Amicus Curiae Brief — Weyerhaeuser Company, Petitioner v. United States Fish and Wildlife Service, et al.

No. 17-71

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

In The

Supreme Court of the United States

-----------------------------------------------------------------WEYERHAEUSER COMPANY,

Petitioner,

v.

UNITED STATES FISH AND

WILDLIFE SERVICE, et al.,

Respondents.

-----------------------------------------------------------------On Writ of Certiorari to the

United States Court of Appeals

for the Fifth Circuit

-----------------------------------------------------------------AMICUS CURIAE BRIEF OF

ECONOMISTS AND LAW PROFESSORS

IN SUPPORT OF RESPONDENTS

-----------------------------------------------------------------AMY SINDEN

TEMPLE UNIVERSITY

BEASLEY SCHOOL OF LAW

1719 N. Broad St.

Philadelphia, PA 19122

(215) 204-4969

asinden@temple.edu

DOUGLAS R. WILLIAMS

SAINT LOUIS UNIVERSITY

SCHOOL OF LAW

100 N. Tucker Blvd.

St. Louis, MO 63101

(314) 977-2786

williaj2@slu.edu

AMY J. WILDERMUTH

Counsel of Record

UNIVERSITY OF PITTSBURGH

SCHOOL OF LAW

3900 Forbes Ave.

Pittsburgh, PA 15620

(412) 648-1401

amy.wildermuth@pitt.edu

Counsel for Amici Curiae

Economists and Law Professors

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

COCKLE LEGAL BRIEFS (800) 225-6964

WWW.COCKLELEGALBRIEFS.COM

i

QUESTIONS PRESENTED

1.

Whether the Endangered Species Act prohibits

designation of private land as unoccupied critical

habitat that is neither habitat nor essential to species conservation.

2.

Whether an agency decision not to exclude an area

from critical habitat because of economic impact of

designation is subject to judicial review.

ii

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ..................................

i

TABLE OF CONTENTS ........................................

ii

TABLE OF AUTHORITIES ...................................

v

INTEREST OF AMICI CURIAE............................

1

STATEMENT OF THE CASE ................................

1

SUMMARY OF ARGUMENT ................................

4

ARGUMENT ...........................................................

6

I.

Congress Intended the Section 4(b)(2) Economic Analysis to Be a Broad, Flexible Weighing of Often Unquantifiable Values .............

6

a. Congress Did Not Require a Formal,

Quantitative Analysis of Costs and Benefits Because It Viewed the Value of Endangered Species as “Incalculable”.......

6

b. Congress Did Not Make the Economic

Analysis Decisive in the Decision Whether

to Exclude .............................................. 10

II. Congress’s Vision of Section 4(b)(2) Is Consistent With the Broader Application of CostBenefit Analysis and With Well-Accepted

Fundamentals of Economic Theory ............. 13

a. Executive Order 12,866 and Accompanying Guidance Documents Emphasize

the Importance of Qualitative Descriptions of Unquantifiable Costs and Benefits in Cost-Benefit Analysis................ 13

iii

TABLE OF CONTENTS – Continued

Page

b. Well-Accepted Fundamentals of Economic

Theory Also Emphasize the Importance

of Taking into Account Qualitative Descriptions of Unquantifiable Variables

in Cost-Benefit Analysis ........................ 16

III.

The FWS’s Economic Analysis in This Rulemaking Complied With the Requirements

of the ESA .................................................... 21

a. FWS’s Economic Analysis for the Gopher Frog Designation Was Unable to

Quantify the Costs, Reporting Instead

Three Possible “Scenarios” of Unknown

Probability, With Costs Ranging From

$0 to $34 million .................................... 22

i. Designation Involves a Crystal Ball

Inquiry That Is Inherently Fraught

With Uncertainty ............................. 22

ii. The Economic Analysis for the Gopher Frog Designation, Which Found

Costs Unquantifiable, Illustrates These

Difficulties ........................................ 25

b. FWS’s Economic Analysis for the Gopher Frog Estimated Benefits in Entirely Qualitative Terms ........................ 32

i. The Enormous Challenges in Estimating the Benefits of Critical Habitat Designation Mean the Wildlife

Agencies Typically Do Not Quantify

These Estimates ............................... 32

iv

TABLE OF CONTENTS – Continued

Page

ii. The Economic Analysis for the Gopher Frog Designation, Which Found

Benefits Unquantifiable, Illustrates

These Difficulties ............................. 33

c.

The Cost-Benefit Analysis Was Inconclusive as to Whether Benefits Will Ultimately Outweigh Costs or Vice Versa .... 36

CONCLUSION .......................................................

39

APPENDIX

AMICI CURIAE ................................................... 1a

v

TABLE OF AUTHORITIES

Page

CASES

Bennett v. Spear, 520 U.S. 154 (1997).........................10

Indus. Union Dep’t, AFL-CIO v. Am. Petrol. Inst.,

448 U.S. 607 (1980) .................................................10

Markle Interests, L.L.C. v. U.S. Fish & Wildlife

Serv., 827 F.3d 452 (5th Cir. 2016) ..........................36

Solid Waste Agency of N. Cook Cty. v. U.S. Army

Corps of Eng’rs, 531 U.S. 159 (2001).......................31

Taylor v. Freeland & Kronz, 503 U.S. 638 (1992) .......36

Tenn. Valley Auth. v. Hill, 437 U.S. 153 (1978)......... 6, 7

United Steelworkers of Am. v. Marshall, 647 F.2d

1189 (D.C. Cir. 1980) ...............................................10

Youakim v. Miller, 425 U.S. 231 (1976) ......................37

STATUTES

16 U.S.C. § 1533(b)(2) ................................. 2, 5, 6, 7, 11

16 U.S.C. § 1533(b)(6)(C) ..............................................9

16 U.S.C. § 1533(b)(6)(C)(ii) .................................... 9, 10

16 U.S.C. § 1536(a)(2) ............................................. 2, 22

16 U.S.C. § 1536(b)(3) .................................................30

33 U.S.C. § 1344(a) ......................................................27

33 U.S.C. § 1344(f )(1)-(2) ............................................27

vi

TABLE OF AUTHORITIES – Continued

Page

REGULATIONS

50 C.F.R. § 402.02 .......................................................30

76 Fed. Reg. 59,774 (Sept. 27, 2011).............................2

77 Fed. Reg. 35,118 (June 12, 2012) ................... passim

Exec. Order No. 12,866, 3 C.F.R. 638 (1994), reprinted as amended in 5 U.S.C. § 601 (2016)..... 13, 14

Exec. Order No. 13,563, 3 C.F.R. 215 (2012), reprinted as amended in 5 U.S.C. § 601 (2016)............14

LEGISLATIVE HISTORY

124 CONG. REC. 21,334 (1978), reprinted in CONG.

RESEARCH SERV., LEGISLATIVE HISTORY OF THE

ENDANGERED SPECIES ACT OF 1973 (1982) ..............12

Endangered Species Conservation Act of 1972:

Hearings on S. 249, S. 3199, and S. 3818 Before the Subcomm. on the Env’t of the S.

Comm. on Commerce, 92d Cong. (1972) ...................8

H. COMM. ON RULES, PROVIDING FOR THE CONSIDERATION OF H.R. 14104, H.R. REP. NO. 95-1757

(1978), reprinted in CONG. RESEARCH SERV.,

LEGISLATIVE HISTORY OF THE ENDANGERED SPECIES ACT OF 1973 (1982) .................................. 7, 8, 12

H.R. REP. NO. 93-412 (1973).........................................7

H.R. REP. NO. 95-1625 (1978).....................................12

H.R. REP. NO. 97-567, pt. 1 (1982) .............................23

vii

TABLE OF AUTHORITIES – Continued

Page

S. COMM. ON COMMERCE, ENDANGERED SPECIES

ACT OF 1973, H.R. REP. NO. 93-307, reprinted

in CONG. RESEARCH SERV., LEGISLATIVE HISTORY OF THE ENDANGERED SPECIES ACT OF 1973

(1982) .........................................................................8

OTHER AUTHORITIES

Amy Sinden, Cost-Benefit Analysis, Ben Franklin, and the Supreme Court, 4 U.C. IRVINE L.

REV. 1175 (2014)......................................................20

Amy Sinden, The Economics of Endangered Species: Why Less is More in the Economic Analysis of Critical Habitat Designations, 28 HARV.

