization of the workload based on 
a consideration of the resources available, those strict deadlines have 
instead led to our current untenable situation where high priority 
listing actions may be indefinitely delayed. It cannot be overstated 
that managing the endangered species program through litigation is 
ineffective in accomplishing the purposes of the ESA.

The Listing/Critical Habitat Backlog
    The Service has, in addition to the critical habitat designations 
already required by court order, 158 backlogged critical habitat 
actions. There are also 257 candidate species on which the Service has 
enough information to propose listing, but listing is precluded by 
other, largely court-ordered, higher priority actions. We also have 
about 40 yet-to-be-dealt-with petitions. The listing backlog is too 
large to eliminate completely over a 1-or 2-year period. The Department 
has asked for a substantial increase, of $3.3 million, for Fiscal Year 
2004, but this increase would solely address expected court-driven 
obligations. It would not help to address the backlog. As of March 31, 
2003, the Service litigation workload was as follows 31 active lawsuits 
with respect to 32 species and 26 notices of intent to sue involving 27 
species.

Economic Analysis
    In contrast to the listing provision, Section 4(b)(2) of the ESA 
requires that the Secretary should take into consideration the economic 
impact of the critical habitat designation and any other relevant 
impacts before specifying any particular area as critical habitat. 
Hence, an economic analysis is part of the process of designating 
critical habitat. Section 4(b)(2) also provides a balancing mechanism 
the Secretary is given broad discretion to consider the economic 
impacts of any proposed critical habitat designation and exclude areas 
where she finds that the benefits of exclusion outweigh the benefits of 
designation. This requirement for balancing enables the Service to 
exclude an area (i.e., a critical habitat unit, or part of a unit) from 
a designation when the benefits of exclusion outweigh the benefits of 
inclusion, if the exclusion would not result in the extinction of the 
species.
    In a case brought by the New Mexico Cattlegrowers Association, the 
Tenth Circuit Court of Appeals held that the Service must examine ``all 
the costs of critical habitat whether or not they are coextensive with 
listing.'' The Service now requires that all economic analyses 
conducted for critical habitat designation apply this standard.
Habitat Protection and Critical Habitat Designation
    It has been our view that areas not in need of special management 
considerations or protections are outside the definition of critical 
habitat. For that reason, we exclude from critical habitat areas 
covered by plans that adequately manage for the species concerned. In 
recent rules, exclusions have included lands covered by Department of 
Defense Integrated Natural Resource Management Plans, areas with active 
Habitat Conservation Plans approved by the Service or by the National 
Marine Fisheries Service, and those with other management plans, 
including those of private landowners.
    We believe this policy is consistent with Secretary Norton's 
cooperative approach to conservation. With regard to critical habitat, 
as well as in other areas, we are continually working to find new and 
better ways to encourage voluntary conservation initiatives. 
Cooperative conservation of fish and wildlife resources is critical to 
maintaining our Nation's biodiversity. A proactive, preventative 
approach based on incentives could harness the voluntary spirit of the 
public to help stem the tide of species extinction.
    The Service currently has many conservation tools available which 
provide for close cooperation with private landowners, State and local 
governments, and other non-Federal partners and that are particularly 
important in our implementation of the ESA. For example, through the 
Candidate Conservation program, the Service can work with the States, 
landowners, and others to voluntarily conserve candidate and other 
declining species. It is with these species that we have the greatest 
flexibility in supporting our mutual partners on proactive conservation 
actions. Thus, a collaborative approach to conservation might result in 
removing the threats that necessitate listing. Similar to preventative 
medicine that hopes to save patients from the need for expensive 
procedures, hospitalization, or even a trip to the emergency room, 
species can be protected by interested partners working with the 
Service before they need the protections of the ESA.
    Conservation efforts on non-Federal property are also essential to 
the survival and recovery of many listed endangered and threatened 
species. The majority of the Nation's current and potential threatened 
and endangered species habitat is on property owned by non-Federal 
entities. The Service strongly believes that collaborative stewardship 
involving the proactive management of listed species is the best way to 
achieve the ultimate goal of the ESA that is, recovery of threatened 
and endangered species. The recovery of certain species can benefit 
from short-term and mid-term enhancement, restoration, and/or 
maintenance of terrestrial and aquatic habitats on non-Federal 
property.
    Safe Harbor Agreements (SHA) provide a means to garner non-Federal 
property owners' support for species conservation on their lands. They 
allow for flexible management by providing assurances to private 
landowners who implement conservation measures for listed species that 
their actions will not lead to additional ESA restrictions. SHAs have 
contributed significantly to the conservation of the red-cockaded 
woodpecker in the southeast as well as other species inhabiting private 
lands.
    Through other programs such as the Landowner Incentive Program, the 
Service provides financial assistance to partners interested in 
implementing conservation actions that benefit listed and other 
imperiled species on non-Federal lands. These programs reflect our 
belief, mentioned above, that the conservation of listed species and 
their habitat depends on the cooperative participation of non-Federal 
partners. These programs, which require non-Federal cost-sharing 
participation, reflect our strong commitment to conservation through 
cooperation, communication, and consultation with our private, State, 
and other non-Federal partners.
    The Habitat Conservation Planning Program provides a flexible 
process for permitting the incidental take of threatened and endangered 
species during the course of implementing otherwise-lawful activities. 
The program encourages applicants to explore different methods to 
achieve compliance with the ESA and to choose the approach that best 
meets their needs. Perhaps the Program's greatest strength is that it 
encourages locally developed solutions to listed species conservation 
while providing certainty to permit holders. Through this process of 
consultation and cooperation with our partners, the Program helps 
provide for the conservation of listed species on non-Federal land 
throughout the country.
    These tools are important in our implementation of the ESA. As 
noted above, we view lands where these programs provide for species 
conservation and management as not in need of critical habitat 
designations.
    However, a recent court case in the District of Arizona has cast 
doubts on our policy to exclude these lands from critical habitat based 
on these types of agreements and plans. In a case relating to Forest 
Service lands, the U.S. District Court in Arizona ruled that this 
interpretation is incorrect, and found that the fact that lands require 
special management necessitates their inclusion in, not exclusion from, 
critical habitat.
    Although the decision is limited to the jurisdiction of that court, 
it may negatively impact our future ability to use this policy 
elsewhere. The Service uses other methods besides this policy. For 
example, Section 4(b)(2) of the ESA allows the Department to exclude 
areas if the benefit of exclusion outweighs that of inclusion as long 
as it does not result in the extinction of the species. However, our 
possible inability to exclude lands with approved conservation 
agreements from critical habitat could serve as a powerful disincentive 
for landowners to enter into such agreements.
    I would also note that this policy has been applied to military 
lands with an approved Sikes Act Integrated Natural Resources 
Management Plan which addresses the needs of the species in question. 
As discussed in testimony before the committee last week, the 
Administration has proposed codifying the policy on excluding military 
lands from critical habitat based on these plans to reduce future 
litigation and challenges and provide more flexibility to the 
Department of Defense.

Summary
    The present system for designating critical habitat is broken. A 
process that provides little real conservation benefit consumes 
enormous agency resources and imposes huge social and economic costs. 
Rational public policy demands serious attention to this issue in order 
to allow our focus to return to true conservation efforts. We are 
prepared to work with Congress to identify ways of providing necessary 
legislative relief.
    Mr. Chairman, this concludes my prepared testimony. I would be 
pleased to respond to any questions you and other members of the 
subcommittee might have.
                                 ______
                                 
  Responses of Craig Manson to Additional Questions from Senator Crapo
    Question 1. How many court cases have been brought since 1998 
concerning critical habitat?
    Response. There have been 80 cases brought against the Fish and 
Wildlife Service (Service) since 1998 concerning critical habitat 
issues.

    Question 2. How much in attorney fees, and to whom, has the 
Department paid as a result of critical habitat litigation?
    Response. In almost all instances, attorney fees in critical 
habitat cases are paid from the Judgment Fund in the U.S. Treasury, not 
by the Department. However, our review has revealed several recent 
cases, which were consolidated and settled, where the Department has 
directly paid attorney fees as a result of critical habitat-related 
litigation. These include Middle Rio Grande Conservancy District v. 
Norton; Forest Guardians v. Norton; and State of New Mexico, et al. v. 
Norton, which all related to critical habitat for the silvery minnow. 
In this matter, fees totaling approximately $38,895.00 were paid from 
the Service's budget to cover fees incurred by Forest Guardians and the 
New Mexico Farm and Livestock Bureau.

    Question 3. What percent of Endangered Species program employees' 
time is spent working on critical habitat-related litigation work 
items?
    Response. The Endangered Species Program has approximately 44 full 
time employees responsible for critical habitat work. If we assume that 
litigation-related work includes litigation support and compliance 
work, then all of these 44 FTEs devote 100 percent of their time on 
critical habitat litigation-related work. This is approximately 3.7 
percent of Endangered Species Act program employees.

    Question 4. Can the FWS effectively use the economic impact 
analysis to produce realistic assessments and exclusions?
    Response. Yes, the Service does effectively use economic analyses 
when considering exclusions. Under section 4(b)(2) of the Endangered 
Species Act, the Secretary has the responsibility to designate critical 
habitat on the basis of the best scientific data available and, after 
taking into consideration the economic impact and any other relevant 
impact, to specify any particular area as critical habitat. The 
Secretary may exclude an area from critical habitat if it is determined 
that the benefits of exclusion outweigh the benefits of specifying it 
as critical habitat as long as the exclusion does not render the 
species extinct.
    The economic effects examined in our analyses include direct costs 
that result from compliance with section 7 of the Act, such as the 
administrative costs of completing informal and formal consultations 
with the Service, the project modification costs that may occur as a 
result of these activities, and other costs arising under the Act. The 
analyses also evaluate indirect effects of the designation, such as 
costs of project delays and regulatory uncertainty, and costs 
associated with changes in implementation of other laws (e.g., the 
California Environmental Quality Act). These are the steps followed in 
an analysis:

      Describing current and projected economic activities 
within and around the proposed critical habitat area;
      Identifying whether such activities are likely to involve 
a Federal nexus;
      For activities with a Federal nexus, evaluating the 
likelihood that these activities will incur costs associated with the 
designation, even if those costs are also associated with other 
elements under the ESA;
      Estimating the direct costs of expected section 7 
consultations, project modifications, and other economic impacts 
associated with the designation;
      Estimating the likelihood that current or future 
activities may require additional compliance with other Federal, State, 
and local laws as a result of new information provided by the 
designation;
      Estimating the likelihood that projects will be delayed 
by the consultation process or other regulatory requirements triggered 
by the designation;
      Estimating the likelihood that economic activities or 
property values will be affected by regulatory uncertainty;
      Estimating the indirect costs of the designation, as 
reflected in the cost of compliance with State and local laws, project 
delays, regulatory uncertainty, and effects on property values;
      Assessing the extent to which critical habitat will 
create costs for small businesses as a result of modifications or 
delays to projects; and
      Assessing the effects of administrative costs and project 
modifications on the supply, distribution, and use of energy.

    The Service and the Department then use this analysis, as well as 
information relating to non-economic impacts, to determine whether 
there are any areas where the benefits of excluding the area from 
critical habitat outweigh the benefits of designating the area as 
critical habitat. If the benefits of exclusion outweigh the benefits of 
designation, the area may be excluded as long as the exclusion does not 
render the species extinct.

    Question 5. Does the inclusion of impacts on critical habitat in 
the consultation process under section 7(a)(2) provide protection for a 
listed species over and above the jeopardy standard? If so, in what 
way? In one case, the Fifth Circuit found the ``definition of the 
destruction/adverse modification [of critical habitat] standard to be 
facially invalid.'' Sierra Club v. U.S. Fish and Wildlife Service, 245 
F.3d 434 (5th Cir. 2001). How does the FWS plan to respond? Can the 
agency realistically assess effects on recovery?
    Response. In 30 years of implementing the Act, the Service has 
found that in most instances, critical habitat designations add little 
protection above that provided by the jeopardy standard under section 
7(a)(2) of the Act. There are limited circumstances in which additional 
protection is provided. The most evident of such circumstances is when 
a critical habitat designation includes an area outside the current 
range occupied by the species. Consultation likely would not occur in 
these areas under the jeopardy standard because the trigger for 
consultation is that species ``may be present.'' Therefore, any project 
modifications that result from new consultations that occur because of 
the critical habitat designation are conservation activities that would 
likely not have occurred but for the critical habitat designation. 
However, because Congress directed that designation of critical habitat 
in unoccupied areas be ``exceedingly circumspect,'' this is not likely 
to be a significant issue. The Department, in cooperation with the 
Department of Commerce, is developing a proposed regulation to address 
the 5th Circuit's 2001 opinion.
    The Service believes that it can assess the effects on recovery. 
Generally, among the common effects of proposed Federal actions are 
that the likelihood of achieving recovery will be delayed or precluded 
due to direct or indirect effects of the action. Actions that preclude 
recovery of a species mean the species will remain vulnerable to 
extinction; actions that delay the achievement of recovery mean the 
species is subject to the types of threats that caused its listing for 
a longer period of time than otherwise necessary.

    Question 6. Currently, FWS is required to prepare the appropriate 
analysis under the National Environmental Policy Act for designations 
of critical habitat in areas under the jurisdiction of the U.S. Court 
of Appeals for the Tenth Circuit. Is FWS considering how to merge this 
with the economic analysis? Is this just another example of the costs 
far exceeding the benefits of designation?
    Response. In most cases, the Service produces an Environmental 
Assessment as the National Environmental Policy Act (NEPA) compliance 
document for critical habitat designations in the Tenth Circuit. In 
cases where an Environmental Impact Statement is done, the Service uses 
the assessment of economic impacts under NEPA as the economic analysis 
for critical habitat designation. In other words, we have consolidated 
the processes for critical habitat designation in the Tenth Circuit.

    Question 7. I understand that FWS relies on ``primary constituent 
elements'' to delineate the specific critical habitat within designated 
boundaries. How does this help others to know whether they are 
affecting the habitat? How is a Federal agency able to consider the 
effects on an unknown area? Doesn't this leave the presence of critical 
habitat up to the opinion of individuals on FWS staff?
    Response. Primary constituent elements are specifically identified 
biological and physical features--specific plants, presence of water, 
etc.--that must be present for the species to exist in an area. Most 
Federal agencies have or can readily contract for the expertise needed 
to determine if these elements will be affected by the agency's action. 
If primary constituent elements are affected by the proposed action, 
the agency will initiate consultation with the Service.
    Insofar as the presence of critical habitat is concerned, the 
boundary of every critical habitat unit is depicted on maps readily 
available to anyone, and those boundaries are determined by a 
rulemaking process which includes public review and comment on draft 
maps and descriptions of the primary constituent elements. Once final 
critical habitat is officially designated, there should be nothing 
unknown or dependent upon the individual opinion of Service staff as to 
its location or the nature of the primary constituent elements. In 
addition, along with the notice to designate critical habitat, we 
publish a description of actions which might constitute adverse 
modification of the proposed critical habitat designation.

    Question 8. With increasing acreage in critical habitat 
designation, and the increasing pressure to make to put more teeth in 
the application of critical habitat to Federal activities (which 
includes private activities funded or permitted by the Federal 
Government), is the FWS in danger of becoming a Federal land use 
control agency?
    Response. As noted previously, almost all critical habitat is 
already occupied by listed species. Accordingly, consultation under 
Section 7 of the ESA would be required for Federal activities in areas 
occupied by the species even without the critical habitat designation, 
and designation does not significantly increase the Service's role in 
reviewing Federal activities.

    Question 9. What percentage of the area designated as ``critical 
habitat'' in the United States is on privately owned lands?
    Response. The Service does not have the percentage of critical 
habitat that fits any particular land ownership available at this time. 
Many critical habitats overlap, so merely adding numbers from 
individual designations would not provide an accurate answer. The 
Service is developing a plan to enter its designated critical habitat 
map coordinates into a national GIS data base. This data base could 
help determine, without double counting areas, the percentage of land 
ownership areas designated as critical habitat. The Service would also 
be able to provide critical habitat data to the Administration's 
Geospatial One-Stop Initiative, led by the Department's U.S. Geological 
Survey (USGS) and the USGS internet map server, NationalAtlas.gov, thus 
making critical habitat information more accessible to affected and 
interested entities.

    Question 10. What arrangements does the Department have to 
compensate private landowners for loss of value or loss of use when 
their lands are included in a critical habitat area?
    Response. While no courts have ruled that designation of critical 
habitat is a taking under the Fifth Amendment and, thus, no just 
compensation is required for such designations, because half of all 
endangered species have at least 80 percent of their habitat on private 
lands, we believe that providing incentives to and active collaboration 
with private land owners is an important component of species 
protection.
    We provided a brief description of some of our collaborative and 
incentive-based activities in our statement for the April hearing 
before your subcommittee. These include incidental take permits and 
Safe Harbor Agreements, conservation banking, the exclusion from 
critical habitat areas covered by plans that adequately manage for the 
species concerned, and various grant programs.

    Question 11. What ``special management considerations or 
protection'' might be considered for lands included within the critical 
habitat of a species? Have any ``special management considerations or 
protection'' ever been implemented on any critical habitat lands? If 
these lands are privately owned lands, what arrangements does the 
Department make to ensure that these landowners are not penalized for 
any restrictions on use that may result from these ``special management 
considerations?"
    Response. Within the geographical area occupied by the species, the 
Act establishes two requirements for an area to be considered critical 
habitat. The area must contain features that are essential to the 
conservation of the species, and it must be true that those features 
may require special management or protection. Protection or management 
might include such activities as protecting riparian corridors, or 
providing for habitat restoration. However, the law does not impose on 
any landowner an obligation to undertake any conservation activities.
    The fact that the critical habitat designation does not 
automatically result in any special management being undertaken and, in 
the case of private landowners, generally acts as a disincentive to 
conservation management, is the major reason we believe the critical 
habitat process, as currently established, results in little if any 
benefit to the species.
                                 ______
                                 
Responses by Craig Manson to Additional Questions from Senator Jeffords
    Question 1. Is it the position of the Administration that Congress 
should eliminate the ESA's critical habitat protection? If Congress 
were to take this step, what mechanisms would remain in place to ensure 
that habitats needed for species recovery are protected?
    Response. It is not the position of the Administration that 
Congressshould eliminate the ESA's critical habitat protection. The 
Administration looks forward to working with Congress to develop a 
workable solution to the current breakdown. For example, one option 
that has been proposed would move the requirement to designate critical 
habitat from the time of listing to the time of recovery planning and 
make it non-regulatory, as in the Chafee-Kempthorne bill, S. 1100, 
which was introduced in the 105th Congress. With that change, the 
determination of which areas are important for a species' recovery 
would become a part of the recovery planning process, enabling the 
Service to determine a species' habitat needs at a time when there is a 
greater knowledge base about the species than at the time of listing. 
However, there are undoubtedly other alternatives which would also 
productively address this situation, and we welcome a chance to work 
with you to explore these.
    We acknowledge that protecting habitat is essential to achieving 
recovery for many listed species. But both this Administration and the 
previous Administration have found that critical habitat designations 
add little, if any, benefits to the species. For example, the ESA 
requires consultation for activities that may affect listed species, 
including habitat alterations, regardless of whether critical habitat 
has been designated. We have also learned over time that, in almost all 
cases, active management of the habitat is far better than the ``do no 
harm'' requirement accompanying a critical habitat designation. 
However, because many landowners and land managing agencies strongly 
oppose critical habitat designations, the current critical habitat 
process has proven counterproductive to meeting the real needs of the 
species in many instances.
    A significant problem is that the original ESA mechanism designed 
to address this, critical habitat designation, cannot produce the 
management needed. Active cooperation cannot be compelled by this 
regulatory scheme. Instead, we believe far better results can be 
achieved by developing and promoting cooperative conservation efforts 
between landowners and land managers.

    Question 2. Does the Administration intend to issue a new 
regulation defining adverse modification of critical habitat as called 
for by the Fifth Circuit decision in Sierra Club v. U.S. Fish and 
Wildlife Service? If so, when will this regulation be proposed and 
finalized? In the meantime, what standard of protection of critical 
habitat is being used by the Administration in the Fifth Circuit?
    Response. The Administration is developing a proposed rule that 
would address the Fifth Circuit's decision. Presently in the Fifth 
Circuit, in evaluating whether the effects of a proposed action 
constitute destruction or adverse modification of critical habitat, we 
analyze whether the effects of the proposed action appreciably diminish 
the value of the critical habitat for the recovery of the species.
    3) Does ESA Sec. 4(b)(2) give the U.S. Fish and Wildlife Service 
(FWS) the flexibility to exclude Defense Department lands from a 
critical habitat designation based on the existence of an adequate 
Integrated Natural Resource Management Plan (INRMP)? If so, what 
factors does FWS consider in determining whether an INRMP conserves 
listed species adequately enough to justify a ESA Sec. 4(b)(2) 
exclusion?
    Response. Section 4(b)(2) allows the Service to exclude DoD lands 
based on the existence of an adequate INRMP, or their importance to 
national security, or other relevant reasons under which the benefit of 
excluding the lands from critical habitat might exceed the benefit of 
including them. However, this is an action which is discretionary. The 
Department of Defense is seeking certainty, and we agree that this is 
warranted.

    Question 4. Have the courts interpreting ESA Sec. 4(b)(2) placed 
any limits on the U.S. Fish and Wildlife Service's ability to exclude 
habitats from critical habitat designations pursuant to this provision 
of the ESA? If so, please describe those limits. If not, please explain 
why ESA Sec. 4(b)(2) is an inadequate tool for substituting an INRMP 
for a critical habitat designation when FWS deems it appropriate.
    Response. The courts have ruled that the Secretary's ability to 
exclude areas under section 4(b)(2) is discretionary. Under the 
applicable standards, as long as proper procedures are followed and 
there is a rational basis on the record for the decision, we would not 
expect a court to overturn a 4(b)(2) exclusion, whether related to 
INRMPs or other factors. However, as noted above, this is an action 
which is discretionary, while the Department of Defense is seeking 
certainty.

    Question 5. Please estimate the cost of cleaning up the backlog of 
critical habitat designations and provide a timeline and a detailed 
breakdown of how this estimate was derived. If Congress were willing to 
fund the cleanup of this backlog, would there be any remaining 
obstacle?
    Response. Section 4 of the ESA requires critical habitat be 
designated for every species listed as threatened or endangered. 
Currently only 306 species or 25 percent of the 1,211 listed in the 
United States under the jurisdiction of the Service have designated 
critical habitat. Additionally, there are currently 257 candidate 
species for which listing proposals are believed to be warranted but 
which are precluded by higher priority actions. If these species are 
ultimately listed, critical habitat would need to be designated for 
most of them as well. Based on actual costs to complete recent critical 
habitat designations (between $200,000--$600,000 per designation 
including economic analysis, NEPA compliance, and drafting and 
publication costs), it would cost hundreds of millions of dollars to 
designate critical habitat for all of these species as the Act 
requires. It would also take many years and substantial resources to 
completely address the backlog of critical habitat designations. Even 
if the resource issues related to the critical habitat backlog are 
addressed, the real issue is whether or not statutory critical habitats 
are effective in helping to conserve listed species. In 30 years of 
implementing the ESA, the Service has found that the designation of 
statutory critical habitat provides little additional protection to 
most listed species, while consuming significant amounts of 
conservation resources. We believe that the service's resources and 
time could be better spent focusing on those actions that benefit 
species through improving the consultation process, the development and 
implementation of recovery plans, and voluntary partnerships with 
States and other landowners. The present system for designating 
critical habitat is broken, and we are prepared to work with Congress 
to identify ways of providing necessary legislative relief.

