The Federal Endangered Species Act requires the U.S. Fish & Wildlife Service to evaluate the economic impacts of designating critical habitat, allowing the Service to exclude certain areas if the economic costs are deemed to outweight the biological benefits. In 2002, the Service proposed critical habitat for the California gnatcatcher (a bird) on approximately 495,000 acres in six southern California counties, and retained EPS to perform the requisite economic impact analysis. Because the proposed designation encompassed such a large land area, including a significant amount of potentially developable land, both the designation and the ensuing economic analysis were among the most contentious of the Federal critical habitat program.
Recognizing the most significant economic impact would be to private land developers, EPS's analysis focused primarily on increased compliance costs and reduced residential and commercial development within designated critical habitat. EPS developed a GIS-based methodology that used local land use projections and real estate pricing data to estimate potential economic losses experienced by private landowners and developers. EPS also conducted an analysis of the effects of the proposed regulation on public infrastructure projects conducted by local, State, and Federal agencies. Finally, in evaluating these effects EPS considered the complex relationship between the Endangered Species Act and a variety of pre-existing State and local land use regulations, including the California Environmental Quality Act, the Natural Community Conservation Planning Program, local and regional Habitat Conservation Plans, and the 4(d) Special Rule.