ENVTL. L. REV. 129 (2004) ............................... passim

ANTHONY E. BOARDMAN ET AL., COST-BENEFIT

ANALYSIS: CONCEPTS AND PRACTICE (4th ed.

2011) ................................................................ passim

Cass R. Sunstein, Incommensurability and Valuation in Law, 92 MICH. L. REV. 779 (1994) ...........17

CASS R. SUNSTEIN, THE COST-BENEFIT STATE: THE

FUTURE OF REGULATORY PROTECTION (2002) ...........20

Cass R. Sunstein, The Limits of Quantification,

102 CAL. L. REV. 1369 (2014) ..................................15

Daniel H. Cole, Law, Politics, and Cost-Benefit

Analysis, 64 ALA. L. REV. 55 (2012) ........................17

Dave Owen, Critical Habitat and the Challenge

of Regulating Small Harms, 64 FLA. L. REV.

141 (2012) .......................................................... 23, 24

viii

TABLE OF AUTHORITIES – Continued

Page

David S. Brookshire et al., Valuing Public Goods:

A Comparison of Survey and Hedonic Approaches, 72 AM. ECON. REV. 165 (1982).................17

DAVID W. PEARCE & ANIL MARKANDYA, ENVIRONMENTAL POLICY BENEFITS: MONETARY VALUATION (1989) ...............................................................17

DAVID W. PEARCE & R. KERRY TURNER, ECONOMICS OF NATURAL RESOURCES AND THE ENVIRONMENT (1990) .............................................................19

DONALD BARRY ET AL., FOR CONSERVING LISTED SPECIES, TALK IS CHEAPER THAN WE THINK (1992),

http://www.nativefishlab.net/library/textpdf/

15635.pdf .................................................................23

Douglas R. Williams, Valuing Natural Environments: Compensation, Market Norms, and the

Idea of Public Goods, 27 CONN. L. REV. 365

(1995) .......................................................................19

E. J. MISHAN & EUSTON QUAH, COST-BENEFIT

ANALYSIS (5th ed. 2007) ...........................................16

EDWARD M. GRAMLICH, A GUIDE TO BENEFIT-COST

ANALYSIS (2d ed. 1997)....................................... 16, 19

Elena G. Irwin, The Effects of Open Space on

Residential Property Values, 78 LAND ECON.

465 (2002) ................................................................18

ELIZABETH ANDERSON, VALUE IN ETHICS AND ECONOMICS (1993) ..........................................................17

ix

TABLE OF AUTHORITIES – Continued

Page

Erik Nelson et al., Identifying the Impacts of Critical Habitat Designation on Land Cover Change,

47 RESOURCE & ENERGY ECON. 89 (2016)...................24

INDUSTRIAL ECONOMICS, INC., ECONOMIC ANALYSIS

OF CRITICAL HABITAT DESIGNATION FOR THE DUSKY

GOPHER FROG (2012), https://www.regulations.gov/

contentStreamer?doc ...................................... passim

J.B. Loomis & Douglas S. White, Economic Benefits of Rare and Endangered Species: Summary and Meta-Analysis, 18 ECOL. ECON. 197

(1996) .......................................................................33

Jacob W. Malcom & Ya-Wei Li, Data Contradict

Common Perceptions About a Controversial

Provision of the Endangered Species Act, 112

PNAS 15844 (2015) ........................................... 23, 24

John M. Quigley et al., The Urban Impacts of the

Endangered Species Act: A General Equilibrium Analysis, 61 J. URBAN ECON. 299 (2007) ........35

John V. Krutilla, Conservation Reconsidered, 57

AM. ECON. REV. 777 (1967) ......................................19

Kenneth Arrow et al., Is There a Role for BenefitCost Analysis in Environmental, Health, and

Safety Regulation?, 272 SCIENCE 221 (1996) .... 16, 20

Leonard Shabman & Kurt Stephenson, Environmental Valuation and Its Economic Critics, 126 J. WATER RESOURCES PLAN. & MGMT.

382 (2000) ................................................................19

x

TABLE OF AUTHORITIES – Continued

Page

OFFICE OF INFO. & REGULATORY AFFAIRS, REGULATORY

IMPACT ANALYSIS: A PRIMER, https://obamawhite

house.archives.gov/sites/default/files/omb/inforeg/

regpol/circular-a-4_regulatory-impact-analysisa-primer.pdf (last visited June 28, 2018) ...............14

OFFICE OF MGMT. & BUDGET, CIRCULAR A-4, REGULATORY ANALYSIS (2003) ................................. passim

Philip E. Graves, Benefit-Cost Analysis of Environmental Projects: A Plethora of Biases Understating Net Benefits, 3 J. BENEFIT-COST ANALYSIS 1

(2012) .......................................................................17

Thomas H. Stevens et al., Measuring the Existence Value of Wildlife: What Do CVM Estimates

Really Show?, 67 LAND ECON. 390 (1991) ......... 18, 19

U.S. GENERAL ACCOUNTING OFFICE, GAO-92-131BR,

ENDANGERED SPECIES ACT: TYPES AND NUMBER

OF IMPLEMENTING ACTIONS (1992) ...........................23

1

INTEREST OF AMICI CURIAE1

Amici Curiae are economists and law professors

with expertise in economic theory, cost-benefit analysis, the valuation of environmental goods, and environmental law and regulation. They teach and have

published extensively on these topics in leading journals and with leading academic presses.

Amici have a particular interest in this case in the

proper administration by the U.S. Fish and Wildlife

Service (FWS) of its duties and authorities under the

Endangered Species Act. They agree that FWS’s critical habitat designation accords with both the requirements of law and fundamental principles of economics

and therefore urge this Court to affirm the judgment

below.

------------------------------------------------------------------

STATEMENT OF THE CASE

In 2011, based on a unanimous assessment by

FWS’s six peer reviewers that its initial critical habitat

designation was “inadequate for the conservation of

the dusky gopher frog,” 77 Fed. Reg. 35,118, 35,123–24

(June 12, 2012), the FWS issued a revised proposed

1

The parties’ consent to the filing of this brief was filed with

the Clerk of this Court in accordance with Supreme Court Rule

37. In addition, in accordance with Supreme Court Rule 37.6,

Amici Curiae certify that no counsel for any party in this case authored this brief in whole or in part, and furthermore, that no person or entity, other than Amici Curiae, has made a monetary

contribution specifically for the preparation or submission of this

brief.

2

designation. 76 Fed. Reg. 59,774, 59,783 (Sept. 27,

2011). This revised designation included Unit 1, with

its rare ephemeral ponds, to address the peer reviewers’ concern that without potential habitat outside

Mississippi, the frog was “at high risk of extirpation”

from “local catastrophic events,” “such as disease or

drought.” 77 Fed. Reg. at 35,121, 35,125.

FWS considered the “economic impact” of this proposed critical habitat designation as required under ESA

Section 4(b)(2). 16 U.S.C. § 1533(b)(2). It elected to hire

an economics consulting firm, “Industrial Economics,”

to perform an economic analysis of the designation, including the inclusion of Unit 1. See INDUSTRIAL ECONOMICS, INC., ECONOMIC ANALYSIS OF CRITICAL HABITAT

DESIGNATION FOR THE DUSKY GOPHER FROG (2012)

[hereinafter EA], https://www.regulations.gov/contentStreamer?documentId=FWS-R4-ES-2010-0024-0157&

contentType=pdf . That analysis concluded that uncertainties precluded any quantification of benefits, making it impossible to know whether the designation

would impose any cost at all on the landowners. The

sources of this uncertainty include whether any potential development plans would be pursued, and if so,

whether those plans would be subject to federal regulatory oversight requiring consultation procedures and

development restrictions under Section 7 of the ESA.

See 16 U.S.C. § 1536(a)(2).

With this uncertainty understood, the analysis

identified three possible scenarios—with costs ranging

from $0 to $34 million—that could occur if the landowners follow through with potential plans to pursue

3

residential development in Unit 1 in in the future. If

they do not pursue residential development, but instead continue to use the land for timber production,

as it has been for the last 100 years, or if proposed

development proceeds without a federal nexus, the

analysis estimated costs at or near $0. The analysis

was unable to estimate the relative probabilities of the

three scenarios.