    Question 6. Please provide a list of any contractors that have been 
retained by the Administration to perform economic impact analyses 
under ESA '4(b)(2), the terms of those contractual arrangements, and 
copies of any instructions that have been provided to these contractors 
regarding how economic impact analyses should be performed.
    Response. The Service contracts with Industrial Economics (IEC) in 
Cambridge, Massachusetts, for completion of its economic analyses. In 
turn, IEC subcontracts out some of the analyses to other firms. Copies 
of the contracts and instructions are attached.
    Question 7. How much money would the Administration save if it were 
not to follow the Tenth Circuit's New Mexico Cattle Growers ruling and 
to instead estimate only the impacts of critical habitat designation 
that are not redundant with the impacts of other ESA provisions? Please 
provide a timeline and a detailed breakdown of how this estimate was 
derived.
    Response. We made a policy decision to apply the 10th Circuit 
ruling nationwide because we believe it to be an accurate statement of 
the law. It has since been endorsed by courts in other circuits, 
including the 9th Circuit and here in the District of Columbia, and has 
not been rejected in any other circuit. Accordingly, it is not at all 
clear that we could legally pursue the course of action raised in this 
question.
    In addition, it is difficult to estimate precisely how much the 
Service might save by this approach. Much of the Service's increased 
economic analysis costs result from doing a more robust analysis of the 
actual costs of critical habitat designations. Because we would still 
take the time to do these more robust analyses, we would likely still 
incur those associated costs.

    Question 8. When the Administration characterizes the critical 
habitat protection as essentially valueless, does it take into account 
the value that critical habitat designation plays in protecting 
habitats not occupied by the listed species? If so, what other ESA 
provision protects unoccupied habitats? What impact on listed species 
would result from removing critical habitat protections for unoccupied 
habitats? Approximately how many listed species will need to be 
restored to unoccupied habitat in order to recover?
    Response. The last element of the question highlights what we 
believe to be the most important aspect of the unoccupied habitat 
issue--that its value under the ESA is for reintroduction of the 
species in order to assist in recovery. However, a critical habitat 
designation cannot compel a private landowner, or a State or Federal 
agency, to allow reintroduction on their land, or to manage their land 
to benefit the species. This can only result from the voluntary 
cooperation of the landowner or land manager.
    As noted in my answer to Question 1 above, it is our experience 
that many landowners--public and private--oppose critical habitat 
designations. Inasmuch as most listed species are found, in whole or 
part, on State and private lands, critical habitat designations have 
become significant obstacles to obtaining landowner cooperation in 
species conservation, and a critical habitat designation for unoccupied 
habitat thus often harms rather than assists recovery for the species 
for which it is designated.
                               __________
 Statement of Jeffrey Kightlinger, General Counsel, Metropolitan Water 
                    District of Southern California

                              INTRODUCTION

    Chairman Crapo and members of the subcommittee, thank you for the 
opportunity to testify before you today on the subject of critical 
habitat and the Endangered Species Act (ESA). My name is Jeffrey 
Kightlinger, and I am the General Counsel of the Metropolitan Water 
District of Southern California. I am testifying today on behalf of the 
Western Urban Water Coalition (WUWC).
    The WUWC consists of the largest urban water utilities in the West, 
serving over 30 million western water consumers in 16 metropolitan 
areas in seven States, including major urban areas in California. The 
WUWC represents the following urban water utilities: Arizona city of 
Phoenix, city of Tucson; California East Bay Municipal Utility 
District, Metropolitan Water District of Southern California, San Diego 
County Water Authority, City and County of San Francisco Public Utility 
Commission, Santa Clara Valley Water District; Colorado Denver Water 
Department; Nevada Las Vegas Valley Water District, Southern Nevada 
Water Authority, Truckee Meadows Water Authority; Utah Central Utah 
Water Conservancy District; and Washington city of Seattle. WUWC 
members own and operate water management, water supply and 
hydroelectric projects, including dams, water conduits, reservoirs, and 
other facilities involved in water supply, transfer, and power 
generation services. In operating these projects, WUWC members are 
involved in a number of Federal and non-Federal activities that are 
subject to the ESA.
    Since its inception in 1992, the WUWC has been very active in ESA 
legislation, administrative reform and implementation. We have 
participated actively in numerous congressional efforts to reauthorize 
the ESA, as well as proposals for specific legislation. For example, we 
testified on, and in support of, S. 1180, the Kempthorne/Chafee 
reauthorization bill. We also participated in a legislative effort 
including environmental organizations, resource development 
organizations, and the Western Governors' Association, to develop a 
consensus ESA reauthorization bill. In addition to these congressional 
activities, the WUWC has played a major role in Clinton and Bush 
Administration efforts to make the ESA work more effectively, including 
administrative reform efforts such as the No Surprises Policy, guidance 
on habitat conservation plans (HCPs), candidate conservation 
agreements, safe harbor agreements, and similar efforts. Many WUWC 
members participate in HCPs and other species conservation efforts. The 
WUWC's general approach to the ESA has been to support its goals, seek 
to improve its implementation, and provide for proactive conservation 
efforts in a manner that is consistent with the goal of insuring a 
reliable, long-term supply of high quality drinking water for over 30 
million customers in western cities.
    WUWC members are directly affected by agency actions that arise 
under the subject of today's hearing: the designation of critical 
habitat and its regulatory consequences. The purpose of my testimony is 
not to complain about critical habitat or its implementation. Instead, 
the WUWC offers recommendations for constructive reform that will allow 
critical habitat to play a more effective and meaningful role in 
achieving the goals of the ESA, without resulting in inefficient and 
unduly expensive agency action or unnecessary restrictions on water 
supply activities.
    My testimony begins with a summary of the WUWC's experience with 
critical habitat, including a description of some current issues. In 
this discussion, I will identify general problem areas that need be 
addressed by Congress and the executive branch. Next, my testimony 
summarizes several aspects of critical habitat that the WUWC has 
addressed through recently released position papers. These issues 
include how to define the term ``adverse modification of critical 
habitat'' under section 7 of the Act and how to conduct an analysis of 
the economic impacts of critical habitat designation under section 4. 
In the final section, I set forth the WUWC's specific recommendations.

                 WUWC EXPERIENCE WITH CRITICAL HABITAT

    These are several examples of how critical habitat designation is 
of concern to WUWC members.
    One category of regulatory effects caused by designation results 
from imposing a geographically defined area for application of section 
7. Under section 7, a time-consuming consultation process occurs and 
all actions that would adversely modify or destroy critical habitat are 
prohibited. Such designation applies section 7 to actions merely 
because they fall within the scope of the designation, rather than 
because they necessarily affect members of the listed species. This is 
an issue of particular concern when the Services adopt the kind of 
broad geographic approach for designating habitat relied upon in recent 
years.
    In several instances, federally authorized actions have been 
stopped because they would modify designated critical habitat, even 
where the species is not present and would not be jeopardized. In Idaho 
Rivers United v. National Marine Fisheries Serv., No. C94-1576R 1995 WL 
877502 (W.D. Wash. 1995), a no jeopardy biological opinion was 
invalidated because, although listed fish were absent from an affected 
stream due to severe mine pollution, the stream was designated as 
critical habitat and fish might someday use unoccupied critical habitat 
after mine cleanup.
    Most recently, a court enjoined the U.S. Army Corps of Engineers 
from implementing maintenance dredging for an existing, federally 
authorized navigation channel on the Snake River. National Wildlife 
Fed'n v. National Marine Fisheries Serv., 235 F. Supp.2d 1143 (W.D. 
Wash. 2002). In its analysis of likelihood of success on the merits, 
the court found it likely that the National Marine Fisheries Service's 
(NMFS) biological opinion for the project would be found invalid 
because it concluded that designated critical habitat for Snake River 
chinook salmon would not be adversely modified. The court criticized 
NMFS for concluding that the seasonal dredging would have no adverse 
effect because it would occur when listed migratory fish were not 
present in the navigation channel. The court reasoned that ``the 
absence of a species from its critical habitat should not provide a 
basis for the determination that adverse modification is permissible.'' 
The court's reasoning indicates that once critical habitat is 
designated, it is protected in its own right without regard for the 
presence or absence of the listed species.
    These are of concern to WUWC members because of the very broad 
areas that have been designated in western States. For example, 
critical habitat designations by the U.S. Fish & Wildlife Service (FWS) 
have included 513,650 acres in Los Angeles, Orange, Riverside, San 
Bernardino and San Diego counties, California, for the coastal 
California gnatcatcher,\1\ 6.4 million acres in California, Nevada, 
Arizona, and Utah for the desert tortoise,\2\ 1,980 river miles in 
Colorado, Utah, New Mexico, Arizona, Nevada, and California for four 
endangered fishes in the Colorado River,\3\3 and 599 miles of streams 
and rivers in southern California, Arizona, and New Mexico formerly 
designated as critical habitat for the southwest willow flycatcher.\4\ 
Currently pending proposals for critical habitat designations include 
over 1.6 million acres in California for vernal pool species (4 shrimp 
and 11 plants),\5\ 1.2 million acres in Pima and Pinal counties, 
Arizona, for the cactus ferruginous pygmy--owl,\6\ and 57,446 acres 
along 657 miles of rivers and streams in Colorado and Wyoming for the 
Preble's meadow jumping mouse.\7\
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     \1\Final Determination of Critical Habitat for the Coastal 
California Gnatcatcher, 65 Fed. Reg. 63,679 (October 24, 2000).
     \2\Determination of Critical Habitat for the Mojave Population of 
the Desert Tortoise, 59 Fed. Reg. 5,820 (February 8, 1994).
     \3\Determination of Critical Habitat for the Colorado River 
Endangered Fishes: Razorback Sucker, Colorado Squawfish, Humpback Chub, 
and Bonytail Chub, 59 Fed. Reg. 13,374 (March 21, 1994).
     \4\Determination of Critical Habitat for the Southwest Willow 
Flycatcher, 62 Fed. Reg. 39129 (July 22, 1997) (designation invalidated 
and remanded by New Mexico Cattle Growers Ass'n v. U.S. Fish & Wildlife 
Serv., 248 F.3d 1277 (10th Cir. 2001).
     \5\Proposed designation of Critical Habitat for Four Vernal Pool 
Crustaceans and Eleven Vernal Pool Plants, 67 Fed. Reg. 59884 (Sept. 
24, 2002).
     \6\Designation of Critical Habitat for the Arizona Distinct 
Population Segment of the Cactus Ferruginous Pygmy-owl, Proposed Rule, 
67 Fed. Reg. 71,031 (November 27, 2002). The original final 
designation, since vacated by National Assoc. of Home Builders v. 
Norton, No. Civ.-00-903-PHX-SRB, (Sept. 21, 2001), encompassed 731,712 
acres in Pima, Cochise, Pinal, and Maricopa counties, Arizona. 
Designation of Critical Habitat for the Cactus Ferruginous Pygmy-owl, 
64 Fed. Reg. 37,419 (July 12, 1999).
     \7\Designation of Critical Habitat for the Preble's Meadow Jumping 
Mouse, Proposed Rule, 67 Fed. Reg. 47, 153 (July 17, 2002).
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    The NMFS has taken the same sweeping approach to critical habitat 
designations. In 2000, NMFS designated critical habitat for 19 
evolutionarily significant units (ESUs) of salmon and steelhead to 
include water bodies, beds, banks, and riparian areas in over 150 
watersheds, river segments, bays, and estuaries covering huge sections 
of the States of California, Idaho, Oregon, and Washington.\8\ NMFS 
designated ``all river reaches accessible to listed salmon or steelhead 
within the range'' of the fish.\9\ ``Accessible reaches'' were defined 
as ``those within the historical range of the [fish] ESUs that can 
still be occupied by any life stage of salmon or steelhead.''\10\
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     \8\Determination of Critical Habitat for 19 ESUs of Salmon and 
Steelhead, 65 Fed. Reg. 7764 (Feb. 16, 2000). This designation was 
subsequently withdrawn and remanded pursuant to a consent decree 
approved by the court in National Ass'n of Home Builders v. Evans, No. 
1 o'clock-CV-02799 (CKK) (D.D.C. April 30, 2002).
     \9\50 C.F.R. Sec. 226.212.
     \10\Id.
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    Second, depending upon how the term ``adverse modification'' under 
section 7(a)(2) is defined, the water supply operations of WUWC members 
could be subjected to a higher standard of protection than would be the 
case in the absence of such a designation. As a result of the decision 
in the Gulf Sturgeon case, Sierra Club v. U.S. Fish & Wildlife Service, 
245 F.3d 434 (5th Cir. 2001), adverse modification of critical habitat 
is arguably held to a ``recovery'' standard. While the precise 
regulatory meaning of the term ``adverse modification'' is yet to be 
defined, it is generally assumed than achieving ``recovery,'' as 
required under the Gulf Sturgeon case, requires a greater degree of 
protection than simply avoiding jeopardy to the continued existence of 
the species in the wild.
    This possibly heightened level of protection would be a matter of 
concern to numerous WUWC members. For example, WUWC members whose 
activities affect salmon and steelhead listed under the ESA are 
affected by NMFS's recovery-driven ``Habitat Approach'' to ESA 
consultation. The Habitat Approach is set forth in a detailed guidance 
document that NMFS applies to all consultations affecting salmon and 
steelhead. Habitat Approach: Implementation of Section 7 of the 
Endangered Species Act for Actions Affecting the Habitat of Pacific 
Anadromous Salmonids (1999). Under the Habitat Approach, NMFS equates 
the requirements of section 7 consultation with ``recovery``:
    Impeding a species' progress toward recovery exposes it to 
additional risk, and so reduces its likelihood of survival. Therefore, 
in order for an action to not ``appreciably reduce'' the likelihood of 
survival, it must not prevent or appreciably delay recovery. Id. at 3.
    A third area of concern results from the relationship between 
sections 7 and 9 of the ESA. As noted above, the designation of 
critical habitat has direct regulatory and economic consequences 
through consultation on Federal actions under section 7 of the ESA. 
However, those effects are also reinforced through the ``take'' 
prohibition in section 9 of the ESA.
    Under section 9, it is unlawful to ``take'' a listed species 
through actions that kill, injure, harass, or harm a species. Unlawful 
``harm'' to a species includes habitat modification when it leads to 
actual death or injury. At least one court has suggested that unlawful 
take or harm may include modification of designated critical habitat 
when a listed species is not present. Defenders of Wildlife v. Bernal, 
204 F.3d 920, 930 (9th Cir. 1999) (B. Fletcher, concurring) (explaining 
that finding of no take was based on evidence that modified habitat was 
unoccupied, but reserving question whether modification of designated 
critical habitat would be unlawful take).
    Any resource manager who seeks to utilize an area designated as 
critical habitat therefore is confronted with the heightened risk that 
unintended, incidental take could occur or be alleged in connection 
with any use of resources in a designated critical habitat area. 
Prudent resource managers may respond to such a risk by avoiding any 
use of the critical habitat area or, if that is not a feasible option, 
the resource manager may seek incidental take protection through a 
voluntary HCP and incidental take permit under section 10 of the ESA. 
When a resource manager applies for an incidental take permit, Federal 
action is required and consultation under section 7 of the ESA is 
required. Thus, the direct regulatory relevance of critical habitat 
designation is applied through ESA section 7 and reinforced by the 
increased threat of take liability under ESA section 9.
    One specific illustration of this problem is presented by the city 
of Phoenix water supply program and the designation of critical habitat 
for the southwest willow flycatcher. The city of Phoenix owns a water 
right to approximately 68,000 acre feet of storage space in the 
Horseshoe Reservoir on Arizona's Verde River. The City developed the 
storage space by adding spillway gates on Horseshoe Dam in the early 
1950's that expanded the Reservoir's storage capacity by adding 
approximately 26 feet to the full pool elevation of the reservoir. 
During wet years, the Reservoir has been filled to full pool, but a 6-
year drought has prevented the City from storing water in the upper 
elevations of the reservoir in recent years.
    During the drought, riparian vegetation including willows and 
tamarisk have grown in thickets along the riverbank where it flows 
through the area that would normally be inundated by a full reservoir. 
Recent biological surveys suggest that the endangered southwest willow 
flycatcher may be using this emerging habitat, and the U.S. Fish & 
Wildlife Service is now studying this new information as it prepares to 
propose the designation of critical habitat for the flycatcher. Should 
the Service designate as critical habitat those emerging habitat areas 
within the Horseshoe Reservoir pool, the city of Phoenix could be 
severely impacted by the potential loss of effective reservoir capacity 
that enables the City to generate and use an average of 21,000 acre 
feet of water per year.
    Although the City owns exclusive water rights within the Horseshoe 
Reservoir, the Dam and Reservoir are managed and operated solely by the 
Salt River Project (SRP). The operation of the Horseshoe Reservoir by 
SRP is a non-Federal action and, as such, does not require consultation 
under section 7. However, the designation of critical habitat within 
the Reservoir could increase the risk of take allegations under section 
9, should the Reservoir be filled and the emerging flycatcher habitat 
flooded.
    Significantly, the flycatcher is a migratory bird and is not 
present in the Verde River valley during most of the fall, winter, and 
spring months. Under normal hydrological conditions, the Reservoir 
would be filled during the winter and spring (during which time 
emergent flycatcher habitat could be flooded in whole or in part), but 
the water level would be drawn down by May, drying most emergent 
flycatcher habitat before flycatchers return to the Verde River valley. 
In this way, the city of Phoenix could exercise its water rights and 
fully utilize its storage capacity without directly killing or injuring 
flycatchers or their nests when the birds are present. Unfortunately, 
the volume of water that is drawn down in preparation for the return of 
the birds may exceed the ability of the city of Phoenix to put that 
water to beneficial use during that timeframe and some of the water 
could be lost. Should the emerging habitat be designated as critical, 
the city of Phoenix and SRP could face an increased risk of allegations 
that any damage to emerging habitat from inundation within the 
Reservoir harms the flycatcher species even when the birds are not 
present, and is therefore a take under the ESA.
    The City and SRP are accountable to the public for stable, long-
term management of water resources that are vital to the communities of 
central Arizona. The City is required under State law to use renewable 
water supplies, such as water from the Verde River to meet its demand. 
As such, it is impracticable for the city of Phoenix to avoid using the 
valuable and vital water rights it has developed in the Verde River. At 
the same time, under the circumstances, the City and SRP are likely to 
apply for an incidental take permit that will promote reliable use of 
water resources with assurances of ESA compliance.
    This ``ricochet effect'' of critical habitat designation can be 
expected in many instances where there is no apparent Federal action, 
but heightened efforts to manage risk under section 9's take 
prohibition lead to Federal action and consultation on critical habitat 
effects.
    All of these examples point to the need for reform of the manner in 
which critical habitat is designated and the regulatory significance 
that it carries once established.

                     CRITICAL HABITAT REFORM ISSUES

    In answer to the question ``Is the critical habitat system as we 
know it broken?'' this committee has itself consistently answered that 
in the affirmative. For a period extending over 5 years, this 
committee, by vote and by recommendation to the full Senate, has 
recognized that the critical habitat system used in administering the 
ESA is either intrinsically flawed in its legislative enabling statute 
or extrinsically flawed in its application, or both. Many meritorious 
proposals for reform have been made, both administratively and 
legislatively, in recent years. Unfortunately, none of these has taken 
hold. The WUWC hopes that, through the efforts of this committee, the 
House Resources Committee, and the Departments of Commerce and the 
Interior, these problems can now be addressed through proactive efforts 
that benefit both species and the regulated community.
    There are some fundamental realities associated with critical 
habitat. These are:

    1) It makes little sense to invest the limited resources of agency 
staff on the numerous lawsuits focusing on critical habitat, when their 
efforts could be better applied to habitat improvement and recovery.
    2) Courts are not the right place to prioritize agency actions and 
budgets affecting all endangered species.
    3) FWS and NMFS (the Services) do not have an effective means to 
address the problems posed by the critical habitat deadlines and 
requirements imposed by the Act. These deadlines are driving an 
overwhelming docket of lawsuits, and that litigation is paralyzing the 
overall ESA program.
    4) The Services do not have adequate resources to discharge their 
duties under the ESA generally or the Act's critical habitat 
requirements in particular. As the WUWC has testified previously, an 
effort should be made to provide the Services with the resources 
necessary to carry out their duties under the Act.
    5) The requirement that the Services designate critical habitat 
concurrent with the listing process is a mandate that dictates less 
than fully informed decisions. The requirement prevents the use of the 
best available science to explore the real needs of the species, it 
also results in decisions that tend to over-designate critical habitat 
and cause unnecessary regulatory burdens.
    6) Critical habitat can, and does, have an economic impact as a 
result of the additional restrictions that are imposed. These impacts 
can be measured and should be taken into account in balancing costs 
versus benefits at the time of designation. Such an analysis is 
necessary to weigh the benefits of including versus excluding an area 
as critical habitat.
    7) When properly applied, the prohibition on adverse modification 
of critical habitat can be an important conservation tool. However, 
when it is too broad in application, the net of effect is to cause 
over-regulation and opposition to species conservation efforts.

    The WUWC believes that each of these problem areas can be solved. 
While comprehensive legislative reform of the overall ESA remains 
desirable, focused congressional initiatives or actions by the 
Administration also can go a long way toward improving the critical 
habitat program.
    The WUWC is a pragmatically driven coalition that seeks a balance 
between the extremes. We act as a policy resource to committees and the 
Administration, to provide alternatives that can improve the ESA's day-
to-day administration for species, as well as for delivering water to 
our broad constituencies. To this end, we have explored the question of 
how to improve critical habitat designation and implementation. Our 
specific proposals for achieving such reform are discussed below.

                   CRITICAL HABITAT REFORM PROPOSALS

    The WUWC's critical habitat recommendations fall in three 
categories: 1) timing of designation; 2) analysis of economic impacts 
at the time of designation; and 3) definition of the term ``adverse 
modification'' under the prohibition of section 7(a)(2). Each 
recommendation is addressed separately.

1. Designate Critical Habitat After a Species is Listed, Coordinated 
        With Recovery Plan Preparation
    As currently drafted, the ESA requires that critical habitat be 
designated at the time of listing. In reality, these designations are 
seldom made coincident with listing. This practice has resulted in a 
spate of lawsuits to force designation. These lawsuits are often 
successful, resulting in a massive backlog of court-enforced 
designations. The Services lack the resources to carry out this 
responsibility effectively. As a result, designations are hurried, and 
often imprecise and overly broad. In addition, as a practical matter, 
there generally is not enough information available at the time of 
listing to define critical habitat accurately. Such information is more 
generally available when recovery plans are prepared. The WUWC believes 
that designation should not be required at the time of listing, but 
instead should be deferred to be coincident with recovery plan 
development. Congress needs to relax this restriction to relieve the 
litigation burden and make possible more common sense, and 
scientifically justified designation decisions.

