software to derive employment and output multi- pliers for the sectors with direct effects primarily
logging. These were used to estimate the total direct and indirect economic impacts associated
with reductions in timber harvests necessary to provide owl habitat. Specifically, the IMPLAN
models were used to construct job response coeffi- cients that were applied to the planned reduction
in timber harvest to obtain the projected job losses in each of the affected counties.
Of note in this study is the narrow economic focus. Attention was restricted to the logging-re-
lated industries, which omitted the possibility of other uses of the forest resources, and to the rural
communities affected
by logging
reductions. Schamberger et al. 1992 suggest that this focus
was intentional given that logging in this area was in decline and there were limited economic alter-
natives for displaced forestry workers. Consider- able effort was made to adjust employment
multipliers to remove metropolitan area effects. Schamberger et al. 1992, p. 44, state that the
adjustment
was intended
to: ‘remove
large metropolitan economies from the analysis... based
on the goal to measure impacts within the regions which contain labor and enterprises closely associ-
ated with the timber industry.’
5. Results of the case studies
5
.
1
. Colorado and San Juan studies For the larger Colorado River basin study,
predicted impacts from species preservation at the seven-state regional level were actually positi6e:
for a 3 discount rate, the present value PV of the regional impacts for the study period are
1.294 billion Brookshire et al., 1993. While positive, these impacts are extremely small com-
pared to overall economic activity, consisting of a 0.003 increase over the baseline. Employment is
expected to increase by 6250 in the last year of the study period, a 0.02 increase over the baseline.
As Brookshire et al. 1993 argue, the total re- gional impacts are positive due to the reallocation
of water from low valued upstream uses primar- ily low valued irrigated cropping to higher valued
downstream uses higher valued cropping and some municipal and industrial uses.
Although regional impacts are positive, impacts differ considerably across states. Among the seven
states, the largest positive impacts accrue to Cali- fornia, resulting in a increase in output of 0.013
over the baseline. This corresponds to an increase in gross output with a PV of 3.335 billion.
Impacts to New Mexico result in a reduction of output by 0.279, equivalent to an increase in
gross output with a PV of 2.454 billion. The impacts of the other states lie between these two
values.
As noted previously, excluding all or part of proposed critical habitat requires identification of
criteria and some determination that economic impacts are excessive. In outlining the exclusion
process followed for the four endangered fishes, the USFWS 1994, p. 13381, cited the need to:
‘provide a method by which the severity of eco- nomic impacts could be assessed’. In the original
Colorado River study, Brookshire et al. 1993 argued that impacts within 1 of the baseline
level of economic activity would fall below a level which the economy could absorb as part of the
natural adjustment process to internal and exter- nal shocks. By this criterion, if predicted impacts
are within this range, then no exclusion from the proposed critical habitat is justified. Berrens et al.
1998 interpreted this as being generally consis- tent with the SMS approach. However, it should
be noted that detailed rationale for the 1 crite- rion is not explicitly given in Brookshire et al.
1993. By inference, it is based on a comparison with past economic fluctuations.
7
The state-level analysis Brookshire et al., 1993 suggested that no reach of the river be excluded
i.e. did not exceed the 1 criterion. However, it was clear that the distribution of impacts was not
uniform and that New Mexico, in particular,
7
Specifically, the average historical fluctuations in the level of economic activity in the region is slightly over 3 of the
baseline growth rate. As this high growth economy has been able to successfully recover from such fluctuations, the pre-
sumption would appear to be that impacts within that 3 band would not represent intolerable costs. The 1 criterion
represents an even more conservative threshold.
Table 2 Impacts of endangered fish critical habitat designation to combined tribal economies — San Juan basin
a
Percentage deviations from Output change: [1991 millions]
Employment: baseline
[average annual jobs change] NPV3
− 18.498
Population- −
0.079 −
16 based share
Employment- −
10.206 −
0.079 −
9 based share
a
Source: Brookshire et al. 1997.
would experience moderate adverse impacts. Within New Mexico, these impacts would be
most strongly felt in the northwestern ‘Four Corners’ region. Hence the need for a more spa-
tially-detailed analysis as reported in the San Juan follow up study.