On the benefits side, the analysis followed FWS’s

ordinary practice of concluding that benefits “are best

expressed in biological terms.” 77 Fed. Reg. at 35,141;

EA at 2–18. Accordingly, the analysis described the

various expected benefits of the designation wholly

qualitatively, including increased potential for future

conservation and recovery of the gopher frog; recreational and aesthetic values; existence values; and values to future generations. EA at 2–18, 5–1 to 5–2. It

also discussed values stemming from the preservation

and enhancement of ecosystem services, biodiversity,

and increases in property values on nearby parcels due

to open space preservation. Id. at 2–18, 5–2 to 5–3.

After soliciting additional rounds of public comment on its revised designation and accompanying

Economic Analysis, the FWS issued its final critical

habitat designation for the dusky gopher frog—including Unit 1—in 2012. 77 Fed. Reg. at 35,118–19. Because the Economic Analysis was inconclusive as to

whether the benefits of Unit 1’s inclusion outweighed

the costs, or vice versa, the FWS did not exercise

its discretion to exclude Unit 1 or any other areas

4

from the designation. Id. at 35,141. This challenge followed.

------------------------------------------------------------------

SUMMARY OF ARGUMENT

The FWS’s Economic Analysis of the critical habitat designation for the dusky gopher frog was reasonable and should be upheld. It conforms with statutory

requirements, with well-established standards for costbenefit analysis across the federal government, and

with widely-recognized principles of textbook economics.

This brief responds to two critical points regarding

the reasonableness of the FWS’s conclusion. First, petitioner mischaracterizes FWS’s Economic Analysis

as finding $34 million in costs and no benefits, and

asserts on that basis that FWS’s finding of no disproportionate costs was an abuse of discretion. See, e.g.,

Markle Merits Br. 18. Second, petitioner wrongly maintains that FWS’s cost-benefit analysis was methodologically flawed. Both contentions are without merit.

The FWS’s Economic Analysis of its critical habitat designation illustrates the inherent difficulties in

quantifying the costs and benefits of critical habitat

exclusion decisions and the wisdom of Congress’s decision not to require formal, quantitative cost-benefit

analysis in this context. FWS was unable to precisely

quantify the costs of including petitioner’s land in the

designation, reporting instead three possible “scenarios,” with costs ranging from $0 to $34 million. FWS

5

also could not quantify the relative probabilities of the

scenarios but the practical circumstances of the case

indicate that the low cost scenarios are more likely.

As a result of these uncertainties, the analysis

followed the agency’s usual practice of estimating benefits in entirely qualitative terms. Thus, FWS’s Economic Analysis did not show a disproportion between

costs and benefits; rather, it was inconclusive as to

whether benefits outweigh costs or vice versa.

FWS’s Economic Analysis was consistent with

congressional intent as expressed in the plain language of Section 4(b)(2), 16 U.S.C. § 1533(b)(2), and the

legislative history of the Endangered Species Act

(ESA). Because Congress viewed the value of endangered species as “incalculable,” it intended economic

analysis under that section to be a broad, flexible

weighing of often unquantifiable values. It also did not

make the economic analysis decisive in the decision

whether to exclude; rather it is one of a broad range of

factors Section 4(b)(2) directs the wildlife agencies to

weigh.

FWS’s Economic Analysis was also consistent with

the broader application of cost-benefit analysis throughout federal government and with well-accepted fundamentals of economic theory. The executive orders and

accompanying guidance documents governing federal

agencies’ use of cost-benefit analysis emphasize the

importance of qualitative descriptions of unquantifiable costs and benefits, as do classic texts in the economics literature.

------------------------------------------------------------------

6

ARGUMENT

I.

Congress Intended the Section 4(b)(2) Economic Analysis to Be a Broad, Flexible Weighing of Often Unquantifiable Values.

The language and legislative history of ESA Section 4(b)(2) makes clear that Congress sought above all

else to give flexibility and discretion to the FWS and

the National Marine Fisheries Service (collectively, the

wildlife agencies) in considering economic impacts and

making exclusion decisions regarding critical habitat.

Congress viewed the value of endangered species as

“incalculable.” Tenn. Valley Auth. v. Hill, 437 U.S. 153,

187–88 (1978). It therefore directed the wildlife agencies to conduct a rough, informal, apples-to-oranges

comparison of costs and benefits. It also made that

analysis one of a broad range of factors the wildlife

agencies are to consider.

a. Congress Did Not Require a Formal,

Quantitative Analysis of Costs and Benefits Because It Viewed the Value of Endangered Species as “Incalculable.”

The parties to this litigation all agree that Section

4(b)(2) vests the wildlife agencies with enormous discretion and flexibility in making critical habitat exclusion decisions. The statute requires the agencies to

“consider” economic impact, 16 U.S.C. § 1533(b)(2)

(“[t]he Secretary shall designate critical habitat . . . after taking into consideration the economic impact”),

and suggests that such consideration should take the

7

form of a comparison of costs to benefits. Id. (referencing the Secretary’s “determin[ation] that the benefits

of [excluding any area from critical habitat] outweigh

the benefits of specifying such area”). When it comes to

making a substantive decision on the basis of that economic analysis, the statute makes a conspicuous shift

from “shall” to “may.” Id. (“[t]he Secretary may exclude”).

This shift in the plain language of the statute from

mandate to discretion makes sense when one considers

the kind of informal, intuitive weighing process Congress envisioned in adding this provision to the statute

in 1978. Because Congress viewed the value of endangered species as unquantifiable, it did not require the

agencies to perform formal cost-benefit analyses, in

which each side of the balance is assigned a monetized

value and compared with mathematical precision. Rather, Congress understood that these analyses would

inevitably be inexact, apples-to-oranges comparisons

necessarily requiring the grant of substantial discretion to the agency. See Amy Sinden, The Economics of

Endangered Species: Why Less is More in the Economic

Analysis of Critical Habitat Designations, 28 HARV.

ENVTL. L. REV. 129, 194–96 (2004) [hereinafter Sinden,

Economics of Endangered Species].

When it first passed the statute in 1973, Congress

saw the value of endangered species as literally “incalculable.” Tenn. Valley Auth., 437 U.S. at 177–78 (quoting H.R. REP. NO. 93-412, at 4–5 (1973)). And when it

amended the statute five years later, Congress’s views

in that regard had not changed. H. COMM. ON RULES,

8

PROVIDING FOR THE CONSIDERATION OF H.R. 14104, H.R.

REP. NO. 95-1757 (1978), reprinted in CONG. RESEARCH

SERV., LEGISLATIVE HISTORY OF THE ENDANGERED SPECIES ACT OF 1973, at 820 (1982) [hereinafter H.R. REP.

NO. 95-1757, LEG. HISTORY] (statement of Rep. Murphy) (“[M]any species have a tremendous esthetic

value which is difficult if not impossible to quantify.”).

Congress’s skepticism about the ability to quantify

the benefits of protecting endangered species arose

from two distinct concerns. The first was that we

simply lack adequate scientific knowledge to fully understand a species’ value. Accordingly, “[e]ach species

is a perishable resource of unpredictable value,” Endangered Species Conservation Act of 1972: Hearings

on S. 249, S. 3199, and S. 3818 Before the Subcomm. on

the Env’t of the S. Comm. on Commerce, 92d Cong. 65

(1972) (statement of Sen. Mark Hatfield), and “we may

never fully comprehend what we have lost.” H.R. REP.

NO. 95-1757, LEG. HISTORY, at 820 (statement of Rep.

Murphy).

The second concern is that certain aspects of the

value of endangered species—aesthetic and spiritual

values, for example—may simply be incommensurable

with dollars and therefore “impossible to quantify.”

H.R. REP. NO. 95-1757, LEG. HISTORY, at 820 (statement of Rep. Murphy); see also S. COMM. ON COMMERCE,

ENDANGERED SPECIES ACT OF 1973, H.R. REP. NO. 93307, reprinted in CONG. RESEARCH SERV., LEGISLATIVE

HISTORY OF THE ENDANGERED SPECIES ACT OF 1973, at

374 (1982) (statement of Sen. Williams) (“Most animals are worth very little in terms of dollars and cents.

9

However, their esthetic value is great indeed. The

pleasure of simply observing them . . . is unmeasurable.”). That skepticism has been borne out in the subsequent practice of the wildlife agencies, which, in the

decades since, have rarely made any attempts to quantify the benefits of critical habitat designations in their

economic analyses. See Sinden, Economics of Endangered Species, at 180–83.