2. Require Accurate Assessment of the Economic Impacts of Critical 
        Habitat
    The courts have made it clear that the Services must accord 
meaningful consideration to the economic impacts of critical habitat 
designation. To do so, the WUWC recommends that a formalized approach 
to conduct such analyses be developed by the government. The WUWC has 
developed recommended guidance for this purpose. Our position paper on 
how to conduct such an economic analysis is attached to my testimony. 
See Exhibit 1. Our proposal is based on the following principles.
            a. Not All Habitat Is Equally Important to Species 
                    Conservation: Delineate and prioritize habitat 
                    based on biological qualities that contribute to 
                    species conservation
    A useful and meaningful comparison of the benefits and costs of 
critical habitat designation must begin with recognition that some 
areas of habitat are more valuable for species conservation than other 
areas. Biologists within the Services should use their professional 
judgment to delineate and prioritize habitat segments based on the 
quality of habitat attributes present within a habitat segment and the 
degree to which the habitat segment is essential to the conservation of 
a species. The process of delineating and prioritizing habitat segments 
satisfies the ESA's requirement that critical habitat be based on 
``specific geographic areas'' that contain physical and biological 
features that are essential for the conservation of the species and 
require special management. 16 U.S.C. Sec. 1532(5)(A).\11\
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     \11\``Prior to designation, there must be a determination of the 
constituent elements of air, land, and water areas essential to the 
species. These constituent elements are defined as including physical 
structures and topography, biota, climate, human activity, and the 
quality and chemical content of the land, water, and air, with a focus 
on the physical and biological needs of the species.'' 50 C.F.R. 
Sec. 424:12.
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    By delineating and prioritizing habitat, biologists provide 
economists with a means for quantifying the benefits of habitat 
designation that can then be compared to the costs or economic impacts. 
Without delineation and prioritization of habitat based on biological 
qualities, all habitat must be treated as though it is of equal 
biological value and significance. When all habitat is equal, economic 
costs are the only consideration in the exclusion process. Areas where 
critical habitat protection costs are high will be more likely to be 
excluded from designation and areas where critical habitat protection 
costs are low will be more likely to be designated regardless of the 
biological qualities that may exist in the included and excluded areas. 
The prospect of including or excluding areas from designation based 
solely on economic costs should give biologists the courage to 
delineate and prioritize habitat based on its value for species 
conservation.
            b. Avoid Expensive Efforts to Monetize Biological Benefits: 
                    Attempting to monetize the biological benefits of 
                    designation and species recovery adds little value 
                    for policymaking
    While it is important to delineate and prioritize habitat areas 
based on biological qualities, there is little value in attempting to 
monetize the biological value of habitat areas for purposes of 
comparing costs and benefits of designation. With the passage of the 
ESA, the United States has implicitly assumed that the benefits of 
saving a species from extinction exceed the economic costs of species 
recovery for the Nation as a whole. The economic analysis called for in 
the ESA should find the least cost combination of 1) critical habitat 
areas, and 2) associated management measures that will provide for the 
recovery of the species.
    Placing a monetary value on the recovery of a species or the 
contribution that a particular habitat area makes to recovery requires 
nonmarket valuation studies. The methodology and results for such 
studies are widely debated within the economics profession, and 
frequently lead to more confusion and debate than clarity in 
decisionmaking. Monetizing the biological benefits of designation and 
recovery is not necessary for the policy decisions that need to be 
made, but it adds significant administrative costs that should be 
avoided.
            c. Operationalize Special Management for Critical Habitat: 
                    Specify what ``special management'' is necessary if 
                    habitat areas are designated as critical
    Delineation and prioritization of habitat areas helps economists to 
identify the benefits of designation, but economists also need 
information on habitat protection measures that will impose costs. 
Economists need to know what special management measures or protections 
are likely to be imposed on each habitat segment if it is designated as 
critical.
    For instance, critical habitat designation will often mean 
restrictions on current or future uses of land and water, or 
requirements for increased water levels at certain times of the year. 
Specificity is required for economists to assess economic activity with 
and without critical habitat designation. Merely designating land areas 
leaves economists' imagining what restrictions may be biologically 
implied and generates concern and uncertainty among stakeholders.
    An attempt should be made to describe these special management 
measures and protections in a manner that is distinct from the 
requirements that would be imposed to prevent jeopardy to the survival 
of a species if it is present in the habitat area. For example, a set 
of fundamental ``jeopardy'' prescriptions might be necessary to ensure 
survival of the species by protecting individual animals from 
destruction or to mitigate the rate of habitat destruction. By 
comparison, an additional set of critical habitat prescriptions might 
be added to preserve existing high quality habitat or to restore 
degraded habitat to an improved condition.
    A comparison of special management measures to prevent jeopardy or 
protect critical habitat for a given species could be accomplished by 
developing alternatives in a manner similar to the development of 
action alternatives for purposes of the National Environmental Policy 
Act. At a minimum, prescriptions for a no action or jeopardy 
alternative could be compared with special management prescriptions for 
designated critical habitat. Additional sets of critical habitat 
prescriptions could be formulated as alternatives where a proposed 
designation is of broad biological, economic, and social consequence. 
Examples of economic analysis based on comparisons of species and 
habitat protection alternatives already exist.\12\ Studies such as 
these may serve as models for the development of specific management 
alternatives that will help economists to differentiate between the 
economic costs of ESA protection under the jeopardy and critical 
habitat standards.
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     \12\See, e.g., Northwest Power Planning Council, ``Human Effects 
Analysis of the Multi-Species Framework Alternatives'' (2000); Huppert 
et al., ``Economic Effects of Management Measures Within the Range of 
Potential Critical Habitat for Snake River Endangered and Threatened 
Salmon Species'' (1992).
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            d. Use A Pragmatic Approach: Economic analysis must be 
                    practical and meaningful to policymaking
    In designating critical habitat, the Secretary must ``weigh the 
benefits of exclusions against those of inclusion of particular areas 
within the designated habitat.'' Catron County Board of Comm'rs v. U.S. 
Fish and Wildlife Serv., 75 F.3d 1429 (10th Cir. 1996). The benefits of 
exclusion are avoided costs to resource owners and users. Economic 
analysis of critical habitat designation can be viewed as a type of 
project analysis where the critical habitat designation is a non-
construction project (a decision). Many of the decisions will be about 
restrictions on current or future resource use, which can be considered 
permanent, but not irreversible.
    The required analysis is not so much benefit-cost analysis, but 
that special class of benefit-cost analysis known as cost-effectiveness 
analysis. Here the objective or ``numerator'' is not expressed in 
monetary terms, but in biological terms such as those habitat 
conditions essential for the conservation of the species. A cost-
effectiveness analysis may be performed by (1) developing alternative 
configurations of habitat designations that provide equivalent 
biological benefits and selecting the least cost alternative or (2) by 
assigning habitat segments ordinal biological and cost values and 
including or excluding areas based on their marginal contributions to 
total costs and benefits.
    Under the first cost-effectiveness approach, each of the options to 
be analyzed may be defined as a combination of habitat areas that 
provides equivalent biological benefits, so that economists may perform 
a least-cost analysis to select a habitat configuration that imposes 
the least cost by excluding areas where higher costs may be avoided.
    Under the second cost-effectiveness approach, each habitat area may 
be analyzed in a 2 x 2 matrix that assigns ordinal values for high and 
low economic cost and high and low biological value. Areas with high 
costs and low biological values will be good candidates for exclusion. 
Areas with low economic costs and high biological values will be good 
candidates for designation. Indeed, there may be some areas so 
important to a species that they should be designated regardless of the 
economic impacts. Areas that are low cost and low value may be excluded 
or included by the Services with less potential for public controversy. 
Areas that are high cost and high biological value can be intensely 
debated by the public for inclusion or exclusion. Using a simple matrix 
and decisionmaking process such as this will promote meaningful public 
participation and it will focus decisionmakers and the interested 
public on the most important factors in a complicated process. It will 
also approximate the least-cost analysis method that assumes species 
conservation as a given objective and minimizes the costs of obtaining 
that objective.
    Because cost-effectiveness analysis involves comparisons between 
options, ordinal rankings between options are more important than 
absolute, cardinal measurements of dollar costs. The cost of doing the 
economic analysis of critical habitat is a very real administrative 
burden to both agency and stakeholders. Procedural short-cuts, or 
approximations, where done in an even and unbiased manner according to 
professionally accepted methods, should still describe the level and 
distribution of economic impacts with sufficient accuracy, and should 
not adversely affect decisions about which options to include. It is 
also important that the intricacy of the analysis and the use of 
original data be scaled to the size and complexity of the critical 
habitat being considered. For example, a more complete analysis is 
justified for a migratory fish or bird covering large areas than for a 
rare plant known to occupy only a few hundred acres. Consistent with 
FWS analyses in the early 1990's, large-scale designations may justify 
a more rigorous model and data set for measuring economic impacts, but 
not all designations will require such extensive analyses.\13\
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     \13\See, e.g., U.S. Fish & Wildlife Service, The Economic Analysis 
of Critical Habitat Designation Effects for the Northern Spotted Owl 
(1992).
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            e. Decision Makers Should Know ``Whose Ox Is Gored``: Local 
                    impacts matter for a full social accounting of who 
                    is impacted
    Analysis of economic impacts from critical habitat designation 
should make the incidence of economic costs explicit for 
decisionmakers. In Middle Rio Grande Conservancy Dist. v. Babbitt, 2000 
U.S. Dist. LEXIS 21438 *59-*76 (D.N.M., Nov. 21, 2000), the court was 
critical of an economic analysis of critical habitat designation for 
the silvery minnow because it concluded that economic impacts were 
insignificant from a long-term national perspective. The court found 
the conclusion to be callous and insensitive to the very real near-term 
economic costs to region designated as critical habitat. The Services' 
approach to future analysis of critical habitat impacts should avoid a 
repeat of the highly theoretical conclusion that all economic impacts 
are insignificant over the long-term and broad-scale.
    In the early science of cost-benefit analysis, there was little 
attention given to who received benefits or incurred costs. In the U.S. 
Flood Control Act of 1936, Congress declared that ``benefits to 
whomsoever they shall accrue'' of Federal projects shall exceed costs. 
Agencies like the Corps of Engineers, Bureau of Reclamation, and Soil 
Conservation Service (now Natural Resources Conservation Service) used 
different analytical approaches, so attempts were made to standardize 
project analysis. As project analysis evolved, more attention was given 
to the incidence of costs and benefits.
    A series of Federal publications on project analysis culminated in 
the ``Principles and Standards for Water and Related Land Resource 
Planning,'' published in the Federal Register, at 38 Fed. Reg. 174, by 
the Water Resources Council in 1973. The Principles and Standards lay 
out four accounts to display benefits and costs among different plans: 
1) national economic development, 2) environmental quality, 3) regional 
development, and 4) social well-being. The regional development account 
should not be ignored in critical habitat studies.
    The decision rule for Federal project analysis has generally been 
``Potential Pareto Superiority.'' That is to say, a new economic 
condition is judged superior to the existing condition if, by changing 
the condition, the gainers could compensate all losers and still remain 
better off. Note that this definition turns on potential, not actual, 
compensation of the losers of the new policy. Objective economics is 
silent on whether the compensation should actually be paid because 
either choice requires a normative judgment.
    Accounting for distributional impacts helps to inform 
decisionmakers such as the Services who are asked to make a somewhat 
normative judgment whether the costs of critical habitat designation 
outweigh benefits for a given area of habitat. ``In fact, a welfare 
analysis that does not adequately indicate individual group effects may 
be misleading or useless to government officials endowed with authority 
to make interpersonal comparisons.'' (HJS, Applied Welfare Economics 
and Public Policy, p. 46). Furthermore, other Federal laws such as the 
Regulatory Flexibility Act, 5 U.S.C. Sec. Sec. 601-612, require the 
Services to consider the economic impacts of their regulations on small 
entities such as individuals, small businesses, and local government. 
An analysis of distributional impacts of critical habitat costs is 
essential for fulfilling this requirement.
    As stated in Principle 3 above, Potential Pareto Superiority was 
assumed in the ESA when Congress determined that the national benefits 
of conserving a given species exceeds all costs. Therefore, the 
national economic development (NED) account for species conservation 
can be assumed to be positive. The function of economic analysis of 
critical habitat designation under the ESA therefore is to inform 
decisionmakers of the relative costs and benefits in the region where 
habitat designation will occur. Delineating the regional or local 
winners and losers is essential to informed comparisons between 
critical habitat options, and to informing decisions by the Services in 
the critical habitat economic impact exclusion process.
3. Define ``Destruction or Adverse Modification of Critical Habitat''
    Critical habitat derives its regulatory significance, in a large 
degree, from the prohibition in section 7(a)(2) on the adverse 
modification of such habitat. Section 7(a)(2) also prohibits actions 
that cause ``jeopardy'' to listed species. The Services' definitions 
for the two consultation tests, ``jeopardy'' and ``destruction or 
adverse modification,'' are quite similar. Because the Services have 
tended to treat the jeopardy and critical habitat tests as equivalent 
regulatory standards, the agencies have failed to designate critical 
habitat for most listed species. Federal courts have held that the 
Services must designate critical habitat because it provides distinct 
protection for listed species apart from the jeopardy test that becomes 
effective with the listing of a species. See Gulf Sturgeon, supra; 
Natural Resources Defense Council v. U.S. Dept. of the Interior, 113 
F.3d 1121 (9th Cir. 1997).
    Because Federal courts now have held that the jeopardy and critical 
habitat standards for consultation under the ESA are distinct tests, 
the Services must resolve the meaning of that distinction as a 
fundamental condition for determining the economic impact of critical 
habitat designations. Environmental advocates have pressed for a 
distinction based on whether critical habitat effects will impair or 
promote recovery of a species. Indeed, the ESA defines ``critical 
habitat'' as ``specific geographic areas'' that are ``essential to the 
conservation of the species'' and it defines ``conservation'' as ``use 
of all methods and procedures'' which are necessary to bring the status 
of a listed species to the point where protection afforded by the ESA 
is no longer necessary. 16 U.S.C. Sec. 1532(3),(5)(A). Many equate 
conservation with de-listing of a species or recovery.
    In the Gulf Sturgeon decision, the Fifth Circuit appears to have 
held that critical habitat protection is a ``recovery'' standard that 
is distinct from the jeopardy standard. Gulf Sturgeon invalidated the 
Services' regulatory definition of ``destruction or adverse 
modification'' of critical habitat because it was tied to the survival 
of a species and not just species recovery. 245 F.3d at 443. In that 
case, the court invalidated the definition of adverse modification 
which equated that term with jeopardy.
    As a result, the Services must now promulgate a new definition of 
the term. The WUWC believes that adverse modification should be defined 
to accomplish several key objectives. These are:

    1. As required by the court decision, to link the term to recovery.
    2. The adverse impacts should be tied to the condition of the 
specific biological and physical habitat elements that were identified 
in, and the basis for, designation of critical habitat in the first 
instance. As required by section 7(a)(2), the determination whether 
those elements have been appreciably diminished is to be based upon the 
``best scientific and commercial data available'' at the time of the 
specific consultation. Thus, although the most current data should be 
used, the measure for recovery is to be based on the reasons for the 
designation in the first instance. Such an evaluation should make 
allowances for new information shedding light on recovery needs.
    3. The concept of ``net effects'' should be reflected, so that 
adverse impacts can be offset by protective measures and replacement 
habitat associated with the proposed action. This concept is already 
reflected in reasonable and prudent alternatives in biological 
opinions, and it should be incorporated into the determination of 
whether adverse modification would occur.
    4. In addition to these changes to the definition, the Service's 
Section 7 Handbook should be revised to assist in explaining how 
adverse modification will be determined. In particular, the Handbook 
revision should emphasize the importance of avoiding too narrow an 
analysis of the relationship between the impacts of the proposed action 
and recovery. Assessing recovery solely in the context of impacts of 
the activity in the action area could lead to a result of finding 
adverse modification even though those effects are inconsequential when 
viewed from the perspective of the overall designated area. This is 
especially likely to be the case when large areas are designated. In 
such a circumstance, even an impact that affects a significant amount 
of habitat in the action area still may not appreciably diminish the 
overall recovery prospects for the species. This principle should be 
explained in the Section 7 Handbook.

    Two related critical habitat reforms should be considered. First, 
the Services should ask for public input on the question of whether the 
regulatory definition of the term ``jeopardy'' also should be revised. 
The Gulf Sturgeon case raises the question of the proper relationship 
between jeopardy and adverse modification. If adverse modification is 
to be linked to recovery, the logically related inquiry is how the 
recovery and survival concepts should be dealt with in determining 
jeopardy. This is an issue that should be presented for public comment 
as part of the adverse modification rulemaking.
    Second, perhaps the most important issue associated with critical 
habitat that is in need of reform, is the manner in which designations 
are made. The Services need to develop an approach to designation that 
does not merely result in all possible habitat being determined to be 
``critical.'' Part of this reform calls for the development of a 
meaningful and realistic approach to analyzing the economic 
consequences of designation. In addition, the biological criteria 
applied to identify areas that are essential to the conservation of the 
species need to be revised so that only those areas important for 
recovery will be designated. Administrative reform to achieve more 
precise and carefully delineated critical habitat designations should 
be coupled with revision to the regulatory definitions.
    Based upon these concepts, the revised definition of critical 
habitat would read as follows:
    Destruction or adverse modification means the net effect of a 
direct or indirect alteration that appreciably diminishes the value of 
the physical or biological features of the designated area such that 
they no longer meet the needs considered to be essential to the 
conservation of the species at the time of designation, after 
consideration of offsetting improvements in habitat or protection for 
replacement habitat associated with the proposed action.

                           RECOMMENDED ACTION

    To implement the recommendations and principles described above, 
Congress and the Services should take several actions.
    First, the ESA needs to be amended to eliminate the requirement 
that critical habitat should be designated at the time of listing. 
Instead, the deadline should be made more discretionary and generally 
associated with the development of recovery plans.
    Second, the regulatory definition of adverse modification needs to 
be revised as described above in this testimony.
    Third, the Services should develop a detailed framework and 
methodology for economic analyses of critical habitat designation 
through a process of public notice in the Federal Register with review 
and comment. The framework and methodology may be embodied in 
amendments to the Services' joint regulations on critical habitat 
designation, 50 C.F.R. Part 424, or in a formal guidance document 
similar to the Services' Habitat Conservation Planning and Consultation 
Handbooks, or using a combination of rule amendments and guidance. The 
framework and methodology for economic analysis of critical habitat 
designation should satisfy fundamental standards based on the 
principles set forth in this paper:
    l Stop using the ``incremental'' or ``baseline'' approach for 
economic analysis and require that each critical habitat designation 
include an exclusion process based on a professional and meaningful 
economic analysis of the relative economic costs for designation of 
specific geographic areas as critical habitat.
    l For a given species and proposed habitat designation, require the 
Services to delineate and prioritize habitat segments based on their 
relative value in conserving a listed species.
    l For the exclusion process, use a least-cost or cost-effectiveness 
approach that assumes the objective of species conservation as a given 
that need not be monetized, and searches for a critical habitat 
configuration that satisfies the conservation objective while 
minimizing costs. Use pragmatic decisionmaking short-cuts such as 
ordinal ranking of habitat segments and the costs of critical habitat 
protection for a particular habitat segment.
    l For a given species and proposed habitat designation, require the 
Services to distinguish between a set of resource prescriptions that 
would likely be required to avoid jeopardy and a set of additional 
resource prescriptions necessary to conserve the species. This will 
enable the Services' economists to assign different economic costs to 
the inclusion or exclusion of a specific geographic area from critical 
habitat designation.
    l Calculate the costs of designation using accepted professional 
economic methods and data that are scaled to the scope of a proposed 
designation and its biological, social, and economic impact. For 
designations involving a highly localized species, a simple tally of 
impacted activities and expected economic costs may be conducted using 
available secondary data or informal survey methods such as telephone 
interviews with affected agencies and property owners. However, more 
sophisticated data sets and models such as input-output or computed 
generalized equilibrium should be used to calculate economic costs for 
large-scale designations and expected large scale economic impacts that 
are directly and indirectly caused by designation.
    l In all economic analyses of critical habitat designation, use an 
accounting stance that recognizes localized and regional impacts in the 
near term so that decisionmakers are provided with information on the 
welfare effects of designation and are not misled by a limited 
consideration of national accounts over the long term.

                               CONCLUSION

    The WUWC believes that critical habitat can be made an effective 
part of the overall ESA program. To do so, focused reform initiatives 
are necessary to: cause the timing of such designations to occur when 
the best data are available; standardize an approach to meaningful 
economic analysis; and redefine the meaning of adverse modification. 
This approach will result in more efficient, cost-effective, and 
appropriate protection for critical habitat, without generating such an 
overwhelming workload for the Services that the ESA program slows to a 
halt or causes unnecessary restrictions on the nonFederal sector. The 
WUWC looks forward to working with Congress and the Bush Administration 
to achieve these goals.
                                 ______
                                 
      WESTERN URBAN WATER COALITION ``FOR THE FUTURE OF THE WEST"
                             POSITION PAPER

            Administrative Reform of Endangered Species Act

  GENERAL PRINCIPLES FOR ANALYSIS OF THE ECONOMIC IMPACTS OF CRITICAL 
                          HABITAT DESIGNATION

Introduction
    The Endangered Species Act (``ESA'') requires the U.S. Fish & 
Wildlife Service (``FWS'') and the National Marine Fisheries Service 
(``NMFS'') (collectively the ``Services'') to consider economic impacts 
when they designate critical habitat. Any area may be excluded from 
critical habitat if the benefits of exclusion outweigh the benefits of 
specifying such area as part of the critical habitat, provided deleting 
the area will not result in extinction of the species. The courts have 
recently invalidated the use of the ``incremental'' or ``baseline'' 
approach (which attributes all economic impacts to the jeopardy test of 
the listing decision, and few or no economic impacts to critical 
habitat designation) in the analysis of the economic impacts of 
critical habitat designation. This position paper recommends several 
general principles for an alternative approach to the analysis of 
economic impacts associated with critical habitat designation.

Discussion
    Principle 1: Not All Habitat Is Equally Important to Species 
Conservation--Delineate and rank habitat based on whether it contains 
biological attributes that are essential to species conservation.
    A meaningful comparison of the impacts of critical habitat 
designation must begin with recognition that some areas of habitat are 
more valuable for species conservation than others. The starting point 
for meaningful economic analysis therefore is an objective ranking of 
habitat based on biological value. The degree to which an area or 
attribute of habitat is already protected by the ESA or other 
applicable law is also an important consideration. There is little or 
no added biological benefit that can be obtained by designating 
geographic areas and habitat attributes that have already been 
designated as critical habitat for other species, or where habitat 
conservation plans already achieve the objective of conserving a 
species within a specific geographic area.

    Principle 2: Define Special Management or Critical Habitat--Specify 
what ``special management'' is necessary if habitat areas are 
designated as critical.
    Economists also need information on management and protection 
measures that will impose costs. Examples of economic analyses based on 
comparisons of species and habitat protection alternatives already 
exist. Studies such as these may serve as models for the development of 
specific management alternatives that will help economists to 
differentiate between the economic costs of ESA protection under the 
jeopardy and critical habitat standards.

    Principle 3: Use A Pragmatic Approach--Economic analysis must be 
practical and meaningful to policymaking.
    In designating critical habitat, the Services must ``weigh the 
benefits of exclusions against those of inclusion of particular areas 
within the designated habitat.'' The required analysis is cost-
effectiveness, which compares benefits and costs in terms of a ``bang 
for the buck,'' and is expressed as the ratio of benefit gained per 
dollar expended. In this case, the benefit or ``numerator'' is not 
expressed in monetary terms, but in biological terms such as those 
habitat conditions essential for the conservation of the species. The 
cost or ``denominator'' is expressed in dollar terms based on 
regulatory costs imposed for each habitat segment that is designated. A 
cost-effectiveness analysis can be performed by either (1) selecting 
the least-cost configuration of alternative habitat designations that 
provide equivalent biological benefits, or (2) assigning habitat 
segments ordinal biological and cost values and analyzing their 
marginal contributions to total costs and benefits. Under the second 
approach, areas with high costs and low biological values are 
candidates for exclusion, and areas with low economic costs and high 
values are candidates for designation. Areas with low cost and low 
value may be excluded or included with less potential for public 
controversy, while areas with high cost and high value can be debated 
further. This approach could be further refined with medium-cost and 
medium-biological value factors. In this type of comparison, ordinal 
rankings between options are more important than absolute, cardinal 
measurements of dollar costs, but biologists must first prioritize 
habitat segments and economists must calculate the costs of designation 
for each habitat segment. The costs should be calculated with 
sufficient accuracy and scope, relative to the size and complexity of 
the critical habitat being considered, to describe the direct, 
indirect, and cumulative costs of including each habitat segment. 
Consistent with FWS analyses in the early 1990's, large-scale 
designations may justify a more rigorous model and data set for 
measuring economic costs and other economic impacts, but not all 
designations will require such extensive analyses.

    Principle 4: Decision Makers Should Know ``Whose Ox Is Gored''--
Regional, local, and near-term impacts matter for a full social 
accounting of who is impacted.
    Local and regional economic impacts and near-term impacts must be 
explicitly considered in the analysis of economic costs caused by 
critical habitat designation. From a national perspective, the decision 
rule for Federal project analysis has generally been a determination of 
net national benefit. However, with enactment of the ESA, the Federal 
Government has implicitly assumed that the benefits of saving a species 
from extinction exceed the costs for the Nation as a whole. The 
economic analysis of critical habitat designation should identify who 
will be impacted in the region where habitat designation will occur, 
evaluate the degree of their potential loss, and serve as a tool for 
minimizing the quantity of loss while achieving the ESA's objective of 
species conservation. An analysis that uses a national accounting 
stance should be rejected in most cases because it diminishes the 
impact of what might be major dislocations in local markets, especially 
in rural areas.

    Principle 5: Avoid Efforts to Monetize Biological Benefits--
Attempting to monetize the biological benefits of designation and 
species recovery adds little value for policymaking.
    There is little value in attempting to monetize the biological 
value of habitat areas, as monetary values cannot be assigned to 
biological benefits without nonmarket valuation studies, which in 
nearly all cases are poorly suited for estimating the benefits of 
habitat protection with any precision. Prioritizing habitat segments 
mirrors the information that might be obtained through a monetized 
approach. Given the substantial expense of non-market studies, the 
additional information that might be gained from such studies would 
almost always be of little value for the policy decisions that need to 
be made in the designation critical habitat.
Recommendations
    The Services should develop a detailed framework and methodology 
for economic analyses of critical habitat designation through public 
notice and comment, including face-to-face discussions with affected 
interest groups. The new approach may be embodied in the Services' 
joint regulations on critical habitat designation, 50 C.F.R. Part 424, 
or in a formal guidance document. Specifically, the framework and 
methodology should: 1) eliminate the ``incremental'' or ``baseline'' 
approach and include an exclusion process based on meaningful economic 
analysis; 2) delineate and prioritize habitat segments based on their 
relative value in conserving a listed species; 3) use a least-cost or 
an ordinal ranking cost-effectiveness approach that avoids the 
monetization of biological benefits, and searches for a critical 
habitat configuration that satisfies the conservation objective while 
minimizing costs; 4) require the Services to distinguish between 
measures necessary to avoid jeopardy and those necessary to conserve 
the species; 5) calculate the costs of designation using methods and 
data that are scaled to the scope and impacts of a proposed; 6) use an 
accounting stance that recognizes localized and regional impacts in the 
near-term, and that considers direct, indirect and cumulative economic 
impacts.
                                 ______
                                 
      Western Urban Water Coalition ``For the Future of the West"

                             POSITION PAPER
            ADMINISTRATIVE REFORM OF ENDANGERED SPECIES ACT
    PROPOSED AMENDMENTS TO THE ESA REGULATORY DEFINITION OF ADVERSE 
                              MODIFICATION

Introduction
    As a result of the decisions in Sierra Club v. U.S. Fish and 
Wildlife Service, 245 F.3d 434 (5th Cir. 2001) (``Gulf Sturgeon''), the 
U.S. Fish and Wildlife Service (FWS) and National Marine Fisheries 
Service (NMFS) are considering revisions to the regulatory definition 
of the term ``destruction or adverse modification'' of critical 
habitat. This briefing paper suggests a proposed approach for this new 
definition.

Discussion
    Under section 7(a)(2) of the Endangered Species Act (ESA), Federal 
actions are prohibited if they result in ``destruction or a verse 
modification'' of critical habitat. In the Gulf Sturgeon case, the 
Fifth Circuit determined that the definition of this term had to be 
equated with an action that appreciably diminishes the ``conservation'' 
or recovery of the species. In reaching this conclusion, the Court 
distinguished the definition of ``adverse modification'' from the 
regulatory definition of the term ``jeopardy'', which also is 
prohibited by section 7(a)(2) of the ESA. The FWS/NMFS regulations had 
defined ``jeopardy'' and ``adverse modification'' to mean essentially 
the same thing: an activity that diminishes appreciably the likelihood 
of both the survival and recovery of a listed species.'' After Gulf 
Sturgeon, it is clear that these two terms must be subject to different 
definitions.
    Adverse modification should be defined to accomplish several key 
objectives. These are:

    1. As required by the court decision, to link the term to recovery 
but not survival.
    2. The adverse impacts should be tied to the condition of the 
specific biological and physical habitat elements that were identified 
in, and the basis for, designation of critical habitat in the first 
instance. As required by section 7(a)(2), the determination whether 
those elements have been appreciably diminished is to be based upon the 
``best scientific and commercial data available'' at the time of the 
specific consultation. Thus, although the most current data should be 
used, the measure for recovery is to be based on the seasons for the 
designation in the first instance.
    3. The concept of ``net effects'' should be reflected, so that 
adverse impacts can be offset by protective measures and replacement 
habitat associated with the proposed action. This concept is already 
reflected in reasonable and prudent alternatives in biological 
opinions, and it should be incorporated into the determination of 
whether adverse modification would occur.
    4. In addition to these changes to the definition, the Service's 
Section 7 Handbook should be revised to assist in explaining how 
adverse modification will be determined. In particular, the Handbook 
revision should emphasize the importance of avoiding too narrow an 
analysis of the relationship between the impacts of the proposed action 
and recovery. Assessing recovery solely in the context of impacts of 
the activity in the action area could lead to a result of finding 
adverse modification even though those effects are inconsequential when 
viewed from the perspective of the overall designated area. This is 
especially likely to be the case when large areas are designated. In 
such a circumstance, even an impact that affects a significant amount 
of habitat prospects for the species. This principle should be 
explained in the Section 7 Handbook.

    Two related critical habitat reforms should be considered. First, 
the Services should ask for public input on the question of whether the 
regulatory definition of the term ``jeopardy'' also should be revised. 
The Gulf Sturgeon case raises the question of the proper relationship 
between jeopardy and adverse modification. If adverse modification is 
to be linked to recovery, the logically related inquiry is how the 
recovery and survival concepts should be dealt with in determining 
jeopardy. This is an issue that should be presented for public comment 
as part of the adverse modification rulemaking.
    Second, perhaps the most important issue associated with critical 
habitat that is in need of reform, is the manner in which designations 
are made. The Services need to develop an approach to designation that 
does not merely result in all possible habitat being determined to be 
``critical.'' Part of this reform calls for the development of a 
meaningful and realistic approach to analyzing the economic 
consequences of designation. When the costs of including a particular 
area in a designation outweigh the added biological benefits, the 
corresponding area need not be designated. In addition, the biological 
criteria applied to identify areas that are essential to the 
conservation of the species need to be revised so that only those areas 
truly important for recovery will be designated. Administrative reform 
to achieve more precise and carefully delineated critical habitat 
designations should be coupled with revision to the regulatory 
definitions.
    Based upon these concepts, the revised definition of critical 
habitat would read as follows:

    Destruction or adverse modification means the net effect of a 
direct or indirect alteration that appreciably diminishes the value of 
the physical or biological features of the designated area such that 
they no longer meet the needs considered to be essential to the 
conservation of the species at the time of designation, after 
consideration of offsetting improvements in habitat or protection for 
replacement habitat associated with the proposed action.
Recommendation
    The Services should amend the regulatory definition of ``adverse 
modification'' to clearly distinguish the term from ``jeopardy.'' The 
definition should relate to the factors that were the basis for the 
listing decision and take into account ``net effects'' by accounting 
for offsetting measures that improve habitat conditions.
                                 ______
                                 
 Responses of Jeffrey Kightlinger to Additional Questions from Senator 
                                 Crapo
    Question 1. You stated in your testimony that Courts are not the 
best place to prioritize agency actions and budgets affecting all 
endangered species. Yet we have seen courts respond to litigation with 
just those remedies. Why shouldn't courts retain jurisdiction over a 
species critical habitat designation when the Service does not complete 
a designation on time according to the statute?
    Response. Courts must retain jurisdiction over a species' critical 
habitat designation when the Service does not complete a designation 
according to the requirements of the statute, regulations and 
guidelines. Once litigation has been commenced to determine if the 
Service has complied with the law, and the court finds that there is 
misfeasance by the Service, it is incumbent on the court to oversee 
completion of the designation according to law. Thus, in many cases, 
the courts have no choice but to retain jurisdiction. Our point is that 
the law should not be written in a way that requires the courts to play 
such a role. Allow me to expand on my statement concerning the 
prioritization of critical habitat designation in the whole.
    We have been told by successive Administrations that the critical 
habitat process is broken and in need of attention. Why? One need only 
look at the recent litigation history to realize how skewed the system 
has become.
    Each Administration tries to interpret the ESA according to its own 
environmental political philosophy. During the last Administration, the 
Service relied upon an interpretation designed to avoid addressing the 
economic impacts of a critical habitat designation. That Administration 
effectively eliminated a very costly economic analysis process by 
creating the legal fiction that there were no impacts at the critical 
habitat designation stage. Rather, they said, all economic impacts 
flowed from the species listing phase, which does not require a 
statutory economic analysis.
    The courts have rejected this approach, and in fairness, the 
previous Administration was coming to grips with this new reality when 
the Administrations changed. As a result of the courts' rejection of 
the fiction used to avoid the costs of economic analysis, there was a 
flood of litigation from those who sought to limit the extensive 
designations of the previous administration. This followed the previous 
flood of litigation under which environmental organizations sought to 
compel designations due to the failure to determine critical habitat of 
the listing phase, as the law requires. As a result, the inflexible 
language of the statute has caused a torrent of litigation to force 
designations due to missed deadlines and then a host of additional 
lawsuits to invalidate the designations as a result of the failure to 
account for economic impacts.
    Driven by disparate agendas, party plaintiffs crowd the courts 
seeking to be heard. They have inevitably been able to find some 
misfeasance in the process applied by the Service. This is because the 
Act is too inflexible. The law incorrectly assumes that sufficient, 
recent, competently conducted scientific evidence exists for each 
threatened or endangered species and that a historically underfunded 
Service can competently process, interpret and apply that data in a 
satisfactory way at the time of listing.
    A court with retained jurisdiction following a finding of a 
violation of ESA by the Service will set timeframes, review findings 
and shepherd a critical habitat designation using the court's powers. 
As a result, the Service is required to re-direct scarce dollars to 
address critical habitat for species picked by plaintiffs, rather than 
being able to plan for designations based upon factors that would lead 
to an improved process considering the need of all similarly situated 
species.
    Agency ability to plan, knowing the needs of all threatened or 
endangered species that compose the universe of species needs for the 
Service, is severely compromised. Similarly, with the loss of planning 
goes the ability to complete a critical habitat designation without 
impacting economic and property values, the ability of natural resource 
users to get financing for annual operations, or conservation planning 
by affected parties. Changing the statutory language is the solution. 
More flexibility and discretion is required as to the time of such 
designations. Meaningful economic analysis should be required, and the 
Service needs to have the obligation to balance those economic costs 
against the biological benefits. If something does not give on the 
current requirements of the Act for critical habitat designation, the 
ESA program very well might collapse over the long run because of the 
heavy litigation burden. Congress can address this problem through the 
changes recommended in the Western Urban Water Coalition's testimony 
before this subcommittee.

    Question 2. You stated in your testimony that this committee had 
for 5 years held that the critical habitat system was broken. You also 
stated that moving critical habitat designation to the recovery 
planning stage was the single most important legislative initiative in 
solving this problem. For those new members of the committee could you 
restate your reasoning and update us on any emerging problems with that 
legislative solution.
    Response. The Senate Environment and Public Works Committee has 
been responsible for productive effort and debate over the Endangered 
Species Act. With the introduction and positive recommendation to the 
floor of the Chafee-Kempthorne Endangered Species Act Reauthorization 
bill in 1997, this committee went on record supporting concepts that 
have remained the focal point of reform efforts. Codification of ``no 
surprises'' and Section 10 remedies, peer review standards for ``good 
science,'' reliance on empirical evidence over modeling theory, 
reinforcement of the recovery planning process, and shifting the 
responsibility for the ``may effect'' standard to the action agencies 
were all elements of that bill.
    Recognizing that a committee of Congress is reorganized each cycle, 
it is understood that no Congress is bound by the understanding of the 
previous Congress. Nevertheless, we can draw from previous committee 
action for a guide to our deliberations today.
    The concept of delaying designation of critical habitat until the 
recovery planning process was likewise first introduced in the Chafee-
Kempthorne bill. The reasoning was simple, sound and logical. The 
process for listing a species as threatened or endangered is grounded 
in a scientific process. Once it is determined that a species meets the 
criteria of the Act and should be listed, a series of time lines are 
imposed for that action. One of these requirements is for the 
contemporaneous designation of ``prudent and determinable'' critical 
habitat. Unfortunately, the listing stage is just the beginning of the 
scientific study into the habits, needs and processes at work that led 
the species to the brink of extinction and how to recover it.
    The development of a recovery plan is the stage where the needs of 
the species are better understood and more information is available. It 
is the document that defines the habitat needs of the species and other 
factors that may or may not amount to jeopardy under the act. This is 
when we know the most about a species because the recovery plan is the 
vehicle designed to contemplate just these factors. Delaying critical 
habitat designation to the recovery stage is the logical conclusion to 
the scientific problem of having sufficient empirical data to make 
decisions about the future of the species.

    Question 3. In your testimony you refer to a ``cost-effectiveness'' 
framework for economic analysis of critical habitat. Could you explain 
how the ``cost-effectiveness'' framework would operate.
    Response. The Endangered Species Act Requires That Economic Costs 
Be Considered In Critical Habitat Designation And Allows For The 
Exclusion Of Habitat Where The Economic Costs Outweigh The Biological 
Benefits.
    The Endangered Species Act (``ESA'') requires that economic impacts 
be considered in the designation of critical habitat. 16 U.S.C. Sec.  
1533(b)(2); 50 C.F.R. Sec.  424.12(a). The Supreme Court has held that 
the requirement that economic impacts be considered in the critical 
habitat designation process is one ``of obligation rather than 
discretion.'' Bennett v. Spear, 520 U.S. 154, 172 (1997). Any area may 
be excluded from critical habitat if the benefits of exclusion outweigh 
the benefits of specifying such area as part of the critical habitat, 
provided deleting the area will not result in extinction of the 
species. 16 U.S.C. Sec.  1533(b)(2); 50 C.F.R. Sec.  424.19. The 
process of weighing the benefits and costs of designation is known as 
``the exclusion process.''

THERE ARE TWO WAYS TO WEIGH THE BIOLOGICAL BENEFITS AND ECONOMIC COSTS 
               IN THE CRITICAL HABITAT EXCLUSION PROCESS.

Cost-Benefit Analysis
    A cost-benefit analysis is a comprehensive approach that requires 
quantification of economic values for both the costs and the benefits 
of a proposal. The estimated costs and benefits are changes in the 
value of market goods and non-market recreational, esthetic, and 
cultural values attributable to a proposal. Cost-benefit analysis is 
commonly summarized in the form of a benefit-cost ratio, with a ratio 
of greater than one signaling the economic feasibility of the project. 
In other words, cost-benefit analysis is a used to determine whether or 
not to take some action because the benefits outweigh the costs.
    Successful application of cost-benefit analysis requires a high 
degree of confidence in scientific and economic understanding of a 
proposal and its consequences. For critical habitat designation, cost-
benefit analysis requires not only a high degree of confidence in the 
biological requirements for species conservation, but an understanding 
of how those requirements translate into economic benefits and costs. 
Biologists are reasonably capable of determining the habitat needs of a 
species and economists are fairly able to estimate the economic costs 
of protecting habitat. But translating the biological benefits of 
habitat protection into economic benefits is far more difficult, and 
ultimately unnecessary for the exclusion process.

Cost Effectiveness Analysis
    Unlike cost-benefit analysis, a cost-effectiveness approach does 
not ask whether to undertake a proposal. Rather, it asks how to 
implement an accepted objective in the most cost-effective or efficient 
manner. This allows the decisionmaker to compare factors that are 
unalike such as biological benefits and economic costs without taking 
the additional step of translating noneconomic biological benefits into 
dollar values comparable to economic costs.
    When a specific objective is predetermined, alternative project 
designs may be considered using cost-effectiveness analysis. In the 
critical habitat context, cost-effectiveness analysis identifies the 
least cost method for providing enough habitat for the conservation of 
a species, where the objective is specified in non-monetary, biological 
terms. Cost-effectiveness analysis can identify the lowest cost 
combination of protected habitat that satisfies the objective of 
species conservation. If there are alternative habitat configurations 
that will conserve a listed species, the decision is simple--choose the 
least costly alternative.

 AN EXCLUSION PROCESS BASED ON COST-EFFECTIVENESS IS BETTER SUITED TO 
                        THE PURPOSES OF THE ESA.

    A cost-effectiveness approach is best suited to the exclusion 
process in critical habitat designation because it accepts the 
objective of species conservation as a given requirement of the ESA, 
and it searches for the combination of habitat protection that 
satisfies the objective while minimizing the adverse economic impacts 
of habitat protection.

      The feasibility perspective of cost-benefit analysis is 
inappropriate because it is best suited to a decision whether to 
designate critical habitat rather than a decision on how best to 
designate critical habitat. The issue whether to designate critical 
habitat is irrelevant because the ESA requires designation for the 
conservation of a species.
      A cost-effectiveness approach to critical habitat 
designation accepts the ESA requirement that sufficient habitat be 
designated for the conservation of a species and uses the exclusion 
process to achieve a more efficient designation that obtains species 
conservation at the least cost.
      A cost-effectiveness approach allows decisionmakers to 
effectively compare two factors that are not measured in the same 
units: biological benefits and economic costs. Biologists provide the 
decisionmaker with an array of eligible habitat units that are scored 
and/or ranked according to the strength of each unit's contribution of 
physical and biological elements within that are essential to the 
conservation of a species. Economists then evaluate the economic costs 
of conserving those physical and biological elements of each habitat 
unit and provide the decisionmaker with an estimated cost for 
designation of each unit. The decisionmaker then assembles a critical 
habitat designation that protects the best habitat at the least cost. 
This can be done, for example, by first including areas of high habitat 
value and low economic cost. Then, excluding areas of low habitat value 
and high economic cost. Then, if more habitat is needed for the 
conservation of the species, a decisionmaker may include areas of high 
habitat value and moderate to high economic cost, or areas of low to 
moderate habitat value, but low cost. Such a cost effectiveness 
strategy will support the more obvious cases of inclusion or exclusion 
and focus deliberations and public comment on the close calls where a 
decisionmaker must exercise judgment to ensure the conservation of the 
species by providing the right quantity, kind, and configuration of 
habitat without imposing unnecessary or undue costs.
      A cost-effectiveness analysis is more pragmatic and it 
plays to the strengths of both the biologists and the economists. A 
cost-effectiveness approach forces biologists to make explicit 
judgments based on the obvious proposition that some areas of habitat 
are more valuable and essential for species conservation than others. 
It requires that biologists use their strengths to differentiate 
between the habitat quality of different areas so that there is a 
greater likelihood that the best habitat will receive protection. When 
all habitat is treated as equal, the only variable that controls is 
cost, regardless of the underlying truth that some habitat units have 
more biological importance than other units.
      A cost-effectiveness approach also plays to the strength 
of economic science by allowing economists to make economic estimates 
rather than biological judgments. It does so by avoiding the problem of 
placing dollar values on biological benefits. A cost-benefit analysis 
requires decisionmakers to convert biological benefits into economic 
values to allow for a direct comparison--a highly speculative, 
controversial, costly, and ultimately unnecessary endeavor. This 
frequently places economists in the position of interpreting biological 
values. It also leads to misplaced measurements, estimates, and 
arguments over economic benefits that are incidental to critical 
habitat designation but do not serve the purpose of species 
conservation. For example, protection of critical habitat may be 
assigned a high economic value based on human recreation or aesthetic 
interests, but the ESA does not call for critical habitat protection 
for any reason other than the conservation of a listed species. Cost-
effectiveness maintains a focus on the biological benefits of habitat 
for the ESA-mandated purpose of species conservation.
                               __________
   Statement of John F. Kostyack, Senior Counsel, National Wildlife 
                               Federation

    Good morning, Chairman Crapo and members of the subcommittee. My 
name is John Kostyack, and I am here to speak on behalf of the National 
Wildlife Federation, the nation's largest member-supported conservation 
education and advocacy organization.
    I greatly appreciate the opportunity to testify today regarding 
critical habitat protections under the Endangered Species Act (ESA). I 
have been working on ESA issues for nearly 10 years, serving as a 
litigating attorney, a policy analyst and commentator, and most 
recently, as manager of NWF's Species Conservation program. Based on 
this experience, I have developed an ever-increasing recognition of the 
importance of critical habitat. At the same time, I have come to 
recognize that significant changes are needed in how the two Federal 
wildlife agencies designate and protect critical habitat. My testimony 
explains why critical habitat is important and suggests measures that 
could be taken to make it work better.

                   THE IMPORTANCE OF CRITICAL HABITAT

    The ESA reaches its 30th anniversary this year, and there is much 
to celebrate. Hundreds of species that were once heading toward 
extinction are now either recovering or at least stabilized. Across the 
country, people recognize the ESA as a vitally important law for 
protecting the nation's precious biological heritage.
    Yet many of the species on the ESA's list of threatened and 
endangered species are not yet on the path to recovery. Scientists tell 
us that the chief reason why so many of our animal and plant species 
are declining toward extinction is habitat loss, fragmentation and 
degradation. We need to do a better job protecting, managing and 
restoring habitats. We cannot hope to save endangered species until we 
come to grips with the continual, piecemeal loss of their habitats, 
even after their listing under the ESA. It hardly matters what else we 
do for an endangered species if we fail to protect its habitat. 
Congress itself recognized this essential point when it enacted the ESA 
in 1973, stating at the outset its that its purpose was to conserve 
``the ecosystems upon which endangered species and threatened species 
depend.''
    Congress and the Administration should now focus on improving 
implementation of each of the ESA provisions that conserve habitats. 
Looking first at the critical habitat provision, as this subcommittee 
is doing today, makes sense. For at least three reasons, the ESA's 
requirement to designate and protect a listed species' critical habitat 
is among the most important of the ESA's habitat protection provisions.
    First, Section 4 of the ESA requires that, with few exceptions, 
critical habitat be designated for every species listed as either 
endangered or threatened. The ESA's implementing regulations require 
that when designating critical habitat, the U.S. Fish and Wildlife 
Service or National Marine Fisheries Service (``Services'') must 
produce maps delineating all designated critical habitat. Drawing lines 
on a map gives clear guidance to the public about which lands and 
waters are particularly valuable to listed species. This helps educate 
people about the natural world they inhabit, and, more importantly, 
helps to ensure that key habitats are not destroyed out of sheer 
ignorance. As the U.S. Fish and Wildlife Service stated in connection 
with its designation of critical habitat for the northern spotted owl:

  ``[C]ritical habitat serves to preserve options for a species' 
    eventual recovery [It] helps focus conservation activities by 
    identifying areas that contain essential habitat features (primary 
    constituent elements) regardless of whether or not they are 
    currently occupied by the listed species, thus alerting the public 
    to the importance of an area in the conservation of a listed 
    species.'' 57 FR 1796 (emphasis added).

    Second, Section 3 of the ESA defines critical habitat as 
encompassing all areas ``essential for the conservation of the 
species,'' and defines conservation as those methods and procedures 
needed to achieve species recovery. Thus, the critical habitat 
provisions are designed to protect more than just the habitat occupied 
by the species in its depleted state; they ensure that all habitats 
needed for recovery are taken into account.
    Third, once a species' critical habitat is established, Section 7 
of the ESA prohibits Federal agencies from carrying out, funding or 
permitting any action that is likely to result in the ``destruction or 
adverse modification'' of critical habitat. Thus, Section 7 gives 
Federal agencies a clear mandate to protect the habitat essential for 
species recovery.

           MAKING THE CRITICAL HABITAT PROVISIONS WORK BETTER

    Seven steps by the Administration and/or Congress would make the 
ESA's critical habitat provisions work better for both people and 
wildlife.