Congress’s efforts to streamline the designation

process in 1978 further demonstrate its intent that the

agencies’ Section 4(b)(2) economic analyses be quick

and informal. In addition to giving the wildlife agencies flexibility to consider economic impacts, Congress

was also concerned about the extended delays that had

plagued critical habitat designation in the early years

of the ESA’s implementation. Accordingly, a number of

the 1978 amendments aimed at speeding up the designation process by, for the first time, setting deadlines

for the designation of critical habitat. 16 U.S.C.

§ 1533(b)(6)(C). This concern with streamlining provides further support for the idea that Congress had in

mind a rough-cut economic analysis that would simply

describe benefits in qualitative terms, rather than

going to elaborate lengths to quantify and monetize.

See Sinden, Economics of Endangered Species, at 194

(“Congress did not anticipate that the economic analysis would be an elaborate or time-consuming process.”).

Indeed, Congress went so far as to specify that,

once the final deadline arrives, the agency “must publish a final regulation, based on such data as may be

available at that time.” 16 U.S.C. § 1533(b)(6)(C)(ii)

10

(emphasis added). This is precisely the kind of language that courts have frequently cited as evidencing

Congress’s conscious decision to choose prompt agency

action over regulatory perfection, particularly when

scientific uncertainty precludes quantification of all

relevant variables. See, e.g., Indus. Union Dep’t, AFLCIO v. Am. Petrol. Inst., 448 U.S. 607, 656 (1980) (plurality opinion) (under the “best available evidence”

standard, an agency “is not required to support its

finding that a significant risk exists with anything approaching scientific certainty”); United Steelworkers of

Am. v. Marshall, 647 F.2d 1189, 1266 (D.C. Cir. 1980)

(construing “best available evidence” as requiring

agency to set standards promptly rather than

“await[ing] the Godot of scientific certainty”).2

b. Congress Did Not Make the Economic

Analysis Decisive in the Decision Whether

to Exclude.

Three aspects of the plain language of Section

4(b)(2) make clear that the economic analysis is not

the sole driver when deciding whether to exclude an

area from critical habitat. First, Section 4(b)(2) lists

“economic impact” as simply one in a list of factors the

2

Bennett v. Spear’s reading of the phrase “best scientific and

commercial data available” in Section 7 of the ESA is not to the

contrary. 520 U.S. 154, 176-77 (1997). The Bennett Court noted that

this phrase is “intended, at least in part, to prevent” “needless economic dislocation” caused by erroneous jeopardy determinations.

Id. This is consistent with reading the phrase “based on such data

as may be available at that time,” 16 U.S.C. § 1533(b)(6)(C)(ii), as

demonstrating a preference for promptness over perfection.

11

agency is to consider, with the list also including “the

impact on national security” and the broad catch-all,

“any other relevant impact.” This catch-all phrase potentially encompasses a whole range of impacts, including positive impacts of designation for the species

as well as other beneficial environmental, historical, or

cultural impacts. Most importantly, this phrase makes

clear Congress’s intent that the agency’s decision-making process on critical habitat exclusion encompass

values other than quantifiable, economic ones. See

Sinden, Economics of Endangered Species, at 193.

Second, the statute’s use of the term “may” rather

than “shall” in connection with the agency’s decision to

exclude any particular area requires an inference that

there are at least some circumstances in which it

would be reasonable for the agency to decline to exclude even where “the benefits of exclusion outweigh

the benefits of [inclusion].” Id. at 149, 196 n. 295. This

means that there must be some other factors, outside

the economic cost-benefit analysis, that can, at least in

some instances, drive the agency’s ultimate decision

whether to exclude.

Third, the same sentence goes on to explicitly

name at least one such external, non-economic consideration that might sometimes trump an economic

analysis: the survival of the species. Specifically, the

last clause of Section 4(b)(2) makes clear that if the

FWS determines a particular exclusion “will result in

the extinction of the species concerned,” the agency cannot exclude, even if the cost-benefit analysis otherwise

warrants it. 16 U.S.C. § 1533(b)(2). A less definitive

12

concern—i.e., that an exclusion might result in extinction—might be precisely the sort of factor Congress

intended FWS to weigh in making a discretionary decision not to exclude.

The legislative history confirms that Congress did

not intend economic impact to be the determinative

factor. The House Report made this explicit: “The Secretary is not required to give economics or any other

‘relevant impact’ predominant consideration in his

specification of critical habitat. . . . The consideration

and weight given to any particular impact is completely within the Secretary’s discretion.” H.R. REP. NO.

95-1625, at 741 (1978) (emphasis added). The word

“flexibility” shows up again and again in the legislative

history accompanying Section 4(b)(2). See, e.g., id. (noting Section 4(b)(2) provides “increased flexibility on

the part of the Secretary in determining critical habitat”); H.R. REP. NO. 95-1757, LEG. HISTORY, at 819

(statement of Rep. Murphy) (“This bill introduces some

needed flexibility into the [ESA]”); 124 CONG. REC.

21,334 (1978), reprinted in CONG. RESEARCH SERV.,

LEGISLATIVE HISTORY OF THE ENDANGERED SPECIES ACT

OF 1973, at 1016 (1982) (statement of Sen. McClure)

(noting “need to have some flexibility on the designation of the critical habitat”).

13

II.

Congress’s Vision of Section 4(b)(2) Is Consistent With the Broader Application of CostBenefit Analysis and With Well-Accepted

Fundamentals of Economic Theory.

Congress’s vision of economic analysis under Section 4(b)(2) is entirely consistent with the broader

application of cost-benefit analysis throughout the federal government. The executive orders that generally

require federal agencies to conduct cost-benefit analysis in connection with major federal regulations consistently emphasize the importance of weighing

unquantifiable impacts. Well-accepted fundamentals

of economic theory likewise emphasize the importance

of unquantifiable variables.

a. Executive Order 12,866 and Accompanying Guidance Documents Emphasize the

Importance of Qualitative Descriptions

of Unquantifiable Costs and Benefits in

Cost-Benefit Analysis.

The use of cost-benefit analysis is widespread

throughout the agencies of the federal government. Beginning with a series of executive orders dating back

to the Reagan administration, federal agencies are required to prepare and submit to the Office of Management and Budget cost-benefit analyses in connection

with all “significant” rulemakings (primarily those

costing over $100 million).3 Exec. Order No. 12,866

3

Statutory requirements to conduct cost-benefit analysis,

like Section 4(b)(2), are rare, especially in environmental statutes.

The FWS did not deem its critical habitat designation for the

14

§§ 3(f ), 6(a), 3 C.F.R. 638 (1994), reprinted as amended

in 5 U.S.C. § 601 app. at 96, 97 (2016). Congress’s intent that Section 4(b)(2) economic analyses take into

account unquantifiable impacts is consistent with the

approach taken in these executive orders, which emphasize that (1) both costs and benefits may be impossible to quantify, and (2) the importance of nonetheless

considering such unquantifiable impacts. See Exec. Order No. 12,866 § 1(a) (“Costs and benefits shall be understood to include . . . qualitative measures of costs

and benefits that are difficult to quantify, but nonetheless essential to consider.”); id. at § 1(b)(6) (similar);

Exec. Order No. 13,563, § 1, 3 C.F.R. 215 (2012), reprinted as amended in 5 U.S.C. § 601 app. at 109 (2016)

(similar).

These requirements have been further refined and

clarified in various guidance documents. See OFFICE OF

MGMT. & BUDGET, CIRCULAR A-4, REGULATORY ANALYSIS

9–10 (2003) [hereinafter Circular A-4]; OFFICE OF INFO.

& REGULATORY AFFAIRS, REGULATORY IMPACT ANALYSIS:

A PRIMER, https://obamawhitehouse.archives.gov/sites/

default/files/omb/inforeg/regpol/circular-a-4_regulatoryimpact-analysis-a-primer.pdf (last visited June 28,

2018) [hereinafter Primer]. These documents also stress

the importance of unquantifiable costs and benefits.

For example, the Office of Management and Budget’s

gopher frog a “significant” regulation, and therefore it was not

technically subject to the executive orders. See 77 Fed. Reg. at

35,141-42. Nonetheless, the Economic Analysis for the gopher frog

specifically referenced Executive Order No. 12,866, EA at 2-4, 218, as well as Circular A-4. EA at 2-2, 2-5, 2-18; see also 77 Fed.

Reg. at 35,127, 35,141.