Define Which Lands And Waters Are ``Essential'' to Conservation
    Critical habitat designation is essentially a three-step process:

      First, the Services must define what habitat areas, 
whether occupied by the species or not, are ``essential to the 
conservation of the species,'' and what habitat areas occupied by the 
species ``may require special management considerations or 
protection.'' 16 U.S.C. Sec. 1532(5).
      Second, the Services must consider ``the economic impact, 
and any other relevant impact, of specifying any particular area as 
critical habitat.'' 16 U.S.C. Sec. 1533(b)(2).
      Third, the Services ``may exclude any area from critical 
habitat'' if they determine ``that the benefits of such exclusion 
outweigh the benefits of specifying such area,'' unless they find that 
a failure to designate a particular area ``will result in the 
extinction of the species.'' Id.

    Unfortunately, the Services often have excluded lands from critical 
habitat in the first step of this process despite the fact that the 
lands are ``essential to the conservation of the species.'' This 
approach has undermined the vital role that critical habitat plays in 
species recovery. Only by defining which lands and waters are essential 
to conservation can the public be informed about which habitats are 
needed and empowered to begin devising measures for saving those 
habitats. Any exclusions from critical habitat should be handled in the 
third step of the designation process, not the first.
    The Services have sometimes justified the exclusion of lands 
essential to the conservation of a species on the ground that they are 
protected by other regulatory mechanisms and thus may be receiving 
``special management considerations or protection'' within the meaning 
of ESA Sec. 3(5). However, this justification reflects a fundamental 
misunderstanding of ESA Sec. 3(5) and the purpose of critical habitat. 
Under ESA Sec. 3(5), the fact that a particular area is protected 
through a habitat conservation plan or as a park argues for its status 
as critical habitat, not against. Although a listed species may already 
be receiving ``special management considerations or protection'' on 
certain parcels of land, it would receive important additional benefits 
from a critical habitat designation on those parcels. For example, such 
a designation educates land managers and others about the importance of 
maintaining and enforcing those management considerations or 
protections. It also provides a ``safety net'' of protection in the 
event those management considerations or protections are removed.
    In Center for Biological Diversity v. Norton, 240 F. Supp. 2d 1090 
(D. Ariz. 2003), a Federal court struck down the Services' 
interpretation of ESA Sec. 3(5)'s ``special management considerations 
or protection'' language. The court explained that this interpretation 
which limits the number of allowable protections to a listed species' 
habitat is not only ``unsupported by the English language, but runs 
contrary to one of the enunciated policies of the ESA.''
    The Services should issue new regulations defining ``special 
management consideration or protection.'' The new definition should 
recognize that the existence of special management considerations in an 
area does not operate as a basis for excluding habitat there from 
designation. To the contrary, it should lead the Services to presume 
that such an area is, in fact, critical habitat.
    A consistent methodology for drawing critical habitat maps is also 
needed. No commonly accepted methodology has been developed to date. In 
some circumstances, the Services have taken short cuts such as drawing 
lines around entire regions, encircling both habitat areas and 
developed areas. The Service should solicit public and scientific input 
on alternative approaches to map drawing, with the ultimate goal of 
achieving a uniform methodology that is both cost-effective and 
scientifically rigorous.

Change the Timing of Designations
    To ensure that designation of critical habitat is based on 
carefully developed science, Congress must change the deadlines for 
critical habitat designations. Under current law, which requires 
designation at the time of listing or at most 1 year thereafter, the 
Services have little time to gather the best scientific thinking on a 
species recovery needs. In this general time period, the Services are 
focused on the challenges of making the listing determination and on 
the threats contributing to species decline, not on what is needed to 
ensure species recovery. Initial designations should be postponed to 
coincide with development of the recovery plan, so that the recovery 
team's thinking helps to inform the decision on the scope of critical 
habitat. Similarly, the decision on critical habitat can help inform 
the recovery plan.
    Because the ESA does not currently impose deadlines for completion 
of recovery plans, Congress should impose deadlines of 3 years from the 
date of listing for both critical habitat designations and recovery 
plans. This was the approach taken in S. 1100, a bill introduced in 
1999 by the late Senator Chafee (R-RI), Senator Crapo (R-ID) and 
Senator Domenici (R-NM). The bill was approved by the Senate 
Environment and Public Works Committee and won the support of 
conservationists, industry groups and the Clinton Administration. It 
also established a reasonable and enforceable schedule for clearing up 
the critical habitat backlog. A similarly targeted approach to 
improving the critical habitat process would be welcome today.

Issue Guidance on Economic Impact Analysis
    In New Mexico Cattle Growers Ass'n v. U.S. Fish & Wildlife Service, 
248 F.3d 1277 (10th Cir. 2001), the court upheld an industry challenge 
to the ESA Sec. 4(b)(2) economic impact analysis of the southwest 
willow flycatcher's critical habitat. Without soliciting public 
comment, the Administration elected to adopt this controversial ruling 
as its national policy, rather than to fix the underlying problems that 
led to the lawsuit. As discussed below, this decision is wreaking 
serious havoc with the entire critical habitat program. New guidance on 
ESA Sec. 4(b)(2) economic impact analyses is needed to minimize the 
damage caused by the Administration's wrongheaded approach.
    In New Mexico Cattle Growers, the industry plaintiffs targeted the 
U.S. Fish and Wildlife Service's economic analysis of the southwestern 
willow flycatcher's critical habitat designation, which concluded that 
there would be no costs associated with the designation. This no-cost 
conclusion was arrived at through use of the Services' baseline method, 
which called for analysis only of the impacts of the critical habitat 
designation, not of the impacts of other ESA protections (such as 
jeopardy and takings) that follow automatically from listing. Applying 
the baseline method, the Service found that critical habitat 
designation alone has no costs. Underlying this finding was the 
Service's controversial view that critical habitat designations 
duplicate the protections provided by the ESA's jeopardy provision. 
However, the Tenth Circuit did not question this controversial view of 
critical habitat. Instead, it overturned the Service's baseline method, 
finding that ``Congress intended that the FWS conduct a full analysis 
of all of the economic impacts of a critical habitat designation, 
regardless of whether those impacts are attributable co-extensively to 
other causes.''
    Without soliciting public comment or waiting for the judgment of 
any other Circuit Court, and without revisiting its controversial 
assertions about the redundancy of critical habitat, the Bush 
Administration has quietly adopted the New Mexico Cattle Growers 
holding as Administration policy. This decision increases the risk to 
imperiled species in several ways. First, virtually all of the critical 
habitat designations across the country will now likely need to be 
redone, draining precious resources away from imperiled species 
awaiting listing, and delaying critical habitat protections for species 
that have never had a designation in the first place. Second, because 
the Administration has refused to keep critical habitat protections in 
place during the remand periods, habitat already designated as 
important for species recovery will lose vital protection for years 
while new economic analyses are performed. Third, because the 
Administration will now begin evaluating the economic impacts of 
listing, the difficulty of getting new species listed will increase. 
Meanwhile, the longstanding ESA principle that listing determinations 
be made based solely on science will be in jeopardy. Fourth, as 
Administration officials have suggested in comments to the media, the 
extensive re-write of critical habitat rules will ultimately lead to 
smaller areas covered by the critical habitat designations, as the 
Services begin to use the ESA Sec. 4(b)(2) exclusion authority in 
unprecedented ways.
    To ensure that vital species protections are not lost, a rulemaking 
is needed on how to perform an ESA Sec. 4(b)(2) economic analysis. 
Whether to follow New Mexico Cattle Growers or whether to reinstate the 
baseline approach is an important policy question that should be 
answered only after a full public airing of alternatives. The 
Administration should begin this process by issuing an advanced notice 
of proposed rulemaking (ANPR) concerning procedural and substantive 
standards for implementing Section 4(b)(2). Although an ANPR is not 
required for such a rulemaking, it would allow the public to weigh in 
with the Administration before its views become locked in.
    In an ANPR, and the proposed and final regulation that follows, the 
Administration should pay close attention to two issues.
    First, any methodology must be cost-effective and time-sensitive, 
so that overall ESA implementation is not undermined by the costs and 
delays of the Section 4(b)(2) process. This is a strong argument for 
reinstating the baseline approach and not following New Mexico Cattle 
Growers. It is extremely wasteful to analyze the impacts of ESA 
protections other than critical habitat when the sole purpose of the 
ESA Sec. 4(b)(2) process is to decide the scope of critical habitat 
protection.
    Second, any methodology must give a fair accounting to the 
ecological benefits of designating critical habitat and the costs of 
not protecting species and ecosystems. Too often, economic studies have 
failed to take into account the ecological limits of economic activity. 
Input from experts in the rapidly growing field of ecological economics 
should be solicited to ensure that a truly balanced methodology for 
economic analysis is developed.

Set Limits on Exclusions from Critical Habitat
    In various ways, the current Administration has signaled that a 
major expansion of the ESA Sec. 4(b)(2) process for excluding lands 
from critical habitat is underway. A random sampling of recent critical 
habitat designations shows that this Administration has begun using ESA 
Sec. 4(b)(2) to exclude sizable parcels of land from critical habitat 
designations. In a New York Times article dated March 17, 2003, 
Assistant Interior Secretary Manson acknowledged that ``we in this 
Administration have been looking at [this exclusion provision] quite a 
bit more robustly than has been done in the past.'' In testimony before 
this committee last week, Mr. Manson stated that entire Defense 
Department installations should be excluded from critical habitat 
designations simply upon a showing that a Sikes Act management plan has 
been completed. This pronouncement was made despite findings by the 
Defense Department's Inspector General that there is no documented 
evidence of implementation of those management plans.
    What the Administration has not said about the ESA Sec. 4(b)(2) 
exclusion process is where are the limits. Lands and waters deemed by 
the Services to be ``essential'' for species conservation should not 
arbitrarily be denied protection. Policy guidance setting parameters 
for the ESA Sec. 4(b)(2) exclusion process is needed now, before a host 
of critical habitat designations are finalized, to ensure that the 
letter and spirit of the ESA's critical habitat provisions are not 
undermined by ESA Sec. 4(b)(2) exclusions.

Revise ``Adverse Modification'' Regulation
    Two years ago, the court in Sierra Club v. U.S. Fish and Wildlife 
Service, 245 F.3d 434 (5th Cir. 2001), held that critical habitat 
serves the goal of species recovery, and comes into play even when 
species survival is not immediately affected. For this reason, the 
court struck down the 1986 regulation defining ``adverse modification'' 
of critical habitat, which limited the application of critical habitat 
to actions affecting both recovery and survival.
    To date, the Administration still has not responded to this court 
ruling. In fact, despite its extensive behind-the-scenes policymaking 
on species-specific critical habitat determinations, it has never 
enunciated and sought public comment on its overall approach to 
critical habitat. To date, its species-specific actions have moved in a 
direction opposite from what the court in Sierra Club suggested was 
necessary. Rather than using critical habitat in a manner that furthers 
species recovery, it has weakened critical habitat protections.
    Regulatory action is needed now to redefine ``adverse 
modification'' of critical habitat consistent with the Fifth Circuit's 
decision in Sierra Club. If the Administration believes that critical 
habitat means something other than habitat essential to a species 
recovery, then it is obliged to state what that meaning is, and explain 
how the ESA would achieve its recovery goal in the absence of the 
critical habitat tool.
    In addition to furthering the conservation of listed species, 
revising the ``adverse modification'' regulation would also help the 
Administration avoid wasting precious resources in ESA Sec. 4(b)(2) 
economic analyses. The New Mexico Cattle Growers ruling calling for 
expanded economic analyses stemmed from the Service's rationale that 
the ``adverse modification'' definition is redundant with jeopardy. If 
the Administration were to fix its ``adverse modification'' definition, 
then the Services would be free to return to the less costly baseline 
approach to ESA Sec. 4(b)(2) economic analyses without violating New 
Mexico Cattle Growers. The baseline approach would lead consistently to 
findings of both positive and negative impacts of critical habitat 
designation, and thus the basis for the prohibition against this 
approach in New Mexico Cattle Growers would disappear.

Educate the Public
    In the March 17, 2003, New York Times article discussed above, 
developers argued that that any benefit of the proposed critical 
habitat designation for the endangered pygmy-owl in Arizona would be 
outweighed ``by the economic costs of effectively barring development 
in 1.2 million acres, or two-thirds of the privately held, developable 
land in the area.'' This assertion, which was not rebutted elsewhere in 
the article or in any subsequent statements by the Administration, is 
not remotely connected with the truth. As discussed earlier, a critical 
habitat designation only affects actions carried out, permitted or 
funded by the Federal Government. In other words, most private land 
development is completely unaffected. Moreover, even where a Federal 
action is contemplated, the designation of critical habitat does not 
mean that the action is terminated. It simply means that a consultation 
must take place with one of the Services to ensure that the action does 
not cause adverse modification of the critical habitat.
    Unfortunately, the kind of alarmism about critical habitat voiced 
in the New York Times article is frequently employed by individuals 
seeking to undermine public support for the ESA, with the ultimate goal 
of evading their own responsibilities under the law. This is not 
surprising. What is disappointing, however, is the failure of the 
Services to clarify for the public what critical habitat does and does 
not do.
    Critical habitat is a key provision in one of the nation's most 
important environmental laws. It is time for the agencies charged with 
implementing this provision to launch a public education campaign to 
explain the meaning and purpose of critical habitat and to build the 
necessary public support for its protection.

Provide Adequate Funding
    The Services' budgets for ESA implementation has never been 
adequate. In fact, the chronic budget shortfalls for listing and 
critical habitat determinations have become worse in recent years as 
more species have joined the threatened and endangered lists and as the 
Services have embarked upon a massive reevaluation of their economic 
analyses.
    To make the critical habitat program succeed, the Administration 
must request, and Congress must appropriate, the funds needed to remedy 
this growing budgetary gap. The nation's goal of recovering and 
delisting species can be achieved only if this essential habitat 
protection program is properly funded.

                               CONCLUSION

    Thank you for the opportunity to testify today. I would happy to 
answer any questions that members of the committee may have.

                               __________

         Statement of David L. Sunding, Professor, UC Berkeley

    Mr. Chairman and members of the subcommittee, I appreciate the 
opportunity to speak with you today about the economic impacts of 
critical habitat designation. I am a professor of natural resource 
economics at UC Berkeley, and my areas of interest include wetlands and 
endangered species policy, housing and land markets, and water 
resources.
    For the past 2 years, I have worked with colleagues and students at 
Berkeley to understand the effects of environmental permitting on the 
process of urban growth and development. As part of this larger 
research program, I have had the opportunity to consider the effects of 
critical habitat designation, in particular its impact on the timing 
and intensity of development; the availability of housing, roads and 
other needed infrastructure; and the costs of designation to consumers, 
developers, landowners and other groups.
    Critical habitat designation has numerous economic impacts, 
including the following:

      Costs of completing a Section 7 consultation. Section 7 
of the Endangered Species Act requires Federal agencies to consult with 
the U.S. Fish & Wildlife Service to insure that any activity funded, 
carried out or authorized will not likely jeopardize the continued 
existence of the species. This requirement increases the cost to 
complete the project, and also imposes additional costs on Federal 
agencies involved with the consultation. Sources of cost to the 
applicant include hiring outside consultants and attorneys to assist 
with the consultation process, and also the developer's own staff 
resources.
    Another direct cost of Section 7 consultation is that the Service 
may require additional mitigation above that required by the action 
agency. In the case of California vernal pools, for example, the USFWS 
required that three acres of vernal pools be created for every one 
filled over and above the baseline. Adding the costs of the Section 7 
consultation to the costs of mitigation, the direct, out-of-pocket cost 
of Section 7 consultation can be substantial, running to several 
thousand dollars per house in the case of some single-family housing 
projects.
      Costs of project modification. The Section 7 consultation 
process may also force project developers to redesign their project to 
avoid modification of certain areas deemed to be critical habitat. This 
project redesign typically reduces the output of the project. Again 
using the vernal pool case as an example, additional Section 7 
conservation requirements consist of avoidance of 85.7 percent of 
vernal pools, a condition that allows only 14.3 percent of the project 
site to be developed. Project redesign imposes additional costs on 
developers and has other, potentially large, economic impacts that stem 
from the attendant reduction in output, particularly in areas like 
California that have a well-documented shortage of housing and urban 
infrastructure.
      Increase in price and reduction in the availability of 
housing and other development. Because critical habitat designation 
increases the cost of development and reduces the level of project 
output, it has the potential to alter regional markets for housing, 
commercial space and other types of development. In particular, 
critical habitat designation can increase market prices for these goods 
and result in large losses to consumers.
    Whether for homes, schools, or other activities, there are numerous 
physical and regulatory constraints onsite selection. Accordingly, if 
critical habitat designation places some land off-limits to 
development, there are a limited number of comparable sites that can be 
developed to pick up the slack. While an area may appear to have an 
ample supply of developable land, in reality the development process is 
highly constrained. In such a setting, critical habitat designation can 
reduce the regional stock of housing and other goods, and prices of 
these goods will increase to establish new market equilibria.
      Delay in completion of projects. Critical habitat 
designation can also delay completion of projects. Unlike the supply 
reduction effects just described, delay is a pure loss affecting both 
producers and consumers. Theoretical results suggest that in many cases 
delay can be the largest component of overall economic impact resulting 
from environmental regulation.
    Delay affects project developers by pushing out project receipts 
further into the future. Delay affects consumers in that they must 
postpone the enjoyment of the project output. For example, if the 
project is to construct a school, then parents and children must wait 
to use the new facilities; if the project is to construct new homes, 
then homeowners must live temporarily in a less than optimal location, 
perhaps having to commute longer distances during this waiting period.
      Economic losses borne primarily by consumers. The 
economic impacts of critical habitat designation are borne mainly by 
consumers. Cost increases can be passed on to consumers to some degree, 
and increases in market price of project outputs actually benefit 
producers.
    A stylized example can help to provide some sense of the magnitude 
of impacts and their distribution across the affected population. 
Consider a 1,000-unit housing project to be built on 200 acres (an 
average of 5 homes per acre, including roads, open spaces and other 
infrastructure). The pre-regulation price of the homes in the project 
is $250,000, and the elasticity of demand for these homes is 1.67. The 
pre-regulation marginal cost of homes in the project is assumed to be a 
constant $200,000.
    Suppose that some of the project is considered to be critical 
habitat; development is to be avoided in these areas and any habitat 
impacts mitigated by some ratio of the USFWS' choosing. Suppose that 
the out-of-pocket cost to the developer of the Section 7 consultation, 
including the mitigation exaction, is $2,000 per home. Suppose also 
that critical habitat designation reduces the size of the project to a 
total of 900 units instead of the planned 1,000. Finally, suppose that 
critical habitat concerns delay completion of the project by 2 years.
    Based on these figures, what are the economic impacts of critical 
habitat designation for this hypothetical project? Homes in the project 
are now more expensive to construct and there are fewer of them, so 
their market price will increase. Under the assumptions above, the 
price of a home in the project will increase from $250,000 to $265,000.
    Consumers lose from critical habitat designation in three ways. 
Some are unable to purchase homes at all due to the reduction in the 
size of the project. Some do purchase homes, but at higher prices. And 
what consumption does occur is 2 years later than it would have been 
without the critical habitat designation. The impacts of permitting on 
developers (and landowners) are more complex. While producers gain from 
the increase in home prices, they lose from the increase in costs and 
from the delay in completing the project and receiving their return on 
investment.
    Taking consumers and producers together, the total economic losses 
from critical habitat designation are $19.5 million for this project. 
This figure counts the cost of project delay, which amounts to $12.5 
million, or over half of total losses. While permitting reduces the 
size of the project from 1,000 to 900 completed units (which results 
mainly in losses to consumers), both consumers and producers must wait 
an extra 2 years for these 900 units to be completed.
    Several interesting conclusions emerge from this example:

    Critical habitat designation can be quite expensive. Total 
    economic losses amount to nearly $20 million in the example, which 
    implies costs of $1 million per acre of habitat conserved.
    Consumers bear the brunt of losses from critical habitat 
    designation. They are unambiguously harmed by increases in price 
    and reductions in the number of homes available for purchase. 
    Developers and landowners fare better because they can pass on some 
    costs to consumers and because they benefit from price increases.
    Traditional measures of the cost of regulation, namely the 
    out-of-pocket cost of Section 7 consultation, are far off the mark. 
    In this example, they understate true impacts by an order of 
    magnitude.

      Regional and indirect impacts: Is conservation good for 
the environment? Critical habitat designation is effectively an ad hoc 
tax on development that changes its intensity, location and timing. As 
such, critical habitat designation can literally change the shape of 
urban areas, and another class of economic impacts results.
    A natural question to ask is whether, by limiting growth in certain 
areas, critical habitat designation pushes development to areas more 
distant from the city center, away from jobs, shopping areas, schools 
and other amenities. If the effect of critical habitat designation is 
to force relocation to areas further out on the urban fringe, there can 
be some important regional and indirect consequences of designation as 
well. For example, if critical habitat designation forces commuters to 
locate further from their jobs, then designation may increase traffic 
congestion and commute times, and may contribute to regional problems 
of sprawl and air pollution.
      Impacts beyond the Federal nexus. A common claim of the 
USFWS is that critical habitat designation only causes economic impacts 
in the presence of a Federal nexus, that is if the activity in question 
is carried out with a Federal permit or Federal funding. While there is 
no definitive research on this topic, my work with developers, local 
government officials and others suggests that critical habitat 
designation has more far-reaching implications.
    One concern is that development is subject to numerous regulatory 
processes carried out by Federal, State and local authorities. If land 
is designated as critical habitat by the USFWS, this designation may 
affect the way the project is treated by other agencies through a 
``signaling'' effect. At a conceptual level, this signaling effect is 
not surprising. Regulators operate under uncertainty and are generally 
risk-averse. A decision by an expert environmental agency like the 
USFWS raises concerns about potential environmental impacts of the 
project and will lead other permitting agencies to take a more 
conservative approach to it. From a practical point of view, this 
signaling effect means that the costs of critical habitat designation 
go beyond the cost and the outcome of the Section 7 consultation 
process.
    Another concern is that designation of critical habitat can impose 
costs on developers even if their project is not on critical habitat at 
all. The USFWS defines critical habitat in such a way that some time 
and expense is needed to determine whether a parcel is actually 
included or not. For example, critical habitat is defined in terms of 
landscape features and some investigation is required to determine 
their presence or absence on a particular parcel. Again, the practical 
effect is for the costs of critical habitat designation to extend 
beyond the Section 7 process.
                                 ______
                                 
 Responses of David Sunding to Additional Questions from Senator Crapo
    Question 1. What aspect of the Section 7 consultation process 
accounts for the largest share of costs resulting from critical habitat 
designation?
    Response. Based on my study of housing projects in California that 
were affected by the presence of listed species, I have found that 
Section 7 consultation delays completion of projects by an average of 
over 6 months and that delay is typically the single most important 
cause of economic losses resulting from interagency consultation. I 
should note that to date, the Fish & Wildlife Service has not 
quantified any losses from delay in its calculation of economic impacts 
resulting from critical habitat designation.

    Question 2. Does critical habitat designation have different 
impacts on public sector activities than on private sector projects?
    Response. Local governments carry out a wide array of construction 
and maintenance projects for schools, libraries, parks, landfills, 
bridges and roads, stormwater management and other activities. These 
projects can be affected by critical habitat designation in much the 
same way as private sector projects.
    The economic impacts of critical habitat designation resulting from 
public sector projects are somewhat different than impacts resulting 
from private projects. Public agencies typically have limited budgets, 
and if critical habitat designation increases the cost of carrying out 
some activity, less money is left for other projects. Thus, without an 
increase in funding critical habitat designation reduces the quality of 
public sector output and reduces its level. If taxpayers choose to 
increase funding to local governments to meet the costs of critical 
habitat designation, then this increase in taxation has its own cost.