15

(OMB’s) Circular A-4 states, “[i]t will not always be

possible to express in monetary units all of the important benefits and costs.” Circular A-4 at 2. Similarly,

the Office of Information and Regulatory Affairs’ Primer states that “some important benefits and costs . . .

may be difficult or impossible to quantify or monetize

given current data and methods.” Primer at 12. In such

circumstances, “[a]gencies should carry out a careful

evaluation of non-quantifiable and non-monetized

benefits and costs,” id. at 12, “exercise professional

judgment in determining how important the nonquantified benefits or costs may be,” and perform a

break-even analysis if they are determined to be

“important.” Circular A-4 at 2. Break-even analysis

subtracts the incomplete benefits estimate from the

(complete) costs estimate and then asks the analyst to

make an intuitive judgment whether the remaining

unquantifiable benefits are likely large enough to

make up the difference. See Cass R. Sunstein, The Limits of Quantification, 102 CAL. L. REV. 1369 (2014).

Even when some degree of quantification is possible, quantitative estimates of both costs and benefits

can also be subject to profound uncertainty, requiring

agencies to express them in ranges or as a series of scenarios. OMB’s guidance notes that “[i]n some cases, the

level of scientific uncertainty may be so large that you

can only present discrete alternative scenarios without

assessing the relative likelihood of each scenario quantitatively.” Circular A-4 at 39.

16

b. Well-Accepted Fundamentals of Economic

Theory Also Emphasize the Importance

of Taking into Account Qualitative Descriptions of Unquantifiable Variables

in Cost-Benefit Analysis.

The federal government’s broad approach to costbenefit analyses mirrors the academic literature in

economics,4 which routinely recognizes that “not all

impacts can be quantified, let alone be given a monetary value,” and warns that “care should be taken to

assure that quantitative factors do not dominate important qualitative factors in decision-making.” Kenneth Arrow et al., Is There a Role for Benefit-Cost

Analysis in Environmental, Health, and Safety Regulation?, 272 SCIENCE 221, 222 (1996); see also ANTHONY

E. BOARDMAN ET AL., COST-BENEFIT ANALYSIS: CONCEPTS

AND PRACTICE 42 (4th ed. 2011) (noting that “technical

limitations may make it impossible to quantify and

then monetize all relevant impacts as costs and benefits” and urging the use of qualitative analyses in

such instances); E. J. MISHAN & EUSTON QUAH, COSTBENEFIT ANALYSIS 241 (5th ed. 2007) (similar); EDWARD

M. GRAMLICH, A GUIDE TO BENEFIT-COST ANALYSIS 136

(2d ed. 1997) (similar).

Indeed, the preservation (or loss) of an endangered

species is perhaps the prototypical example of an impact that’s difficult or impossible to quantify. See, e.g.,

GRAMLICH, supra at 136 (citing “loss of an endangered

4

See Circular A-4 at 21, 23 (noting that agency use of costbenefit analysis should be “consistent with economic theory”).

17

species” as an impact that “cannot easily be quantified”); Daniel H. Cole, Law, Politics, and Cost-Benefit

Analysis, 64 ALA. L. REV. 55, 60–61 (2012) (similar).

Although several respected thinkers argue that

any attempt to monetize environmental values is

misguided because they are fundamentally incommensurable with money, see generally ELIZABETH ANDERSON, VALUE IN ETHICS AND ECONOMICS (1993); Cass R.

Sunstein, Incommensurability and Valuation in Law,

92 MICH. L. REV. 779, 785–86 (1994), economists have

developed a number of techniques for trying to assign

monetary sums to impacts like these. See generally DAVID W. PEARCE & ANIL MARKANDYA, ENVIRONMENTAL

POLICY BENEFITS: MONETARY VALUATION (1989). “Revealed preference” techniques attempt to infer a dollar

value for nonmarket goods by observing things that

are traded in markets and are thought to reflect (or

“reveal”) the unpriced value. See generally David S.

Brookshire et al., Valuing Public Goods: A Comparison

of Survey and Hedonic Approaches, 72 AM. ECON. REV.

165 (1982); see also BOARDMAN ET AL., supra, at 353–

57; Philip E. Graves, Benefit-Cost Analysis of Environmental Projects: A Plethora of Biases Understating

Net Benefits, 3 J. BENEFIT-COST ANALYSIS 1, 12–19

(2012).

These techniques often take the form of hedonic

valuation methods, which attempt to disaggregate environmental attributes from other goods with which

they are bundled in the market in order to infer the

value people place on them. See BOARDMAN ET AL., supra, at 353–57. For example, economists try to measure

18

how much value people attach to unspoiled open space

by comparing the prices of properties located adjacent

to such areas with those that are not. See, e.g., Elena

G. Irwin, The Effects of Open Space on Residential

Property Values, 78 LAND ECON. 465 (2002). The other

primary revealed preference technique aimed at environmental and natural resource values—the travel

cost method—involves inferring the value of environmental amenities from the costs people incur to travel

to them. See BOARDMAN ET AL., supra, at 358–65.

Alternatively, where values cannot be “revealed”

through actual market transactions, economists turn

to “stated preference” methods. “Contingent valuation”

or “willingness-to-pay” surveys, for example, attempt

to measure people’s willingness to pay for nonmarket

goods by simply asking them. See BOARDMAN ET AL., supra, at 372–05; Thomas H. Stevens et al., Measuring

the Existence Value of Wildlife: What Do CVM Estimates Really Show?, 67 LAND ECON. 390, 392–97

(1991). These are essentially sophisticated public-opinion polls that give respondents information about a

particular natural resource and then ask them how

much they would be willing to pay to preserve the resource or avoid the disease.

Such willingness-to-pay studies are usually designed to capture both what economists call “use values” and “non-use values” or “existence values.” “Use

values” reflect benefits people gain by actually making

use of natural amenities—by, for example, hunting, fishing, hiking, or enjoying a scenic view. See BOARDMAN

ET AL., supra, at 224. “Existence values,” in contrast,

19

reflect benefits people gain by “the very existence of

[natural amenities] that they neither visit, nor ever

anticipate visiting.” Id. at 224 (quoting John V. Krutilla, Conservation Reconsidered, 57 AM. ECON. REV.

777, 784 (1967)).

All of these methods are controversial and produce

highly contestable results. See DAVID W. PEARCE & R.

KERRY TURNER, ECONOMICS OF NATURAL RESOURCES AND

THE ENVIRONMENT 141–58 (1990); Leonard Shabman

& Kurt Stephenson, Environmental Valuation and

Its Economic Critics, 126 J. WATER RESOURCES PLAN. &

MGMT. 382, 382–84 (2000); Douglas R. Williams, Valuing Natural Environments: Compensation, Market

Norms, and the Idea of Public Goods, 27 CONN. L. REV.

365, 401–07 (1995). Samples may be insufficiently

large or insufficiently representative to produce meaningful results. In hedonic surveys, it may be difficult to

control for all variables other than the presence or absence of the non-market good being valued. Many analysts regard willingness-to-pay surveys as unreliable

because (1) the results depend heavily on how information is presented, and (2) respondents’ answers are

untethered to accurate knowledge of the resource at issue or any requirement to actually spend money. See,

e.g., Stevens et al., supra, at 399. Finally, they are typically under-inclusive, measuring only a narrow swath

of the full scope of species and/or ecosystem impacts, so

that qualitative descriptions of benefits must supplement any numbers produced. See GRAMLICH, supra, at

136 (noting that hedonic valuation methods provide

only “a lower-bound estimate”). For all these reasons,

20

the U.S. Environmental Protection Agency (EPA), often

praised around the world as the gold-standard for sophisticated cost-benefit analysis, has shied away from

using contingent valuation studies to generate specific

estimates of regulatory benefits. See Amy Sinden,

Cost-Benefit Analysis, Ben Franklin, and the Supreme

Court, 4 U.C. IRVINE L. REV. 1175, 1203–07 (2014).

Such studies are also expensive and time consuming to conduct. As a result, it is rare for FWS to have a

willingness-to-pay study available for the particular

species at issue in a critical habitat designation. Sinden, Economics of Endangered Species, at 180–83.

Given these limitations, economists and other proponents of the use of cost-benefit analysis in agency

decision making advise that cost-benefit analysis

should not be the sole driver for all decision making,

but rather should be one among a range of inputs. See

Arrow et al., supra, at 122 (“[A]gencies should not be

bound by strict benefit-cost tests.”); BOARDMAN, supra,

at 15 (“[cost-benefit analysis] is only one input to [the]

political decision making process”). Professor Cass

Sunstein, a prominent proponent of the use of cost-benefit analysis in agency decision making, has suggested

that where endangered species are at issue, cost-benefit analysis may not be an appropriate decision tool at

all. CASS R. SUNSTEIN, THE COST-BENEFIT STATE: THE

FUTURE OF REGULATORY PROTECTION 68–69 (2002).

21

III. The FWS’s Economic Analysis in This Rulemaking Complied with the Requirements of

the ESA.

The Economic Analysis in this case emphasized

the large uncertainties involved in attempting to predict the costs and benefits of the critical habitat designation for the gopher frog. It expressed benefits in

purely qualitative terms and took a scenario approach

to cost estimation, describing three potential scenarios

in which costs range from $0 to $34 million. This

approach was entirely consistent with both OMB guidance and good economics. The result was an inconclusive analysis. See 77 Fed. Reg. at 35,141 (“Our

economic analysis did not identify any disproportionate costs that are likely to result from the designation.

Consequently, the Secretary is not exercising his discretion to exclude. . . . ”). This analysis fully complied

with the requirements of the ESA.

22

a. FWS’s Economic Analysis for the Gopher

Frog Designation Was Unable to Quantify the Costs, Reporting Instead Three

Possible “Scenarios” of Unknown Probability, With Costs Ranging From $0 to

$34 million.

i. Designation Involves a Crystal Ball

Inquiry That Is Inherently Fraught

With Uncertainty

Estimating the costs of critical habitat designation, particularly the incremental costs associated with

the inclusion of any particular area, is always fraught

with uncertainty. The crux of the problem is that estimating critical habitat costs “essentially involve[s]

predicting the future.” See Sinden, Economics of Endangered Species, at 200.

These uncertainties are particularly acute where

private land is at issue. The designation of critical habitat does not produce any regulatory restrictions on a

private landowner’s activities. The only duty the statute triggers with respect to critical habitat is the Section 7 duty to avoid “adverse modification,” and that

duty applies solely to federal agency actions. 16 U.S.C.

§ 1536(a)(2). Accordingly, regulatory restrictions on

private landowners, along with attendant costs, only

occur if the landowner engages in some activity with a

federal nexus (e.g., federal permitting or funding). In

such instances, the federal nexus triggers the relevant

federal agency’s duty under Section 7 to consult with

the wildlife agencies to “insure” that the agency avoids

“adversely modifying” critical habitat. Id. Even then,

23

the wildlife agencies often reach a compromise during

consultation that allows the landowner’s development

project to go forward with minimal restrictions, and

therefore minimal costs.

Indeed, empirical studies of the Section 7 consultation process have repeatedly shown that consultation hardly ever prevents projects from going forward,

and indeed, very rarely produces a jeopardy or adverse

modification finding at all. See Jacob W. Malcom & YaWei Li, Data Contradict Common Perceptions About a

Controversial Provision of the Endangered Species Act,

112 PNAS 15844 (2015); Dave Owen, Critical Habitat

and the Challenge of Regulating Small Harms, 64 FLA.

L. REV. 141 (2012); DONALD BARRY ET AL., FOR CONSERVING LISTED SPECIES, TALK IS CHEAPER THAN WE THINK

(1992), www.nativefishlab.net/library/textpdf/15635.pdf;

U.S. GENERAL ACCOUNTING OFFICE, GAO-92-131BR,

ENDANGERED SPECIES ACT: TYPES AND NUMBER OF IMPLEMENTING ACTIONS 31–32 (1992); H.R. REP. NO. 97567, pt. 1 (1982).

The most recent of these studies analyzed 88,000

formal and informal consultations conducted between

2008 and 2015, and found that “no project was stopped

or extensively altered as a result of FWS finding jeopardy or destruction/adverse modification.” Malcom &

Li, supra, at 15,845. Indeed, only two of the consultations analyzed produced a jeopardy and/or adverse

modification finding at all—and a court overturned

one of those, leaving only one jeopardy finding in place.

Id. In that case, FWS allowed the project to proceed

24

with measures in place to minimize and partially offset

the adverse effect on the species. Id.

Moreover, because consultations occur even in

the absence of critical habitat designation (to ensure

federal agencies do not “jeopardize” listed species),

only some small portion, if any, of the already small

percentage of consultations that result in significant

development restrictions can actually be attributed to

critical habitat designations. See Owen, supra, at 165–

67 (“[C]ritical habitat designations had little effect on

regulatory outcomes.”). In short, even when a critical

habitat designation triggers Section 7 consultation, it

rarely imposes significant costs. See Erik Nelson et al.,

Identifying the Impacts of Critical Habitat Designation

on Land Cover Change, 47 RESOURCE & ENERGY ECON.

89 (2016) (finding no significant difference in rate of

land cover change between lands with and without

critical habitat designations).

Accordingly, estimating the costs of including any

particular area of privately owned land in a critical

habitat designation requires (1) predictions about the

kinds of development activities landowners are likely

to pursue in the future; (2) predictions about the likelihood that such activities will involve a federal nexus;

and (3) predictions about the likelihood, nature, and

cost of any development restrictions that any resulting

Section 7 consultations might impose. Thus, “the seemingly scientific numbers produced by such analyses

actually rest on multiple layers of guesses and simplifying assumptions, each of which is subject to challenge. And errors in the early layers multiply as each

25

subsequent layer is added.” Sinden, Economics of Endangered Species, at 200.

ii. The Economic Analysis for the Gopher

Frog Designation, Which Found Costs

Unquantifiable, Illustrates These Difficulties

The Economic Analysis of the designation of critical habitat for the gopher frog provides an illustration

of these difficulties. The authors of the Economic Analysis judged the uncertainties associated with the cost

calculation for Unit 1 so significant as to preclude a

single quantitative estimate. Instead, the analysis developed three separate cost estimates based on three

possible “scenarios” of how future events might unfold,

even assuming the owners pursue residential development of the land (another source of considerable uncertainty).5 Those three scenarios generated three highly

disparate cost estimates—$0, $20 million, and $34 million—but the analysts were unable to quantify (or estimate in any way) their relative probabilities. EA at

4–15.

5

This scenario approach is entirely consistent with OMB

guidance. See Circular A-4 at 18 (“When . . . benefit and cost estimates are uncertain . . . you should report benefit and cost estimates that reflect the full probability distribution of potential

consequences. . . . If . . . lack of knowledge prevents construction

of a scientifically defensible probability distribution, you should

describe benefits or costs under plausible scenarios and characterize the evidence and assumptions underlying each alternative

scenario.”).

26

As noted above, the first step in generating a cost

estimate requires predicting the kind of development

the owners are likely to pursue. The Economic Analysis

explained that Unit 1 is comprised of 1,544 forested

acres that have been managed for timber harvest for

the past 100 years. EA at 4–11. It covers only a small

portion (3.5 percent) of much larger land holdings

owned by six private landowners. EA at 4–6. One of

those landowners is Weyerhaeuser; the other five have

been leasing their land to Weyerhaeuser (or its corporate predecessor) since 1953. The current lease is set

to expire in 2043. EA at 4–1.

In 2006, the five landowners “entered into an understanding with the Weyerhaeuser Real Estate Development Company (WREDCO)” to pursue a joint

venture for residential development of the land “when

market conditions are amenable.” EA at 4–2. The current timber lease would be “released once [such] development occurs,” and if the land is sold to a third party,

the landowners and WREDCO have agreed on a division of the profits. Id.

While the area is fast growing and considered attractive for development, according to the Economic

Analysis, “[d]evelopment plans for [unit 1] are currently delayed due to the recession and the negative

real estate bank-lending environment. Recently, the

landowner indicated that development may not occur

until 2043. . . .” EA at 4–3; see also id. at 4–2, n. 68

(“There remains significant uncertainty regarding the

timing of potential development activities within Unit

1.”); AR 3564 (similar).

27

Designation only triggers regulatory action on private land if some development activity involves a “federal nexus,” if that nexus triggers formal consultation

under Section 7, and if that consultation then imposes

development restrictions. Filling the ephemeral pools

or other wetlands on Unit 1 in connection with residential development would only create a federal nexus if

a Section 404 Clean Water Act permit, 33 U.S.C.