    Question 3. What groups bear the brunt of impacts from critical 
habitat designation?
    Response. Drawing on evidence from the housing sector in 
California, consumers appear to be the group most affected by critical 
habitat designation. Developers have some ability to pass cost 
increases along to consumers in the form of higher prices. In most 
simulations I have conducted, consumers bear over 80 percent of all 
economic losses from critical habitat designation.
                                 ______
                                 
   Responses of David Sunding to Additional Questions Questions from 
                             Senator Inhofe

    Question 1. What aspect of the Section 7 consultation process 
accounts for the largest share of costs resulting from critical habitat 
designation?
    Response. Based on my study of housing projects in California that 
were affected by the presence of listed species, I have found that 
Section 7 consultation delays completion of projects by an average of 
over 6 months and that delay is typically the single most important 
cause of economic losses resulting from interagency consultation. I 
should note that to date, the Fish & Wildlife Service has not 
quantified any losses from delay in its calculation of economic impacts 
resulting from critical habitat designation.

    Question 2. Does critical habitat designation have different 
impacts on public sector activities than on private sector projects?
    Response. Local governments carry out a wide array of construction 
and maintenance projects for schools, libraries, parks, landfills, 
stormwater management and other activities. These projects can be 
affected by critical habitat designation in much the same way as 
private sector projects.
    The economic impacts of critical habitat designation resulting from 
public sector projects are somewhat different than impacts resulting 
from private projects. Public agencies typically have limited budgets, 
and if critical habitat designation increases the cost of carrying out 
some activity, less money is left for other projects. Thus, without an 
increase in funding critical habitat designation reduces the quality of 
public sector output and reduces its level. If taxpayers choose to 
increase funding to local governments to meet the costs of critical 
habitat designation, then this increase in taxation has its own cost.

    Question 3. What groups bear the brunt of impacts from critical 
habitat designation?
    Response. Drawing on evidence from the housing sector in 
California, consumers appear to be the group most affected by critical 
habitat designation. Developers have some ability to pass cost 
increases along to consumers in the form of higher prices. In most 
simulations I have conducted, consumers bear over 80 percent of all 
economic losses from critical habitat designation.

    Question 4. How does your approach to measuring the economic costs 
of critical habitat designation compare to the one used by the Service?
    Response. I find two major failings with the Service's approach. 
First, the Service emphasizes only the most obvious aspects of cost, 
namely the direct, out-of-pocket expenditures needed to complete the 
Section 7 process and ignores the potential for ESA regulation to 
change the market price of housing and other types of development. 
Accordingly, the Service ascribes all economic impacts to developers 
and landowners and none to consumers who will, in fact, ultimately bear 
most of the costs. Thus, the Service seriously underestimates the 
impacts of critical habitat designation (in some cases by more than an 
order of magnitude) and also mischaracterizes their incidence.
    Second, the Service only attempts to measure the aggregate economic 
impacts of critical habitat designation. Congress intended that 
economic analysis be used to help prioritize land for inclusion in 
critical habitat. An analysis of the total cost of designation does not 
help determine which parcels should be included in critical habitat and 
which should be excluded. What is needed instead is a more detailed 
approach to economic analysis that recognizes differences in the 
opportunity cost of land.

                               __________
               Statement of Craig Douglas, Austin, Texas

    Good morning Mr. Chairman and Members. My name is Craig Douglas, 
and I am a lawyer from Austin, Texas. I appreciate the opportunity to 
be here today with you, Judge Manson, and the other panelists to 
discuss critical habitat in a forum where we are all interested in 
finding solutions that work for the species and the people that live 
amongst them.

1. Introduction
    Very briefly, a little bit about what I do and the people my firm 
represents so you will understand my perspective on this panel. My firm 
represents clients in several States relating to the environmental 
regulation of land use, and one of our areas of expertise is the 
Endangered Species Act. Our clients are engaged in a wide variety of 
endeavors, including: traditional land development; agriculture; public 
water and power agencies; local governments; large transportation 
projects; mining, and energy exploration and delivery. On the 
regulatory and compliance side, we represent these groups in connection 
with habitat conservation plan permits under section 10 of the Act, 
interagency consultations under section 7 of the Act, creating 
mitigation alternatives and solutions and working out conservation 
agreements. On the litigation side, we've worn several hats as well 
we've sued the Fish and Wildlife Service; we've been sued by 
environmental organizations, and in a new twist lately, we've even 
intervened in lawsuits on the side of the Fish and Wildlife service 
when they've been sued by interest groups on matters of concern to our 
clients. Presently, my firm represents a coalition of 17 agricultural 
and ranching associations and water supply agencies from four States 
that are challenging the designation of critical habitat for the 
Arkansas River shiner in Oklahoma, Texas, New Mexico, and Kansas. That 
case is currently pending in Federal District Court in New Mexico.
    If there is a theme to our practice, it is that you can be an 
advocate for economic development and the protection of endangered 
species, and that you can be a strong advocate for conservation and 
property rights. That is what we try to bring to the table.

2. Support for ESA Reform
    In the last few years, I've dealt with no other environmental issue 
that has spawned as much litigation as critical habitat under the ESA. 
I will not tread on the same ground that was ably covered by Judge 
Manson, but I must say this. To me, this is a very simple proposition: 
when you think about all of the things that we could be doing to 
protect and foster the recovery of endangered wildlife, and then you 
consider all of the time, energy, and money that we are spending down 
at the courthouse arguing over critical habitat, it is clear that the 
critical habitat component of the ESA is broken.
    There are two things you can do here: Ether the law can be changed, 
or the regulatory focus can be refined within the confines of existing 
law. As for the former, we believe in the ESA, but we also believe that 
it needs reform, and critical habitat, in my view, is the best place to 
start. There was a proposal in the 106th Congress to change the role of 
critical habitat by shifting the focus from the regulatory component of 
the Act to the recovery planning component, and I believe that proposal 
merits further exploration. As I recall, the initiative to redefine the 
role of critical habitat under the ESA in this manner began under the 
Clinton Administration and was advanced by Secretary Babbitt, whose 
administration recognized that critical habitat was not resulting in 
any net value added to the recovery of endangered species. Under 
Secretary Norton, Judge Manson and Director Williams, we believe that 
the Fish and Wildlife Service is doing the best it can given the 
constraints imposed by the agency's manpower and resources, and the 
limited amount of flexibility afforded by the law. As Judge Manson 
testified earlier, they are actively engaged in trying to find 
solutions to this crisis, and I think that the regulated community is 
ready to work with them, and all interested parties, to help Congress 
with ESA reform.
    Until reform is achieved, however, efforts to resolve this crisis 
are going to be limited by the parameters of current law. That is not 
to say that there are no options, some of which I am about to describe 
to you, but let me emphasize that ultimately, the cycle of litigation 
and the related drain on the Service's resources can only be remedied 
by statutory rather than regulatory reform.

3. Debate Sharpened by New Mexico Cattle Growers and Sierra Club
    In 2001, the Courts of Appeals in the Fifth and Tenth circuits 
handed down the two decisions that are framing today's debate about the 
role of critical habitat and how it is to be designated and implemented 
under existing law. In the Sierra Club case out of the Fifth Circuit, 
the court ruled that the Service's regulatory interpretation of what it 
means to destroy or adversely modify critical habitat was inconsistent 
with the ESA insofar that it was linked to both the survival and 
recovery of a species. The court found that the statutory definition of 
critical habitat was grounded in the defined concept of conservation 
and recovery, which was much broader than mere survival. The Sierra 
Club case has been interpreted in some quarters to mean that critical 
habitat, as defined by the statute, is potentially a much more potent 
regulatory tool than it has been under the Service's interpretation of 
the law. Of course, we believe that the experience of the last several 
years has shown that critical habitat is already a powerful tool, 
albeit one whose regulatory and economic cost far outweighs the benefit 
to the species.
    The case that has been receiving most of the attention (by virtue 
of the fact that it has been driving a great deal of the critical 
habitat litigation in recent months) is the New Mexico Cattle Growers 
decision out of the Tenth Circuit. In that case, the court found that 
the Service's process of designating critical habitat was fundamentally 
flawed. Section 4(b)(2) of the ESA, which governs the designation of 
critical habitat, contains a ``balancing test,'' whereby the Service is 
required to base its determination on the best scientific data 
available, and take into consideration the economic impact, and any 
other relevant impact, of specifying any particular area as critical 
habitat. The statute further provides that the Service may exclude any 
area from critical habitat if it determines that the benefits of such 
exclusion outweigh the benefits of specifying any such area as critical 
habitat, unless it is determined that the failure to designate such 
area as critical habitat will result in the extinction of the species. 
The cattle growers challenged the Service's use of a so-called 
``baseline approach'' to analyzing economic impacts, which attributed 
virtually all economic impacts associated with any ESA regulation to 
the listing of the species itself as threatened or endangered, which 
almost always resulted in a finding that the designation of critical 
habitat had no economic consequences at all. The Tenth Circuit found 
that Congress intended for economic considerations to be a fundamental 
part of the critical habitat equation, and any formula that reduced 
those factors to insignificance was contrary to the plain meaning of 
the statute.

4. Focus on the ``Essential'' Aspect of Critical Habitat
    There are aspects of both of these cases (primarily the Cattle 
Growers case) that can be used to shift the regulatory focus of 
critical habitat in a way that might bring it more into line with what 
Congress originally intended when it adopted the ESA which is a tool to 
regulate impacts on specific areas that are truly essential to the 
conservation of the species. Essential. That's a key word in the 
statutory definition of critical habitat that seems to get lost in the 
shuffle. The ESA defines critical habitat as those areas that are truly 
``essential to the conservation of the species.'' The Sierra Club case 
pointed up the difference between the concepts of conservation and 
recovery on the one hand and mere survival on the other. I believe that 
either the Administration through its interpretation and application of 
the statute, or Congress through reform, can seize the moment and 
retake some measure of control over the critical habitat crisis by 
restoring the focus of critical habitat designation and regulation by 
giving meaning to the word ``essential' in the definition of critical 
habitat. For the time being, the means to do this is available through 
the section 4(b)(2) balancing test that was resuscitated by the New 
Mexico Cattle Growers case.

5. Using the Balancing Test
    In defining critical habitat, I believe that Congress used the word 
``essential'' for a reason. Critical habitat is not defined as ``all 
the land and water that could conceivably be used in an effort to 
ensure the conservation of the species.'' The word ``essential'' 
carries with it a ``but for'' connotation--if these lands are not 
designated, conservation will not be possible. For several years, 
however, my clients have been faced with critical habitat designations 
that did not seem to take the concept of ``essential'' into account. It 
is my belief that prior to the Cattle Growers decision, there was no 
procedural Governor on the designation process that forced the Service 
to focus on the ``essential'' aspect of critical habitat. For example, 
the critical habitat designation for the Arkansas River shiner was done 
at a time when the Service was not performing its legal obligation to 
fully consider the ``economic impact and any other relevant impact'' of 
designating critical habitat. This led, in our view, to the designation 
of 1,150 river miles and nearly 90,000 acres of adjacent riparian zone 
across four States that was ill considered and not justifiable under 
the law. The same can be said of another situation faced by many of our 
clients in southern Arizona. There, a large portion of a critical 
habitat designation in the thousands of acres for a pygmy owl was 
centered on an area northwest of Tucson that, on the one hand, was one 
of the most desirable areas in the state for development, and on the 
other hand, was perhaps the least valuable area of the owl's habitat in 
terms of its recovery. In both of these cases, the costs of designation 
in terms of potentially lost economic development opportunities; 
reduced property values; clouded entitlements; effects on existing 
operations; and property and water rights far outweighs the benefits to 
the species in a majority of the areas covered by the respective 
designations.
    Just this week, however, the Administration provided an example of 
how a faithful application of the balancing test can work. There are 
nine species of cave-dwelling invertebrate bugs (most of which wouldn't 
cover a fingernail) that apparently exist almost entirely within the 
confines of Bexar County, Texas (in the San Antonio area, near the 
Texas Hill Country). All nine species of bugs were listed as endangered 
under the ESA, and critical habitat was subsequently proposed by the 
Service as a result of a lawsuit that prompted them to do so. The 
original proposed critical habitat designation covered almost 9,500 
acres. After the proposal came out, the Service made a concerted effort 
to consider not just the potential economic impacts of the proposal, 
but also considered many things that I believe fall within the catch-
all ``all other relevant factors'' prescribed by the statute, including 
the conservation efforts and benefits of the State and local 
governments and numerous private parties. The Service also paid careful 
attention to the comments submitted by affected landowners and species 
advocates alike. The process gave the Service the opportunity to stop 
and really think about ``given the needs of the species and the impacts 
to these people, what do we really need here what is essential.'' The 
end result, which was published in the Federal Register on Tuesday, was 
a critical habitat designation that encompasses, in total, about 1,500 
acres. The balancing test can work.

                               __________
        Statement of William J. Snape III, Defenders of Wildlife

Introduction
    Thank you, Mr. Chairman and Ranking Member of the Subcommittee on 
Fisheries, Wildlife, and Water. On behalf of Defenders of Wildlife 
(Defenders), where I am vice-president and chief counsel, as well as 
our approximately one million members & supporters, I appreciate the 
opportunity to address the value of critical habitat under the 
Endangered Species Act (``ESA'' or ``Act''), 16 U.S.C. Sections 1531 et 
seq., particularly pursuant to Section 4 and 7 of the Act. 16 U.S.C. 
Sec. Sec. 1533, 1536. I am also chairman of the Endangered Species 
Coalition Board.
    Today I will focus on four basic values of the ESA critical habitat 
provisions: 1) the legal, or conservation, benefits of critical 
habitat; 2) the scientific, or biological, benefits of critical 
habitat; 3) the economic, or value based, benefits of critical habitat; 
and 4) the social, or common sense, benefits of critical habitat. My 
overarching theme is that while the critical habitat provisions of the 
ESA have tangibly benefited species at relatively low cost, the 
provisions have nonetheless not reached their full potential.

Legal Benefits
    The tangible benefit of critical habitat is reflected in at least 
two basic ways under the ESA. First, the definition of the term 
critical habitat says that it is the ``specific areas'' that are 
``essential to the conservation of the species.'' 16 U.S.C. 
Sec. 1532(5) (emphasis added). See also 16 U.S.C. 
Sec. 1532(3)(``conservation'' means to use ``all methods and procedures 
which are necessary to bring any endangered species or threatened 
species to the point at which the measures provided pursuant to this 
Act are no longer necessary.''). Thus, critical habitat is a 
fundamental tool in recovering listed species, the goal and mandate of 
the Act. Second, the ESA Section 7 standards governing 
``consultations'' between the Services (either the Fish and Wildlife 
Service, FWS, or the National Marine Fisheries Service, NMFS) and a 
Federal action agency (e.g., Forest Service, Department of 
Transportation or Army Corps of Engineers) are distinctly different 
depending upon whether a listed species possesses critical habitat or 
not. See, e.g., Sierra Club v. U.S. FWS, 245 F.3d 434 (5th Cir. 
2001)(discussing and differentiating, inter alia, the ``jeopardy'' and 
``adverse modification'' standards in ESA Section 7(a)(2)).
    No species' ecosystem better illustrates the conservation benefit 
of critical habitat in this context than the endangered cactus 
ferruginous pygmy owl of southern Arizona's Sonoran Desert. See, e.g., 
Defenders of Wildlife v. Ballard, 73 F.Supp.2d 1094 (D. Ariz. 
1999)(holding several Federal agency actions illegal based upon lack of 
adequate Section 7 consultation in an area defined by critical habitat 
for the pygmy owl). Here, critical habitat for the owl, which the 
Administration has voluntarily agreed to vacate as it redoes its 
economic analysis for the designation, has not only spurred the 
successful and collaborative Sonoran Desert Conservation Plan, but it 
has also tempered many potentially inappropriate developments in a 
region that is still thriving with growth. In fact, the temporary 
lifting of the critical habitat designation has had the negative result 
of green lighting several troublesome projects opposed by local 
officials.

Scientific Benefits
    As confirmed in a definitive study by Dr. David Wilcove of 
Princeton University and others, by far the leading contributor to 
wildlife species imperilment is habitat loss. Not surprisingly, many 
ESA recovery plans reflect this biological reality. This, of course, is 
the whole policy point behind the critical habitat provisions in the 
Act. See, e.g., House Committee on Merchant Marine and Fisheries, H.R. 
Rep. No. 887 (94th Cong., 2d Sess. at 3). The leading purpose of the 
ESA is ``to provide a means whereby the ecosystems upon which 
endangered species and threatened species depend may be conserved.'' 16 
U.S.C. Sec. 1532(b). Ecosystems largely consist of habitat.
    The piping plover is a good example of a species that undeniably 
needs habitat protection, as specified clearly, both in its recovery 
plans and in all leading scientific literature. Yet, the final rules 
designating critical habitat for the piping plover are under attack by 
interests either ignorant of or hostile to the goals of conservation. 
With only 72 adults left in the Great Lakes breeding ecosystem, this 
species needs all the help it can get in Michigan, Wisconsin and 
Minnesota, as well as in its wintering range that includes States such 
as North Carolina, Florida, and Louisiana. Even more challenging for 
this species is the fact that its habitat--beaches influenced by ocean 
or river tides--can change from year to year. Unfortunately, the 
Administration illegally and unwisely excluded vital areas such as 
Padre Island National Seashore in its final rule for the piping 
plover's wintering habitat. See, e.g., Center for Biological Diversity 
v. Norton, 240 F.Supp.2d 1090 (D. Ariz. 2003)(holding critical habitat 
designation for Mexican spotted owl to be illegal because it improperly 
evaluated benefits of critical habitat protection).

Economic Benefits
    The process of designating critical habitat under the ESA requires 
the Federal Government to assess important economic information about 
the species' habitat area. See 16 U.S.C. Sec. 1533(b)(2). However, a 
combination of: 1) severe budgetary constraints; and 2) significant 
legal confusion regarding the scope of the Act's economic analysis 
requirement, have hampered implementation of this ESA provision. 
Perhaps the most glaring present problem is New Mexico Cattle Growers 
Ass'n v. U.S. FWS, 248 F.3d 1277 (10th Cir. 2001), which held that the 
FWS must create a second economic baseline to take into account the 
economic impacts of listing in addition to impacts due to critical 
habitat alone. The FWS is wasting time and resources complying with 
this order throughout the entire country, not only because the decision 
was wrongly decided, but also because it represents bad economics.
    No ecosystem better captures the economic centrality of habitat 
than the Colorado River, one of the most heavily managed and allocated 
rivers in the world. Like a ribbon of life flowing throughout the arid 
U.S. West, the mighty Colorado is a whimpering trickle by the time it 
reaches Mexico, sucked almost dry by the millions of humans dependant 
upon it. Spurred by the critical habitat designation of large native 
river fish such as the Colorado squawfish, bonytail chub, and razorback 
sucker, the Federal agencies have finally initiated a rational plan to 
serve regional people and wildlife protection known as the Lower 
Colorado River Multi-Species Conservation Plan (MSCP). Although this 
MSCP presently possesses several key flaws, it is an improvement over 
the do-nothing past and can be directly attributed to the critical 
habitat provision in the ESA. See, e.g., Charles Bergman, Red Delta 
(Fulcrum Press, 2002).

Social Benefits
    The Endangered Species Coalition (ESC), of which Defenders and over 
400 other citizen groups across the country are a part, understands 
that there are frequently misperceptions and sometimes even fear over 
the critical habitat provisions in the ESA. We think these attitudes 
are misplaced, but we respect the feelings of those who hold them. We 
believe the answer includes better public education by the Services, a 
repudiation of the Cattle Growers case (which we don't think even 
serves the Cattle Growers themselves), and better linking of critical 
habitat with the recovery objectives in the Act. It should be 
remembered that the only direct benefit of critical habitat under the 
ESA occurs only when a Federal agency action impacts a listed species 
with critical habitat.
    Two highly imperiled species reinforce our recommendations for 
increased attention to critical habitat protection. First is the 
Sonoran pronghorn, North America's fastest land mammal, which is down 
to as few as 20 individuals in the United States, largely as a result 
of uneconomic and subsidized grazing on Bureau of Land Management (BLM) 
lands in southern Arizona. Second is the equally
    endangered woodland caribou in northern Idaho national forests 
(i.e., Idaho Panhandle NF), which possesses as few as 12 individuals in 
the U.S., again as a result of severe habitat loss, in this case old-
growth forests. Neither one of these species has the protection of 
Section 4(b)(2) of the ESA because they were listed before the critical 
habitat provision became mandatory in 1978. Both species need and 
deserve critical habitat protection immediately.

Conclusion
    For many inter-related reasons, some plainly obvious and others 
more nuanced, critical habitat is a central aspect of the ESA. Its fate 
in the coming months and years deserves serious discussion. We support 
proposals that would strengthen both the ecological and economic 
implementation of critical habitat for threatened and endangered 
species. In this regard, we stand with our professional colleagues at 
the National Wildlife Federation, which is also testifying on this 
important topic this morning. Thank you for your attention.
                                 ______
                                 
 Attachment: Critical Habitat Works for Endangered Species, Center for 
                      Biological Diversity (2003).

Critical Habitat is Essential to Ecosystem Protection
    The Endangered Species Act (ESA) relies on two broad strategies: 
the listing of species as threatened or endangered, and the designation 
of critical habitat areas. The listing of species requires that private 
citizens, States, and Federal agencies not ``jeopardize'' endangered 
species and that they attempt to mitigate any harm (i.e. ``take'') done 
to them. The ESA's take limitations only apply to the small areas where 
the species still exist. It does not apply to the much larger area 
where the species used to live, and where it must reestablish itself if 
it is to recover. Listing, in and of itself, has proven an effective 
shield against extinction, but is not sufficient to recover and delist 
species.
    In adding the critical habitat provision to the ESA, Congress 
clearly saw that species-based conservation efforts must be augmented 
with habitat-based measures:

  ``It is the committee's view that classifying a species as endangered 
    or threatened is only the first step in insuring its survival. Of 
    equal or more importance is the determination of the habitat 
    necessary for that species' continued existence . . . . If the 
    protection of endangered and threatened species depends in large 
    measure on the preservation of the species' habitat, then the 
    ultimate effectiveness of the Endangered Species Act will depend on 
    the designation of critical habitat.''\1\
---------------------------------------------------------------------------
     \1\House Committee on Merchant Marine and Fisheries, H.R. Rep. No. 
887, 94th Cong. 2d Sess. at 3(1976).