§ 1344(a), was required. It is unlikely that continued

timber production would create such a federal nexus,

because of a specific grandfathering exemption for existing timber operations in Section 404 of the Clean

Water Act. 33 U.S.C. § 1344(f )(1)-(2).

Accordingly, if the landowners continue to manage

the land for timber production, there will likely be no

significant costs. The critical habitat designation will

only trigger Section 7 consultation if the landowners

pursue residential development, if those development

plans require filling of pools, and if the pools turn out

to be subject to Clean Water Act jurisdiction.6 Even

then, as discussed above, the costs of designation

might well remain low because consultation rarely results in significant restrictions on development. Only

if the landowners and the U.S. Army Corps of Engineers (Corps) are unable to negotiate reasonable and

prudent alternatives that allow the development to go

6

It should be noted that any resulting development restrictions can only be attributed to the critical habitat designation

if they would not have occurred under the jeopardy standard in

the absence of the designation.

28

forward without undue harm to the frog habitat will

there be significant costs.7

In short, if the landowners continue the land’s current use for timber production, no regulatory activity

under the ESA will likely be triggered, resulting in a

cost of zero or close to it.8 To the extent the landowners

do pursue residential development on Unit 1, those

plans are likely decades off and thus relatively speculative. The Economic Analysis notes that 2043, the predicted development date, “is beyond the 20-year

timeframe of this analysis.” EA at 4–3. Arguably these

plans are too far out in the future and too speculative

to be accounted for in the Economic Analysis at all.

Nonetheless, all three scenarios in the analysis proceeded on the (conservative) assumption that the landowners would eventually pursue plans for residential

development of lands within Unit 1. EA at 4–6.

7

The Analysis also discussed other potential costs that it

concluded were too uncertain and speculative to quantify, including the possibility of oil and gas development on Unit 1, see EA at

4-5 to 4-6, the possibility of stigma effects, see id. at 2-17, and prescribed burns necessary “in order to properly manage the breeding sites within Unit 1.” Id. at 4-3.

8

The Economic Analysis notes that even if critical habitat

designation does not actually result in any actual regulatory restriction on use of the land, “[p]ublic attitudes about the limits or

restrictions that critical habitat may impose can cause real economic effects to property owners. . . .” EA at 2-17. It also observes

that such “stigma effects” are likely to decrease over time: “As the

public becomes aware of the true regulatory burden imposed by

critical habitat, the impact of the designation on property markets

may decrease.” Id.

29

Based on that assumption, the Economic Analysis

described the three possible scenarios like this:

•

Scenario 1 . . . assumes that development occurring within [Unit 1] avoids impacts on jurisdictional wetlands, [such that] there is

no Federal nexus . . . triggering section 7 consultation[, generating an estimated cost of

$0]. . . .9

•

Scenario 2 . . . assumes the proposed development of Unit 1 requires a Corps CWA Section

404 permit . . . subject to section 7 consultation . . . [and] further assumes that [negotiations between the landowners and the

Service] result[ ] in 40 percent of the Unit being developed[, generating an estimated cost

of $20 million]. . . .

•

Scenario 3 . . . again assumes that the proposed development of Unit 1 requires a Section 404 permit and therefore is subject to

section 7 consultation . . . [and further] assumes that . . . the Service recommends that

no development occur within the unit[, generating an estimated cost of $34 million].

EA at 4–4. The analysis did not explicitly list a fourth

possibility—what we might call “scenario #0”—in

which no residential development occurs on Unit 1 at

all.

9

This scenario could occur in two different ways: First, the

Corps might decide that the pools are not within its jurisdiction.

Second, the design for development might avoid the pools.

30

The analysis generated the dollar figures for each

scenario by multiplying the number of acres on which

development would be prohibited by $23,500, the price

per acre at which “adjacent land with comparable zoning has been proposed for sale.” EA at 4–6. Because the

adjacent lands are also subject to Weyerhaeuser leases,

the analysis inferred that this per acre price did “not

include the value of the standing timber,” but rather

reflected only the value of the land for future development.10 Id.

The analysis made no effort to characterize the

relative probabilities of the three scenarios, but the existence of a fourth plausible scenario means that the

probabilities of the three named scenarios likely sum

to less than 100 percent. There is good reason to suggest that Scenarios 1 and 2 are more likely. First, FWS

has a legal obligation to work with the landowners to

identify “reasonable and prudent alternatives” that

will allow development to go forward without causing

jeopardy or adverse modification, 16 U.S.C. § 1536(b)(3),

and those alternatives must be both economically and

technologically feasible. 50 C.F.R. § 402.02 (definition

10

The analysis concedes that this per-acre price “is not a perfect proxy for development value of the critical habitat acres,” but

notes that it “represents the best available information.” EA at 47. It is also worth noting that this price also potentially over-estimates the portion of the land’s value attributable to future residential development potential because it presumably includes not

just future residential development potential, but all future development potential, including future timber harvest (beyond the

currently standing timber), which the critical habitat designation

does not impair.

31

of “reasonable and prudent alternatives”). In this case,

FWS’s repeated statements that it “hope[s] to work

with the landowners to develop a strategy that will allow them to achieve their objectives for the property

and protect the isolated, ephemeral ponds,” indicate

that Scenarios 1 and 2 are more likely than Scenario

3. 77 Fed. Reg. at 35,123; see also EA at 4–3 to 4–4

(noting that, as between Scenarios 2 and 3, FWS has

called Scenario 2 “the most likely”).

In addition, with respect to Scenario 1, it is significant that the FWS has described the pools at issue as

“isolated.” 77 Fed. Reg. at 35,123–24. Although the

rules governing the Corps’ Section 404 jurisdiction are

currently in flux, even on the most liberal reading, the

Corps’ jurisdiction excludes “isolated” ponds that occur

within one state’s boundaries. See Solid Waste Agency

of N. Cook Cty. v. U.S. Army Corps of Eng’rs, 531 U.S.

159 (2001). Accordingly, there is a high likelihood that

the Corps would find the ephemeral pools on Unit 1 to

fall outside its jurisdiction such that even a residential

development plan that required complete destruction

of the pools would have no impact on jurisdictional waters and would therefore fall within Scenario 1. Even

if the federal government were to assert jurisdiction

under Section 404, Scenario 1 might still come to pass

if the development was designed to avoid impacts to

jurisdictional waters.

Finally, an understanding of the empirical literature on the Section 7 consultation process described

above suggests that Scenario 3 is quite unlikely. See

AR 3563 (“During section 7 consultations, the Service

32

works with our Federal partners to minimize the impacts of a particular action to designated critical habitat. Therefore, the likelihood of scenario 3 . . . is low.”).

b. FWS’s Economic Analysis for the Gopher

Frog Estimated Benefits in Entirely Qualitative Terms.

i. The Enormous Challenges in Estimating the Benefits of Critical Habitat

Designation Mean the Wildlife Agencies Typically Do Not Quantify These

Estimates

The wildlife agencies rarely produce monetary

estimates of benefits in their economic analyses of critical habitat designations. See Sinden, Economics of

Endangered Species, at 180–83. Although there is a

substantial literature showing the public’s willingness

to pay for the preservation of endangered species in

general, it is rare for there to be willingness-to-pay

studies on any particular listed species. Even rarer are

studies that quantify the incremental value attributable to designating any particular area as critical habitat. See id.

Further exacerbating these economic valuation

problems is the fact that virtually all of the sources of

uncertainty described above for cost estimation also

plague the benefits side of the balance. It is an inherently probabilistic enterprise—and one for which the

necessary information to allow quantification, or even

qualitative description of the relevant probabilities, is

33

usually lacking. It is thus no surprise that the longrunning and widespread practice of the wildlife agencies is to describe these benefits in qualitative terms.

ii. The Economic Analysis for the Gopher Frog Designation, Which Found

Benefits Unquantifiable, Illustrates

These Difficulties

FWS’s Economic Analysis of the critical habitat

designation for the gopher frog was no exception. It

discussed the fact that willingness-to-pay studies can

generate quantified estimates of some of these benefits, but noted that no such studies exist for the gopher

frog. See EA at 5–1 (citing J.B. Loomis & Douglas S.

White, Economic Benefits of Rare and Endangered

Species: Summary and Meta-Analysis, 18 ECOL. ECON.

197 (1996). Even if such studies did exist for the gopher

frog generally (or for a sufficiently similar species),

translating those general estimates into a specific estimate of “the incremental change in the probability of

gopher frog conservation that is expected to result

from [this particular] designation,” or from the inclusion of any particular unit of critical habitat within the

designation, would require even more granular studies. EA at 5–1.

Such studies would have to evaluate inherently

uncertain and stochastic factors. FWS’s whole purpose

in adding Unit 1 was to provide a hedge against uncertain but potentially catastrophic events. The six peer

reviewers were unanimous in their assessment that

34

without Unit 1, there was a “high risk” that “local catastrophic events” like “disease or drought” could eradicate the existing population of gopher frogs and their

habitat in Mississippi. 77 Fed. Reg. at 35,121, 35,134–

35. Thus, a study quantifying the additional benefits

provided by the inclusion of Unit 1 would have to put

a number on the probability of such stochastic events

occurring. Not surprisingly, “[n]o [such] studies exist.”

EA at 5–1. They never do. Accordingly, the Analysis described the benefits of designation generally, and the

inclusion of Unit 1 specifically, in entirely qualitative

terms. See EA at 2–18.

This qualitative description of benefits was wide

ranging, including both direct and ancillary benefits.

The direct benefits described in the Analysis included

“the maintenance or enhancement of the use and nonuse value (e.g., existence value) that the public may

hold specifically for the gopher frog.” EA at 5–2. The

use values included “wildlife-viewing opportunities

[and] option[s] for seeing or experiencing the species in

the future.” EA at 5–1. The non-use values included

“assur[ing] that the species will exist for future generations, and simply knowing a species exists, among

other values.” Id.

The Analysis also discussed ancillary benefits,

noting that “critical habitat designation can result in

maintenance of particular environmental conditions

that may generate other social benefits aside from the

preservation of the species.” EA at 2–18. These include

“the public’s willingness to pay to preserve wilderness areas, for wildlife management and preservation

35

programs[;] protection of open space[;] and ecosystem

maintenance.” Id. at 5–1. As it did with respect to direct benefits, the Analysis indicated that, while such

benefits likely exist, studies have not been done at a

sufficient level of granularity to permit quantification

of “the incremental values associated with this . . . critical habitat designation.” Id.

The Analysis then went on to discuss a number of

additional ancillary benefits that can be anticipated to

occur in connection with “the avoidance of development in Unit 1.” Id. at 5–2. These included increases in

property values for neighboring or nearby parcels that

may occur as a result of “open space or decreased density of development resulting from gopher frog conservation.” Id. Economic modeling demonstrates that

these impacts can be substantial, even outweighing

the negative impacts to the value of the land designated. See John M. Quigley et al., The Urban Impacts

of the Endangered Species Act: A General Equilibrium

Analysis, 61 J. URBAN ECON. 299 (2007).

Ancillary benefits discussed by the Analysis also

include “social welfare gains . . . associated with enhanced aesthetic quality of [the] habitat,” EA at 5–2;

“[t]he maintenance or enhancement of use and non-use

values for these other species” in the same ecosystem,

EA at 5–3; a variety of ecosystem service benefits, including “protection and improvement of water quality

and preservation of natural habitat for other species,”

as well as “improvements to ecosystem health that are

shared by other, coexisting species,” EA at 5–2 to 5–3;

36

and, finally, “[t]he maintenance or enhancement of . . .

biodiversity in general.” EA at 5–3.

The inclusion in cost-benefit analysis of “ancillary

benefits”—i.e., those that are not the primary goal of

the regulatory action but can nonetheless be expected

to result from it—is basic, uncontroversial, textbook

economics and is, in fact, required by OMB guidance.

See, e.g., Boardman, supra, at 2 (“In CBA we try to consider all of the costs and benefits to society as a whole.”)

(emphasis added); Circular A-4 at 26 (“Your analysis

should look beyond the direct benefits and direct costs

of your rule and consider any important ancillary benefits and countervailing risks.”).

c. The Cost-Benefit Analysis Was Inconclusive as to Whether Benefits Will Ultimately

Outweigh Costs or Vice Versa.

Petitioners have raised a number of objections

about the methods employed in FWS’s Economic Analysis. See Weyerhaeuser Merits Br. 53–55. These objections were not raised with specificity before the court

of appeals, see Markle Interests, L.L.C. v. U.S. Fish &

Wildlife Serv., 827 F.3d 452, 475 (5th Cir. 2016) (“the

Landowners do not challenge the methodology that the

Service used when analyzing the economic impact on

Unit 1”), nor were they included in the questions on

which this Court granted certiorari. Accordingly, these

objections are in contravention of Rule 24.1(a) and

should be deemed forfeited. See Taylor v. Freeland &

Kronz, 503 U.S. 638, 646 (1992) (“[T]his Court does not

37

decide questions not raised or resolved in the lower

court[s].”) (second alteration in original) (quoting

Youakim v. Miller, 425 U.S. 231, 234 (1976) (per curiam)).

In any event, the petitioner’s objections to the Economic Analysis lack merit. The Economic Analysis

properly emphasized the many layers of uncertainty

on both sides of the balance, and ultimately, produced

inconclusive results. Noting that the “benefits of the

proposed rule are best expressed in biological terms,”

EA at 2–18 (emphasis omitted), the analysis described

the benefits of the critical habitat designation in

wholly qualitative terms. This does not mean that the

benefits were zero. Nowhere did the Economic Analysis

state that the designation would produce “no benefits.”

Rather, it identified and described a whole range of expected benefits in qualitative terms. In addition to the

increased potential for future conservation and recovery of the gopher frog, these include recreational and

aesthetic values; existence values; values to future

generations, and values stemming from the preservation and enhancement of ecosystem services, biodiversity, and increases in property values of nearby parcels

due to open space preservation.11 On the other side of

the balance, the analysis was also unable to quantify

costs, instead outlining a series of three possible “scenarios,” each of unknown probability.

11

Ironically, these enhancements in property value may in

many instances accrue to the petitioners themselves, who own far

more land in the vicinity than just the relatively small parcel that

constitutes Unit 1.

38

As noted above, the same sources of uncertainty

plague both the cost side and the benefit side of the

analysis—in particular, uncertainty about the extent

to which critical habitat designation will ultimately result in on-the-ground development restrictions. Because both costs and benefits are linked at least in part

to development restrictions, they may fluctuate in

concert. Where significant development restrictions

impose high costs, those same restrictions may well

provide significant environmental benefits.

Petitioners’ assertion that costs will simultaneously be at their peak while benefits are zero is untenable as a matter of both law and fact. First, the

argument that the designated critical habitat’s value

to the species is zero because the land is currently unoccupied flies in the face of the clear statutory text.

Congress would not have made specific provision in the

statute for the designation of unoccupied habitat if it

did not believe that such habitat could provide significant potential value—or a kind of “option value”—for

imperiled species. Second, as noted above, in the unlikely event that Section 7 consultation occurs and results in significant development restrictions (Scenario

2 or 3), it is also likely that the FWS and the landowners would find a “reasonable and prudent alternative”

that would allow at least some development to go forward in exchange for management of the land to allow

reintroduction of the frog. It is also possible that habitat protections under such a scenario would incentivize

the landowners to sell to a land trust or other buyer

interested in managing the land as frog habitat. In

39

that instance—where landowners’ costs would likely

be at their highest—biological and other benefits

would also likely be at their highest point because

frogs and the ecosystem would receive more protection.

In short, if substantial development restrictions

do occur on the land, those restrictions will impose

costs on the landowners. They will also generate benefits in the form of protections for the species, open

space preservation, ecosystem services, and the many

other benefits described in the Analysis.

------------------------------------------------------------------

CONCLUSION

The judgment of the court of appeals should be affirmed.

Respectfully submitted,

AMY SINDEN

TEMPLE UNIVERSITY

BEASLEY SCHOOL OF LAW

1719 N. Broad St.

Philadelphia, PA 19122

(215) 204-4969

asinden@temple.edu

DOUGLAS R. WILLIAMS

SAINT LOUIS UNIVERSITY

SCHOOL OF LAW

100 N. Tucker Blvd.

St. Louis, MO 63101

(314) 977-2786

williaj2@slu.edu

AMY J. WILDERMUTH

Counsel of Record

UNIVERSITY OF PITTSBURGH

SCHOOL OF LAW

3900 Forbes Ave.

Pittsburgh, PA 15620

(412) 648-1401

amy.wildermuth@pitt.edu