    Critical habitat contains ``all areas essential the conservation of 
the species'' where ``conservation'' is defined as full recovery. They 
contain most or all of the places where the species still persists, but 
more importantly, they contain areas where the species used to live and 
where it must reestablish itself in order to recover. Federal agencies 
are not permitted to ``adversely modify'' critical habitat areas. They 
must instead manage them for the recovery of the species and the 
ecosystem upon which it depends. Critical habitat does not affect 
private lands unless their development requires Federal permits.
Critical Habitat Works
    In 1994 and 1996, the U.S. Fish and Wildlife Service assessed the 
status of all threatened and endangered species under its 
jurisdiction.\2\ Of the 560 species with a known status in 1994, those 
with critical habitat were 11 percent less likely to be declining and 
14 percent more likely to be stable than species without critical 
habitat.\3\ Of the 697 species with a known status in 1996, those with 
critical habitat were 11 percent more likely to be improving and 13 
percent less likely to be declining than those without critical 
habitat.\4\ The benefits of critical habitat accrue over time: those 
with critical habitat for over 5 years were in better shape than those 
with critical habitat for 5 years or less.
---------------------------------------------------------------------------
     \2\U.S. Fish and Wildlife Service, U.S. Department of the Interior 
Report to Congress, Recovery Program, Endangered and Threatened Species 
(1994); U.S. Fish and Wildlife Service, U.S. Department of the Interior 
Report to Congress, Recovery Program, Endangered and Threatened Species 
(1996).
     \3\Jeffrey Rachlinski,''Noah by the Numbers: An Empirical 
Evaluation of the Endangered Species Act,'' 82 Cornell Law Review 356-
89 (1997).
     \4\Martin Taylor and Kieran Suckling, ``An empirical assessment of 
the effect of critical habitat, recovery plans, and economic conflict 
on the status of endangered species,'' Center for Biological Diversity, 
Tucson, AZ.
---------------------------------------------------------------------------
    The following examples show how critical habitat designation makes 
real, on-the-ground improvement for ecosystems and species.
    Peninsular Bighorn Sheep. The Peninsular bighorn sheep inhabits the 
foothills of Southern California's Peninsular Mountain Ranges. It has 
declined by 77 percent due to diseases spread by livestock, overgrazing 
by livestock, ORVs, roads, and urban sprawl. Though the Fish and 
Wildlife Service first announced in 1985 that it may be endangered, and 
listed it as an endangered species in 1998, little was done to protect 
its habitat. By 2000, there were just 334 animals left, leaving more 
golf courses in the Palm Springs area than bighorn sheep.
    In 2001, the U.S. Fish and Wildlife Service designated 845,000 
acres of critical habitat. Suddenly, land management began to change. 
The Bureau of Land Management removed livestock from all 226,026 acres 
of critical habitat under its jurisdiction, closed illegal roads, and 
instituted seasonal road closures in critical lambing areas. These 
protections were not offered to areas outside critical habitat. The 
U.S. Forest Service likewise removed livestock from all 17,982 acres of 
critical habitat under its jurisdiction. Local cities have enacted 
growth decisions to protect portions of the bighorn's critical habitat.
    Desert Tortoise. Desert tortoises in the Mojave Desert have 
declined by 90 percent since the 1930's due to livestock overgrazing, 
car collisions and respiratory disease. Though biologists first warned 
of its possible extinction in 1970 and the U.S. Fish and Wildlife 
Service listed it as an endangered species in 1994, few proactive steps 
were taken to protect its habitat. In response to complaints that its 
critical habitat areas were being degraded, the Bureau of Land 
Management issue decisions in 2000 and 2001 prohibiting new or expanded 
mining operations on 3.4 million acres of the critical habitat, 
prohibiting or limiting livestock grazing on 2.2 million acres of 
critical habitat, closing approximately 4,500 miles of illegal roads, 
and prohibiting off-road vehicles on approximately 500,000 acres of the 
critical habitat. Tortoise habitat outside designated critical habitat 
zones were not given these protections.
    Steller Sea Lion. In western Alaska, Steller sea lion populations 
have plummeted by up to 90 percent since the 1970's, due in part to a 
massive increase in large-scale commercial fishing. The National Marine 
Fisheries Service listed the sea-lion as a threatened species in 1990, 
designated critical habitat in 1993, and upgraded it to endangered 
status in 1997. In response to complaints about overfishing within 
critical habitat zones, the National Marine Fisheries Service closed or 
limited specific commercial fisheries within the sea-lion's critical 
habitat. High levels of fishing still occur outside the critical 
habitat areas.
Agency Resistance Reflects Illegal Reagan Era Policy



    Since habitat loss is the primary cause of endangerment for 84 
percent of all listed species, Congress stipulated that barring rare 
circumstances, all species should have critical habitat areas. Prior to 
1987, the U.S. Fish and Wildlife Service regularly implemented this 
portion of the ESA (see figure 1). After 1987 the U.S. Fish and 
Wildlife Service rarely designated critical habitat. The shift came in 
response to a policy enacted by the Reagan Administration eliminating 
recovery as the standard for critical habitat management.\5\ Instead, 
Reagan required that critical habitat be managed under the much 
narrower extinction avoidance standard. In this emasculated form, 
critical habitat added little to the protections which automatically 
ensue with species listing. As University of Virginia School of Law 
professor E. Perry Hicks wrote:
---------------------------------------------------------------------------
     \5\50 C.F.R. 402.02 (1986).

  ``Historically this protection [critical habitat] has had enormous 
    practical consequences, but subsequent to the Department of 
    Interior's 1986 amendments to regulations implementing section 7 of 
    the ESA, it is doubtful that critical habitat has any practical 
    value.''\6\
---------------------------------------------------------------------------
     \6\E. Perry Hicks, ``Designation Without Conservation: The 
Conflict Between the Endangered Species Act and its Implementing 
Regulations,'' Virginia Environmental Law Journal (2000).

    In the late 1990's, endangered species advocates won a series of 
lawsuits putting critical habitat designation back on track. In 2001, 
the 5th circuit court of appeals struck down the Reagan policy, 
affirming that critical habitat must be managed at the higher recovery 
standard.\7\ In 2001, a similar decision was rendered in the 9th 
circuit.\8\ Thus the stage has been set for improved ecosystem 
management through critical habitat designation.
---------------------------------------------------------------------------
     \7\Sierra Club v. U.S. Fish and Wildlife Service and National 
Marine Fisheries Service, 245 F.3d at 441-42.
     \8\Natural Resources Defense Council et al. v. United States 
Department of Interior et al., CV 99 5246 SWV (CTx).
---------------------------------------------------------------------------
Bush Administration Slashing Critical Habitat Designations
    The Bush Administration has adopted an illegal policy prohibiting 
final critical habitat rules from expanding upon proposed rules, even 
if such expansion is called for by scientific peer reviewers. Between 
the proposed and final decisions, it decreased the size of 75 percent 
of the 32 critical habitats it designated in 2001 and 2002. It did not 
increase the size of any. Cumulatively, the proposed designations were 
reduced by 51 percent, thus depriving almost 39 million acres of 
habitat protection.
    In the case of the San Bernardino kangaroo rat, the administration 
reduced the proposed rule by 22,113 acres, contradicting all six peer 
reviewers. In the case of the Mexican spotted owl, it reduced the 
critical habitat proposal by 8.9 million acres over the objections of 
agency biologists. A Federal judge struck down the decision in January 
2003, calling the designation ``nonsensical'' because it excluded over 
90 percent of all known owl locations and virtually all lands under 
actual threat of logging.

Budget Being Used as a Weapon Against Critical Habitat and Listing
    Ignoring the fact that species with critical habitat are recovering 
faster than those without, ignoring the many examples of critical 
habitats being managed better than non-critical habitat areas, and 
ignoring the court orders striking down the 1986 Reagan policy, the 
Bush Administration continues to insist that critical habitat 
protection should be limited to avoiding extinction and is thus 
duplicative of the protections that ensue with listing. Thus the Bush 
Administration attempts to justify its refusal to protect endangered 
species' habitats.
    Unable to sway the courts or environmentalists, the Bush 
Administration is using its budget authority as a weapon to limit both 
the designation of critical habitat and the listing of endangered 
species. While the U.S. Fish and Wildlife Service says it needs $137 
million to address the backlog of critical habitats and listings,\9\ 
the Bush Administration asked Congress for just $9 million in fiscal 
year 2003 and $12.3 million for fiscal year 2004. The requests are so 
inadequate that the Fish and Wildlife Service has announced that it 
will not be able to list any species or designate critical habitats in 
fiscal year 2003 other than those already ordered by the courts.\10\ It 
is no wonder that in 2001 and 2002, the Bush Administration listed 
fewer species under the ESA than any 2 year period since Reagan in 
1982-1983.
---------------------------------------------------------------------------
     \9\J. R. Pegg, ``Conservationists Warn of Bush Budget Tricks,'' 
Environmental News Service, February 5, 2003 
     \10\Letter from Anne Badgley, Regional Director, Pacific Region, 
U.S. Fish and Wildlife Service, to Mike Peterson, Executive Director, 
The Lands Council, February 10, 2003.
---------------------------------------------------------------------------
    While all other USFWS ESA line items have increased at least 1,319 
percent since 1979, the listing and critical habitat budget increased 
just 406 percent. Accounting for inflation, it has remained nearly 
static since 1979 (see figure 2). As a proportion of the total USFWS 
ESA budget, listing and critical habitat has declined from 24 percent 
to 3 percent (see figure 3).



                                 ______
                                 
 Responses of William Snape to Additional Questions from Senator Crapo
    Question 1. Should Congress carve out a distinct role for critical 
habitat in an amended ESA, and provide a more coherent definition of 
``critical habitat'' in ESA Sec. 3(5)?
    Response. We believe the definition of critical habitat in the 
aforementioned section is clear, distinct and coherent.

    Question 2. For example, should all lands needed for the recovery 
and delisting of a larger population of a listed species be designated 
as critical habitat?
    The answer to this question depends upon the species and habitat in 
question. Generally speaking, we believe the Act already requires 
critical habitat to be a central tool in the recovery of listed 
species. In our view, the plain language of Sections 3(5)(A) and 
3(5)(C) already properly describes and defines the geographic area to 
be included in critical habitat designations. In fact, the ESA defines 
critical habitat as all geographic areas ``essential for the 
conservation of the species'' i.e., recovery. See ESA Sec. 3(3).

    Question 3. For example, since many different combinations of lands 
could satisfy recovery objectives, how should FWS choose which lands to 
designate as critical habitat? Should Federal lands be chosen over 
private lands?
    Response. As you know, the ESA now requires a two-step process for 
designating critical habitat under Section 4(b)(2) of the ESA. First, 
``on the basis of the best scientific data available,'' the 
implementing agencies should determine what the species in question 
biologically needs for conservation. Second, the biological needs are 
tempered by the requirement of ``taking into consideration the economic 
impact, and any other relevant impact, of specifying any particular 
area as critical habitat.'' We think this is a balanced approach.
    In terms of Federal lands and private lands, the same two-step 
process should be utilized, remembering that the ``Secretary may 
exclude any area from critical habitat if (s)he determines that the 
benefits of such exclusion outweigh the benefits of specifying such 
area as part of the critical habitat, unless (s)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 the species concerned.'' Id. Again, we believe this is a balanced 
approach.
    Thus, an assessment of Federal, State, private and other geographic 
areas cannot be answered generically, but depends upon the best 
scientific data available for the species in question and an accurate 
assessment of the impacts of a critical habitat designation. For 
example, the highly endangered Sonoran pronghorn and Woodland caribou 
neither of which possess critical habitat have the vast majority of 
their remaining habitat on Federal land, but both species are on the 
brink of extirpation in the U.S. because the applicable Federal 
agencies have not done all they can do for them. Conversely, the 
endangered pygmy owl is dependant upon conservation on private lands, 
and critical habitat designation on these lands is necessary and 
appropriate.

                               __________
            Statement of the American Farm Bureau Federation

    The American Farm Bureau Federation (AFBF) appreciates the 
opportunity to submit this statement for the hearing record.
    Farms and ranches comprise much of the privately owned open space 
in this country. Farmers and ranchers own much of the habitat for 
endangered or threatened species, and for all wildlife. Approximately 
76 percent of all listed species occur to some extent on privately 
owned lands and more than one-third occur exclusively on privately 
owned lands. Agricultural lands are also the buffers between wildlife 
habitat and development.
    Section 4 of the Endangered Species Act requires that ``critical 
habitat'' be designated for any listed species unless such designation 
is not prudent or would not benefit the species. ``Critical habitat'' 
is defined as ``the specific areas within the geographical area 
occupied by the species'' on which are found ``those physical or 
biological features essential to the conservation of the species and 
which may require special management considerations or protection.'' 
Critical habitat may also include habitat currently not occupied by the 
species ``upon a determination by the Secretary that such areas are 
essential for the conservation of the species.'' Critical habitat may 
include privately owned lands as well as Federal, State or tribal 
lands.
    Critical habitat was envisioned as only area that is essential for 
the species, to the point where ``special management considerations'' 
might need to be imposed. ``Except in those circumstances determined by 
the Secretary, critical habitat shall not include the entire 
geographical area which can be occupied by the species.''
    Section 4 of the ESA also requires the Secretary to determine 
critical habitat only after ``taking into consideration the economic 
impact, and any other relevant impact, of specifying any particular 
area as critical habitat.'' This requirement is important because it is 
one of only two places in the entire Endangered Species Act that 
Congress specifically allows economic impacts to be considered in 
making decisions.\1\ The Secretary ``may exclude any area from critical 
habitat if he determines the benefits of such exclusion outweigh the 
benefits of specifying such area,'' unless the species will become 
extinct if critical habitat is not listed.
---------------------------------------------------------------------------
     \1\The rarely used Endangered Species Committee is the other.
---------------------------------------------------------------------------
    The effect of designating an area as ``critical habitat'' may cause 
serious consequences to the owner or user of the designated land. The 
section 7 consultation requirements will be applied any time a 
landowner seeks to undertake any action with a Federal nexus that may 
result ``in the destruction or adverse modification of critical 
habitat,'' a circumstance not present on lands not so designated. 
``Adverse modification'' is broad enough to include almost any action 
taken on critical habitat lands. This can result in the loss of use of 
lands designated as critical habitat. In addition, critical habitat 
designation allows land to be restricted by the Endangered Species Act 
even when there are no listed species on that land.
    Since critical habitat lands are defined as areas ``which may 
require special management considerations or protection,'' they are 
always subject to the possibility that their use may be further 
restricted to fulfill the purpose of the designation. Landowners are 
hesitant to make full use of critical habitat lands because of this.
    At least one study conducted in the habitat area for the black-
capped vireo and golden checked warbler near Austin, Texas, found that 
property values declined significantly for areas designated as critical 
habitat.
    Designation of critical habitat had not been a high priority of the 
Department of Interior under previous administrations. As a result, 
despite a rising number of species listings, fewer and fewer ``critical 
habitat'' designations were made. That all changed when courts began 
ordering the Department to designate critical habitat.
    Following are some concerns and issues of the American Farm Bureau 
Federation with regard to critical habitat.

1. The Department Must Give Full Consideration to Economic Impacts as 
        Required by New Mexico Cattle Growers Decision
    The New Mexico Cattle Growers decision marks a milestone in the 
evolution of critical habitat designations. It required the full 
economic impacts of critical habitat designation be considered and 
weighed against the benefits of designation. Prior to that decision, 
the Department of Interior had only given lip service to the economic 
impact requirement. The court ruled that the method the Department had 
employed in analyzing the economic impacts of critical habitat 
designations was wrong. Every critical habitat designation made up to 
May 11, 2001, was therefore wrong.
    There has been little visible progress in complying with this court 
decision. No new regulations have been proposed. No new guidance or 
policy seems to have been enacted. No process for correcting the 
erroneous pre-2001 designations has been proposed.
    Critical habitat designations can cause significant economic impact 
to farmers and ranchers. Productive farm and ranch lands can lose much 
of their value if their use is restricted due to critical habitat 
designation. Critical habitat on farm or ranch lands will also subject 
farmers and ranchers to section 7 consultations for virtually any 
action they propose to take within the critical habitat area.
    It is extremely important that the full economic impacts of a 
proposed designation on privately owned farm or ranch lands be 
considered before a designation is made. If the cost to the landowner 
is greater than the benefits of designation of critical habitat to the 
species, then that farm or ranch land should not be included within the 
critical habitat. This should apply not only to future designations, 
but also to all of the designations that were done improperly.
    Full economic consideration is not only desired, but is required. 
An unchallenged Federal appellate court decision ruled against the old 
method for conducting economic analyses nearly 2 years ago. It is past 
time to implement this decision.

2. Critical Habitat Should Not be Designated in Areas Not Occupied by 
        the Species Unless there is Conclusive Proof that the Area is 
        Essential for Conservation
    Another major issue of concern to farmers and ranchers is the 
designation of critical habitat that includes areas not currently 
occupied by the species. The problem is especially acute in cases of 
river or stream habitat where uses are restricted and buffer zones 
imposed on areas designated as critical habitat.
    For example, the Department of Interior recently designated over 
1,100 miles of rivers in Oklahoma, Texas, New Mexico and Kansas as 
critical habitat for the Arkansas River Shiner. Of the 1,100 miles 
designated, about half currently contains shiners. The designation also 
includes buffer zones of 300 feet on each side of waterways designated 
as critical habitat. Almost 99 percent of the land along the 
designation is privately owned. This situation creates significant 
hardship for farmers and ranchers and all landowners in the designated 
area.
    The designation was made with very little explanation why 
``essential'' habitat must include twice as much river area as is now 
occupied. Arkansas River Shiners do not require exclusive territory 
within a river. Instead of bearing the burden to justify its decision, 
the Department has placed the burden on challengers of the decision to 
prove why the decision was wrong.
    The concept of critical habitat was designed to specially protect 
those areas essential for the species. As such, Congress allowed 
critical habitat lands to be burdened with greater restrictions than 
non-designated lands. As a result, there must be greater justification 
given by the Department for placing those restrictions on private 
lands.
    This is especially true in the case of unoccupied lands being 
included within a designation. The ESA does not permit restrictions to 
be placed on such lands if they are not part of a critical habitat 
designation and extreme care must be exercised to ensure unwarranted or 
unnecessary restrictions in the name of critical habitat are not placed 
on lands not otherwise subject to Federal restriction.
    The need for proceeding cautiously in designating unoccupied 
habitat as ``critical'' is even greater when considering the intended 
purpose of critical habitat. As lands ``essential for the conservation 
of the species,'' it is more difficult to justify including lands not 
occupied by that species.
    It is therefore imperative that ``critical habitat'' be limited to 
currently occupied habitat, unless there is conclusive proof 
demonstrated by the designating agency that such unoccupied habitat 
will become inhabited in the near future if protected and unless the 
agency also conclusively proves the unoccupied habitat is essential for 
the conservation of the species.

3. Congress Must Reinforce the Original Intent of the Critical Habitat 
        Concept and its Relationship to Non-Designated Species Habitat
    There are some who see little value to critical habitat. They argue 
that the concept adds nothing to the protection of species or habitat. 
A major reason for this perception is the administration of the ESA has 
encroached on land use restriction to a far greater degree than 
Congress intended. The Department itself questioned the usefulness of 
critical habitat in a guidance proposed in 1999 (but never enacted).
    Congress seemed to intend that ``critical habitat'' should mean the 
specific areas within the geographical range of the species that is 
essential for survival. It is to be subject to ``special management 
considerations or protections,'' which is beyond what Congress had in 
mind for other habitat. Critical habitat is thus an important part of 
the statutory scheme. It is supposed to be the habitat of a species 
where the agency is to focus its management activities in order to 
conserve the species. The definition specifically provides that 
``Except in those circumstances determined by the Secretary, critical 
habitat shall not include the entire geographical area which can be 
occupied by the threatened or endangered species.''
    Federal agencies that loosely and wrongly interpret the ``critical 
habitat'' area too broadly, apply the same restrictions to a species' 
entire habitat as are supposed to be applied to truely critical 
habitat. Such an interpretation ignores the special nature of critical 
habitat, the special management considerations it envisions and is 
directly contrary to the above-cited provision that it shall not 
include the entire habitat.
    In Sweet Home Chapter of Oregon v. Babbitt, the U.S. Supreme Court 
specifically rejected the notion that all habitat was subject to the 
regulatory reach of the Fish & Wildlife Service under the ESA. The 
Court interpreted the ``harm'' definition within section 9 of the Act 
to reach habitat modifications that actually resulted in physical 
impacts to the species. Under the reach of that case, any adverse 
impacts to habitat that is not critical and that does not physically 
impact a member of the species in not actionable.
    The interpretation of Sweet Home would also explain the distinction 
between the standards of ``jeopardize the continued existence of the 
species'' and the ``adverse modification of habitat determined to be 
critical.'' The former is applied to actions that might apply to the 
species directly, while the latter is applied to actions affecting 
habitat. Since critical habitat is defined as habitat ``essential to 
the conservation of a species,'' the two standards can be interpreted 
almost the same, but only in the context of a viable critical habitat 
provision. For a species without designated critical habitat, the 
section 7 consultation provision can only apply to actions directly 
affecting the species.
    In order for ``critical habitat'' to have meaning, Congress must 
reinforce its original intent as habitat that is essential for the 
conservation of the species, and which may require special management 
considerations.

4. Private Landowners Should Not Be Penalized for Critical Habitat on 
        their Property
    As indicated above, private landowners may suffer significant 
economic impacts as a result of having part, or all, of their lands 
designated as ``critical habitat'' for a listed species. The value of 
their land may decline as a result of the designation, they may be 
restricted in how they might use their land, or they may be burdened 
with additional section 7 consultation costs and obligations.
    Privately owned lands when correctly designated as ``critical 
habitat,'' provide a significant public benefit. They are deemed 
``essential'' for the conservation of a listed species and possibly 
might prevent that species from becoming extinct. Private landowners 
should not be expected to bear this cost alone.
    It is incumbent upon the government to share in the cost of 
maintaining this habitat that is essential for a listed species. There 
is a real opportunity for the government to provide an innovative 
program to maintain essential habitat, enhance the species and not 
penalize the owner of the land on which essential habitat is found.
    Purchasing ownership or conservation easements in critical habitat 
is one answer, but should not be viewed as the first or only option. We 
firmly believe providing incentives to private landowners to maintain 
critical habitat offers the best opportunity to recover the affected 
species. Active management through landowner participation reaps 
greater benefits than passive management or negative enforcement. If 
critical habitat is to have any meaning, or any role in species 
conservation, landowners must participate in its maintenance and 
management.
    We strongly urge Congress to enact a program that recognizes the 
contributions of private landowners with critical habitat on their 
property and also recognizes the public responsibility to assist them 
in maintaining habitat that is critical for a listed species.

5. Military Exemption from Critical Habitat Requirements Will Likely 
        Increase the Burdens on Private Landowners
    We strongly support the adequate training and military preparedness 
and readiness of our military. Restrictions placed by environmental 
statutes should not hamper the readiness or diminish the training of 
our armed forces.
    Lost in the debates on the requested waivers for the military, 
however, is the fact that private landowners adjacent to or near 
affected military bases are likely to shoulder the increased burdens of 
additional habitat requirements for listed species. Critical habitat 
that would not be placed on military training grounds will likely 
instead be placed on privately owned lands.
    We ask Congress and Federal agencies to consider how these private 
landowners will be compensated for assuming these additional 
restrictions.

                               __________
   Statement of C. Kent Conine, National Association of Home Builders

    Chairman Crapo, and members of the Fisheries, Wildlife, and Water 
Subcommittee, I am pleased to share with you the views of the National 
Association of Home Builders (NAHB) concerning the designation of 
critical habitat under the Endangered Species Act (ESA). My name is 
Kent Conine. I am a homebuilder and developer from Dallas, Texas, and 
the 2003 President of the National Association of Home Builders. I 
submit this testimony on behalf of our 205,000 NAHB members.
    NAHB's membership consists of individuals and firms who develop 
land and construct homes and apartments, as well as commercial and 
industrial projects. While our members are committed to environmental 
protection and species conservation, oftentimes well-intentioned 
policies and actions by regulatory agencies result in plans and 
programs that fail to strike a proper balance between conservation 
goals and needed economic growth. In these instances, our members are 
faced with increased costs attributed to project mitigation, delay, 
modification, or even termination. Within the context of the Endangered 
Species Act, these difficulties are often attributable to species 
listing and the designation of critical habitat.
    When homebuilders develop land and construct homes and apartments, 
the process may occur within or adjacent to an area where there may be 
endangered or threatened species or their habitats. As a result, in 
seeking to comply with the ESA, many of our members are prevented from 
developing their property or are required to submit to extensive 
mitigation requirements in order to move forward.
    Setting aside the community benefits of developing balanced 
neighborhoods, the economic impact of home building extends itself deep 
into the economy of the U.S. The economic activity generated by home 
building is three to four times the typical homebuyer's down payment. 
Hence, a typical $34,000 down payment on a new home generates nearly 
$160,000 in new economic activity (the underlying land value is 
subtracted from the calculation). Many aspiring homebuyers, however, 
are just on the edge of being able to qualify for a mortgage and make 
the required payments. Even a small change in home prices, interest 
rates or delays in construction can determine whether they can buy a 
home.
    Home builders are generally entrepreneurial members of the small 
business community. 82 percent of home builders build fewer than 25 
homes a year and 60 percent of our members build fewer than ten homes a 
year. Many of these small-volume builders and subcontractors do not 
have the capital to withstand the devastating effects of an accidental 
or intentional error in an ESA decision.
    Therefore, NAHB believes the listing of species as threatened or 
endangered and the designations of critical habitat for those species 
must be based on reliable, accurate and solid biological and scientific 
data.
    We wholeheartedly agree with the testimony put forth by Assistant 
Secretary Manson at this hearing, and echo his statement that ``simply 
seeking additional funding for this program is not the solution.'' More 
money is not the answer to the ESA's problems. Rather, we believe it is 
time that serious thought and meaningful action is devoted to fixing 
the ESA and its administration of America's endangered species.
    NAHB remains concerned that critical habitat has been and continues 
to be designated in vastly expansive swaths without conducting the 
rigorous scientific and economic analyses that Congress requires. In 
general, we believe that there are four key reasons why critical 
habitat designations under the ESA are failing to be implemented as 
statutorily defined. These four concerns, further expanded upon below, 
address both the breadth and basis of critical habitat designations for 
species listed under the ESA.
    1. Congress did not intend for critical habitat to encompass the 
species' entire historic range or all potential habitat areas that the 
species may use. Critical habitat is a more defined, smaller subset of 
the species' geographic range.
    The ESA directs that ``critical habitat'' can be designated in two 
types of ``specific areas``: (1) Specific areas within the geographical 
area occupied by the species, if they contain biological features that 
are essential for the conservation and require special management 
considerations or protection; and (2) Specific areas outside of the 
geographical area occupied by the species if they are found to be 
essential for that species' conservation. In any case, critical habitat 
normally cannot include the entire geographic area that can be occupied 
by the listed species.
    Courts have relied on these statutory provisions and decided that 
Congress intended critical habitat to be designated in terms of 
restricted geographic scope. Two particular cases have determined that 
``critical habitat'' must only encompass areas which are ``absolutely 
essential'' to species' survival. See Northern Spotted Owl v. Lujan, 
758 F. Supp. 621 (W.D. Wash. 1991) and Middle Rio Grande Conservancy 
Dist. v. Babbitt, No. CIV 99-870, 99-872, and 99-1445M/RLP 
(consolidated), at 17 (D.N.M. 2000). These cases correctly stand for 
the proposition that critical habitat must represent a more narrow, 
carefully delineated segment of the overall historic, geographic, and 
potential range of the species.
    The legislative history bears this out. NAHB believes that Congress 
intended ``critical habitat'' to be a narrower area than the species' 
entire historic or geographic range. When Congress enacted the ESA in 
1973 and during subsequent amendments in 1978 and 1982, it emphasized 
the concern that critical habitat was being designated more broadly 
than the Act allowed. Specific amendments in 1978 were intended to 
ensure that designated habitat did not encompass all land, air, and 
water environments of the species, but were instead limited to 
``essential areas'' within those environments.
    Despite the clarity of the statute, however, geographic limitations 
are not always observed in practice. The final critical habitat 
designation for the Southwestern Willow Flycatcher, for example, was 
written to include areas that ``contain the remaining known 
southwestern willow flycatcher nesting sites, and/or formerly supported 
nesting southwestern willow flycatchers, and/or have the potential to 
support nesting southwestern willow flycatchers.'' (62 FR 39133)
    2. Critical habitat reflects a narrow concept that must be limited 
to ``specific areas'' that FWS finds are absolutely ``essential'' for 
species conservation, concepts that are oftentimes overlooked or 
ignored in critical habitat designations.
    The ESA defines ``critical habitat'' as:

    ``(i) the specific areas within the geographical area occupied by 
the species . . . on which are found those physical or biological 
features (I) essential for the conservation of the species and (II) 
which may require special management considerations or protection; or
    (ii) specific areas outside the geographical area occupied by the 
species . . . [that] are essential for the conservation of the 
species.'' (16 U.S.C. Sec. 1532(5)(A).)

    Two key phrases stand out in these statutory definitions. First, 
critical habitat contemplates ``specific areas.'' Second, those 
specific areas must be ``essential for conservation.''
    ``Specific Areas``: In using this term, Congress strove for 
precision. Regulators, affected municipalities, conservationists and 
property owners alike would all benefit if they knew, exactly, where 
the species is found. Programs to conserve listed wildlife will be more 
efficient if stakeholders all know what areas, precisely, warrant 
heightened regulation and protection. Recent history, however, seems to 
challenge this common sense approach.
    Of continuing concern for NAHB is the refusal of the Services to 
provide stakeholders with the specific locations where an endangered 
species may be known to exist, including the disclosure of unpublished 
and uncorroborated data used in the designation of critical habitat. In 
the case of the Pygmy Owl, the U.S. Fish and Wildlife Service (FWS) 
failed to respond to a 1998 FOIA request and a 2002 court order to 
provide NAHB with information on all known numbers and locations of the 
Pygmy Owl. Only recently, after four-and-a-half years of litigation, 
has NAHB finally acquired information on the location of Pygmy Owls in 
southern Arizona.
    Furthermore, some critical habitat designations have been 
criticized for reading the term ``specific areas'' out of the Act. For 
example, the final designation rule for Pacific Northwest Salmon simply 
states that critical habitat covers ``all river reaches accessible to 
listed [salmon] within the range'' of the fish. The Salmon final 
designation rule further states that critical habitat comprises ``the 
water, substrate, and adjacent riparian zone'' of over 150 watersheds, 
river segments, bays and estuaries throughout northern California, 
Oregon, Washington, and Idaho. In the future the Services should strive 
to avoid the vague descriptions that characterize the designations for 
this and other species. Such descriptions do little to provide insight 
to what specific areas may or may not be covered by a critical habitat 
designation.
    ``Essential for Conservation``: The second key term in the ESA's 
definition of critical habitat is ``essential for conservation.'' The 
term ``essential'' is an important qualifier, and limits consideration 
of critical habitat to those areas that are absolutely necessary to 
achieve conservation to the point that the species no longer needs to 
be listed. Congress's use of the word ``essential'' in defining 
critical habitat comports with our first principle that designated 
areas are not as broad as geographic ranges but must be restricted to 
areas that are absolutely necessary and important to the species' 
conservation.
    The Fifth Circuit's decision in Sierra Club v. FWS and NMFS (March 
15, 2001) (hereafter, Sierra Club) should not be misinterpreted to 
ignore the terms ``specific areas'' and ``essential'' in the Act's 
critical habitat definition. In opining on the ``adverse modification'' 
regulation, the Fifth Circuit held that Section 7 consultation is 
required ``where an action affects recovery alone; it is not necessary 
for an action to affect the survival of a species.'' The court stated 
that the ESA ``distinguishes between 'conservation' and 'survival,''' 
and that ``[r]equiring consultation only where an action affects the 
value of critical habitat to both the recovery and survival of a 
species imposes a higher threshold than the statutory language 
permits.'' (Id.)
    Even if the Fifth Circuit is correct that consultation (under 
Section 7) can be triggered under a recovery standard independent from 
a survival standard, this does not mean that critical habitat must be 
defined (under Section 3) or designated (under Section 4) based on a 
broad recovery standard one that would improperly encompass huge 
expanses of historic and potential habitat with nebulous parameters. In 
other words, critical habitat is not habitat generally ``for'' recovery 
or generally ``for'' conservation. Rather, critical habitat is 
restricted to ``specific'' areas that the Service determines are 
``essential'' for conservation.
    Congress was clear in its determination that critical habitat 
should be composed of those areas that are found to be ``essential for 
conservation'' of a species. To this end, NAHB is concerned that any 
legislation that would tie critical habitat designations to the 
recovery planning stage would sweep broader areas into the regulatory 
net than Congress intended. If critical habitat were to be tied to a 
recovery plan, the boundaries of critical habitat areas would likely 
coincide with the larger area of ``recovery habitat,'' thereby raising 
the standard for designation. Furthermore, the text of the ESA, 
legislative history, and case law all make clear that recovery plans 
serve as guidance documents, and do not have the force and effect of 
law. If critical habitat the designation of which does have regulatory 
impact is to be determined as part of the recovery planning process, 
the unintended consequence would likely be that the elements of the 
recovery plan would be transposed as having binding, legal effect on 
private parties.
    3. The ``best available science'' must provide the basis for the 
Services' biological finding that ``specific areas'' are ``essential'' 
for conservation. However, the Services have not always used the best 
available science to yield rational determinations of occupied and 
unoccupied areas.
    The ESA requires that the Services use the ``best available 
science'' to make a determination of areas within the ``geographic 
area'' that are ``essential to the conservation'' of the species. The 
U.S. Supreme Court has emphasized that the ``best available science'' 
standard ensures that the ESA is not implemented on the basis of mere 
guesswork. Accordingly, only the ``best available science'' can support 
the Services' findings that certain specific areas contain the 
biological features essential for the species' conservation.
    Past, glaring examples of misconduct however do little to reinforce 
a sense of trust in the Service's ability to make use of this 
scientific standard. The admission of several Forest Service and FWS 
employees of planting false samples of Canadian lynx hair in Washington 
State national forests, as well as the use of faulty data of spotted 
owl habitat to block logging projects in California (which, as a 
result, resulted in the payment of $9.5 million in damages to a logging 
company), call into question the objectiveness of the science utilized 
by the Services.
    In using the ``best science available'' standard prospectively, the 
Services must limit both the occupied and unoccupied areas to only 
those segments that are ``essential for conservation.'' By doing so, 
the Services will ensure that the entire geographical area occupied or 
(unoccupied) is not designated. In order to properly limit areas that 
are ``essential for conservation'' the Services should endorse a common 
sense, scientific approach to ``occupied'' habitat. Some past critical 
habitat designations have construed ``occupied'' too broadly, to avoid 
the necessary finding that certain unoccupied areas are deemed 
essential for conservation.
    For example, 1.2 million acres of critical habitat were treated as 
``occupied'' by 36 Pygmy Owls in southern Arizona. Similarly, the final 
critical habitat rule for the Coastal California Gnatcatcher designates 
over half a million acres 513,650. Yet, in the Gnatcatcher rule, U.S. 
FWS determined that the bird occupied only 54,000 acres. It is 
inconsistent with the vision of Congress to protect 459,650 unoccupied 
acres or 89 percent of the entire designation as ``critical'' habitat.
    Under the Act ``unoccupied'' areas may also be designated as 
critical habitat but only where the Secretary specifically finds that 
the unoccupied area is ``essential to conservation.'' The Services have 
an affirmative obligation to find that unoccupied areas are ``essential 
for conservation'' before they are incorporated into a final critical 
habitat designation. In short, the Services' authority to designate 
``unoccupied'' critical habitat areas is limited and exceptional, and 
must be supported by sound scientific data.
    4. Once the specific areas that are biologically ``essential'' for 
conserving the species is determined based on the ``best available 
science,'' an economic analysis must be completed to exclude any area 
from critical habitat if the benefits of such exclusion outweigh the 
benefits of designation. In the past, economic analyses have failed to 
incorporate the direct, indirect, and cumulative impacts of critical 
habitat designations.
    For years, the rallying cry of the regulated community has been to 
require the Services to conduct a thorough economic analysis on the 
impacts of critical habitat designations. The ESA requires that the 
Services designate critical habitat based on 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.'' FWS's own regulations require the consideration of 
the ``probable economic and other impacts of the designation.'' (50 
C.F.R. Sec. 424.19)
    However, in the past the Services have argued in court and 
elsewhere that designation of critical habitat does not have an 
economic impact above and beyond listing of a species. One circuit 
court of appeals has invalidated this ``incremental'' approach to the 
evaluation of the economic impacts of critical habitat. New Mexico 
Cattle Grower's Assn. v. U.S. Fish and Wildlife Service (10 Cir. May 
11, 2001). Analysts have also criticized the incremental approach, 
noting that the recent rash of court orders requiring designation of 
critical habitat under strict deadlines have been supported by 
inadequate economic analyses.
    In New Mexico Cattle Growers Assn. v. U.S. Fish and Wildlife 
Service, the court held that the baseline approach to economic analysis 
used by the Service there was not in accord with the language or intent 
of the ESA. The court further took note of the Sierra Club decision and 
stated: ``[T]he regulation's definition of the jeopardy standard as 
fully encompassing the adverse modification standard renders any 
purported economic analysis done utilizing the baseline approach 
virtually meaningless. We are compelled by the canons of statutory 
interpretation to give some effect to the congressional directive that 
economic impacts be considered at the time of critical habitat 
designation.'' In accordance with the 10th Circuit decision, the 
Services shall avoid their previous position that there is only 
``incremental'' economic impact from the designation of critical 
habitat above and beyond the listing of the species.
    Indeed, recent independent studies have continued to challenge the 
methods by which the Services conduct economic analyses. A recent case 
study by the California Resource Management Institute suggests that the 
FWS underestimated the costs of the critical habitat designation for 
vernal pool species in California by seven to 14 times.
    Accordingly, NAHB recommends that the Service should specify, in 
guidance, certain factors for consideration in an economics analysis 
for critical habitat designations. For example, guidance could specify 
that areas can be excluded from critical habitat designation in light 
of studies showing the designation's impact on: public works projects; 
transportation projects; job loss; the availability and cost of 
housing; the ability of affected counties, cities and municipalities to 
issue development approvals and conduct land use planning processes 
within their respective jurisdictions; increased costs to navigate 
heightened regulatory processes; impacts on the lending and banking 
communities; and the price and tax implications on affected real 
estate.
    Moreover, NAHB suggests that Services should consider the 
cumulative economic impacts of critical habitat designations. Had the 
Services been compelled to consider the cumulative economic 
consequences that flow from multiple critical habitat designations, it 
is doubtful that we would see the myriad of designations that have 
caused 1/3 of the State of California to be designated as critical 
habitat.
    The costs attributed to critical habitat designations can be 
staggering. For example, Arizonans living in Pima and Pinal counties 
will be faced with as much as $108 million in costs as a result of 
proposed Pygmy Owl critical habitat. It is for this reason that NAHB 
believes the Services must be made to follow their statutory mandate to 
exclude any area from the designation of critical habitat if the 
economic and other impacts of the designation outweigh the benefits of 
the designation.
    Furthermore, NAHB believes that the Services must foster a notion 
of predictability and transparency through the establishment of clear 
criteria and formal procedures for the process by which the benefits of 
inclusion and exclusion are balanced under Sec. 1533(b)(2). Of course, 
it goes without saying that the Services should not exclude specific 
areas if they determine, based on the best available science that the 
exclusion will result in the extinction of the species. As mentioned 
previously, our members are committed to environmental protection and 
species conservation, but are looking to the Services to adopt policies 
and promulgate regulations in processes that are legal, equitable, 
fair, and consistent with the ESA and its intent and interpretation.

Conclusion
    In conclusion, NAHB supports the goals of the ESA in protecting 
endangered and threatened species and their habitats, but these 
protection measures must be based on reliable, accurate and solid 
biological and scientific data. Our members are often prevented from 
developing their property or must submit to extensive mitigation 
requirements based upon what are often hypothetical and speculative 
impacts to species and their habitats. Continuing to apply unsound, 
unreviewable, and at times fraudulent evidence in ESA decisions could 
endanger the very species it seeks to protect, and it will certainly 
continue to unfairly raise the cost of housing, lock families out of 
the housing market, and have harmful effects on our economic recovery.
    Congress intended critical habitat to encompass limited geographic 
scope. The ESA restricts critical habitat to those ``specific'' areas 
that are found to be ``essential'' to species conservation based on the 
best available scientific data, and after considering the economic 
impacts of the designation. However, the Services usually designate 
critical habitat only as the result of litigation filed by 
environmental groups. Accordingly, the Services fail to engage in the 
rigorous scientific and economic analyses required by the Act and paint 
with too broad a brush and improperly include huge swaths of historic 
and potential habitat areas within the ``critical'' habitat 
designation. NAHB looks forward to continuing to work with this 
committee, with Congress, and with the Services to ensure that 
Congress' intent with respect to critical habitat is properly carried 
out.
    Mr. Chairman, I appreciate your leadership on this important issue, 
and thank you for your consideration of NAHB's views.
                               __________
                                        Canadian Embassy,  
                                501 Pennsylvania Avenue NW,
                                 Washington, DC 20001, May 2, 2003.

The Honorable Michael Crapo, Chair,
Senate Subcommittee on Fisheries, Wildlife, and Water,
U.S. Senate,
Senate Office Building,
Washington, DC 20510.

Dear Senator Crapo: I am taking this opportunity to correct information 
presented by the Defenders of Wildlife at the April 10th subcommittee 
hearing regarding the alleged impact softwood lumber logging in Canada 
has on the recovery of endangered Woodland Caribou in the United 
States.
    In October 2002, the U.S. General Accounting Office (GAO) completed 
and released a detailed report (enclosed) entitled ``United States and 
Canadian Efforts to Protect, Monitor and Recover Four Transboundary 
Species'' (GAO-03-211 R). Woodland Caribou were included in that study, 
which focussed on forest-dependent species. Indeed, one of your 
subcommittee members, Senator Max Baucus (D-MT), was a requester of the 
study and his office is aware of the GAO's findings.
    The GAO found that the management regimes for the four species, 
including the Woodland Caribou, are similar in the United States and 
Canada. The report also highlights the extensive cooperation that 
exists between Canadian and U.S. wildlife agencies, citing as prime 
examples the International Woodland Caribou Recovery Team and the 
International Mountain Caribou Technical Committee. Implementing joint 
recovery plans and sharing data, these multiagency teams are working 
expertly and objectively to enhance Woodland Caribou populations and to 
protect habitat on both sides of the border.
    GAO notes that, according to governmental wildlife officials, 
``certain threats to the species, such as predation, residential and 
commercial development, and human recreational activities are equal or 
greater threats to transboundary species recovery than, for example, 
logging and logging roads''. (p.2). Indeed, Idaho's Fish and Game 
Agency confirms that predation is an important factor in the high 
mortality levels of caribou transplanted to your State from Canada.
    Canada has assisted with the recovery of U.S. Woodland Caribou by 
sending surplus caribou to Idaho to help the State's endangered 
population. For example, between 1987 and 1990 alone, 60 Woodland 
Caribou were moved to northern Idaho from British Columbia to help 
bolster the remnant herd.
    I hope the report is of assistance to you in your discussion of the 
softwood lumber issue at the upcoming Canada-U.S. Interparliamentary 
Group in Niagara Falls, N.Y.
            Yours sincerely,
                                             Michael Kergin
                                                         Ambassador
                                 ______
                                 
                                 General Accounting Office,
                                  Washington, DC, October 31, 2002.

The Honorable Max Baucus,
The Honorable Lincoln D. Chafee
U.S. Senate.

Subject: Transboundary Species: Potential Impact to Species

    The United States/Canada Softwood Lumber Agreement expired in March 
2001. As part of the preparation process for renegotiating the 
agreement, the United States Trade Representative requested public 
comment on softwood lumber trade issues between the United States and 
Canada and on Canadian softwood lumbering practices. The comments 
received included allegations that Canadian lumbering and forestry 
practices were affecting animal species with U.S./Canadian ranges 
(transboundary species) that are listed as threatened or endangered in 
the United States. To consider these comments as well as provide useful 
information to the U.S. Trade Representative in the renegotiations, the 
Department of the Interior, with the Department's U.S. Fish and 
Wildlife Service's (FWS) assistance, prepared a conservation status 
report on selected species that may be affected by the new agreement. 
The status report presented summaries of information on eight 
transboundary species and reached preliminary conclusions of potential 
impact to four species.
    You asked us to review the information and the process that 
Interior used to develop the January 2001 status report as well as 
provide you with updated information concerning several specific 
transboundary species. Accordingly, this report describes the (1) 
supporting information that FWS used and the process it followed when 
compiling its information for the Department of the Interior's January 
2001 conservation status report on selected threatened or endangered 
species with U.S./Canadian ranges; and (2) existing U.S. and Canadian 
efforts aimed at protecting, monitoring, and facilitating the eventual 
recovery of four transboundary species-the bull trout, grizzly bear, 
marbled murrelet, and woodland caribou-listed as threatened or 
endangered in the United States.
    On October 4, 2002, we briefed your offices on the results of our 
work. This report transmits the materials used during that briefing.
Results in Brief
    In compiling the information for the Department of the Interior's 
2001 conservation status report for the U.S. Trade Representative, the 
Fish and Wildlife Service relied chiefly on previously published 
material and internal agency documents, such as individual species 
recovery plans, Federal Register listing information, other 
administrative records, and public comments received. According to the 
FWS official we contacted, FWS headquarters had to compile the report 
under a tight timeframe and did not have time to consult with the 
regional recovery team coordinators responsible for monitoring the 
species or seek updated information to supplement the information used 
from dated species recovery plans. From our analysis of the report and 
our discussions with U.S. and Canadian wildlife officials, we believe 
that the report, among other things,

      understates the extent of cooperation between U.S. and 
Canadian officials to monitor, protect, and recover transboundary 
populations of species listed as threatened or endangered in the United 
States. In particular, the report did not fully capture the extent of 
data exchange or joint initiatives undertaken, and
      gives little attention to certain threats to the species, 
such as predation, residential and commercial development, and human 
recreational activities, that, according to governmental wildlife 
officials, are equal or greater threats to transboundary species 
recovery than, for example, logging and logging roads.

    Whereas the inclusion of such updated information has the potential 
to change the details presented in the report, we do not believe that 
the additional information would alter the report's general findings.
    The United States and Canada similarly engage in processes-both on 
their respective side of the border and in collaboration with one 
another-aimed at protecting, monitoring, and facilitating the eventual 
recovery of the bull trout, grizzly bear, marbled murrelet, and 
woodland caribou. Specifically, wildlife officials on each side grant 
species a special protective status; outline the threats to the 
species; collect diverse sources of data to monitor the species' 
habitat and population trends; undertake specific species recovery, 
protection, and coordination activities; and encounter similar 
obstacles in their attempts to assess the species and facilitate its 
recovery. Furthermore, U.S. and Canadian officials often work in tandem 
by jointly participating in conferences on species recovery issues; 
consistently sharing species monitoring data and other technical 
information; and for certain species like the woodland caribou, jointly 
participate in the development of recovery plans.

Supplemental Information
    In addition to the presentation slides used during our briefing, we 
also are enclosing the other documents discussed during that meeting 
(see enc. 1). Specifically, we are enclosing:

      the timetable for preparing the January 9, 2001 report 
(enc. II);
      the authorizing legislation and agreements related to the 
protection of species at risk in the United States and Canada (enc. 
III);
      the process for listing species in the United States and 
Canada (enc. IV); and
      an overview of species-specific information (enc. V). 
These materials supplement the content in the presentation slides. 

Scope and Methodology
    To respond to the above objectives, we met with representatives of 
the Department of the Interior and FWS, the recovery coordinators for 
the four species, and Federal and provincial wildlife officials from 
Alberta and British Columbia. We reviewed documents associated with 
managing and recovering the four species. We also contacted and 
obtained documents from environmental organizations and industry 
associations.
    The maps that we present in enclosure V do not include the 
historical range or entire current range and may not be drawn to scale. 
We provided the maps, however, to provide readers with a general 
geographical reference to the range of habitat for these four 
transboundary species.
    We performed our work on this assignment from March 2002 to 
September 2002 in accordance with generally accepted government 
auditing standards. A detailed description of our scope and methodology 
is included as enclosure VI.

Agency Comments
    While we did not receive comments on a draft of this report, we did 
hold exit conferences with the various U.S. and Canadian officials that 
we met in the course of our review and obtained oral comments. During 
the exit conferences we discussed the information used to develop the 
briefing slides and supplemental enclosures with appropriate U.S. and 
Canadian officials. Generally, the officials indicated that the 
information was accurate and provided a good, general overview of their 
respective species management and recovery programs. The officials also 
provided some technical clarifications that we have incorporated as 
appropriate.
    As agreed with your office, unless you publicly announce the 
contents of this report earlier, we plan no further distribution until 
30 days from the report date. At that time, copies of this report will 
be available at no charge on GAO's Web site at http://www.gao.gov.
    If you or your staff have any questions on the matters discussed in 
this report, you may contact me at (202) 512-3841. Major contributors 
to this report were Linda L. Harmon, Michael J. Rahl, and Jonathan 
McMurray.
                                              Barry T. Hill
                       Director, Natural Resources and Environment.



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