The primary motivation for the San Juan fol- low-up study was an evaluation of the impacts
to relatively poor Tribal economies, which are less able to cope with adverse exogenous shocks
such as the designation of critical habitat. An important consideration was restrictions on the
completion of the final component ‘Block 9’ of the large scale Navajo Indian Irrigation Project.
While the unemployment rate for the region was 9.7, Tribal unemployment rates ranged from
17.2 for the Jicarilla Apache to 27.9 for the Navajo. Thus, there was a concern that alterna-
tive opportunities are especially limited for em- ployment in Tribal economies.
The predicted output and employment im- pacts to the Tribal economies are reported in
Table 2. These results represent the aggregate impacts to the four Tribal entities. There is a
considerable difference in the absolute level of impacts between the population- and employ-
ment-based sharing methods, which bracket the possible values for the impacts to the Tribal
economies − 18.5 vs. − 10.2 million PV of output. As in the Colorado study, the criterion
used in San Juan study was whether predicted impacts were within 1 of the historical fluctua-
tion of the region. Again, no detailed rationale for this criterion was explicitly given. As in the
original economic analysis, none of the pre- dicted impacts in the San Juan study were
found to exceed the 1 threshold, and thus no critical habitat was excluded Brookshire et al.,
1997. Also, in the case of the San Juan basin, no
direct compensation measures were considered or undertaken. However, between the 1993 and
1997 studies there was a significant change in the calculation of the direct impacts of setting
aside critical habitat. In the original study Brookshire et al., 1993, ‘Block 9’ of the
Navajo Indian Irrigation Project was treated as infeasible to complete, given the stream flow
needs of the endangered fishes. In the San Juan study Brookshire et al., 1997, this block was
projected to be permitted and scheduled for completion in 2003 under the argument that
other water conservation efforts would meet stream flow needs. While there was no explicit
statement that this change was made as mitiga- tion, one interpretation is that this helped lessen
i.e. make more tolerable the impacts on a rela- tively poor Tribal economy. This significant
change also explains why estimated impacts 0.079 on output in Table 2 are actually
smaller than the estimated New Mexico impacts 0.279 on output in the larger Colorado River
study.
5
.
2
. Northern spotted owl study Economic impacts reported in the owl study
are employment losses in the timber industry, losses in timber revenues to the federal govern-
ment, and loss of dollar value output in the timber sectors. These impacts are summarized in
Table 3. Direct impacts were concentrated in one industry, and the threshold for excessive im-
pacts was defined in terms of changes in em-
Table 3 Impacts of northern spotted owl critical habitat designation
a
Aggregate impacts Total impacts
Initial impacts annualized values
for study period Employment earnings
− 64.553
− 34.667
losses million NPV
Employment impacts −
1420 Timber royalty losses
− 18.367
million annualized
Distributional effects Most affected
Least affected county
county Employment impacts
1.13 0.01
job loss 22.99
Timber royalty losses 1.13
reduction in revenues
a
Source: Derived from Schamberger et al. 1992. The assumption is that employment will decline for only
two years. Replacement jobs are lower wage than lost timber industry jobs.
Only annualized values are reported for this metric.
ble’ and eligible for exclusion if the unemploy- ment rate was 2 above the average over the
previous six years, or if the county rank of vulner- ability was greater than the mean vulnerability
score plus two standard deviations. On these bases, some 40 of the proposed habitat in Ore-
gon, 89 in Washington and 72 in California were excluded. While not explicitly stated, the
rationale for the chosen exclusion criterion can be inferred to be allowing identification of counties
least able to absorb employment losses from log- ging
restrictions. These
counties presumably
would experience longer term economic impacts from critical habitat designation, and thus were
given special consideration by the USFWS. A subsequent analysis by Waters et al. 1994
also evaluated the economic impacts associated with critical habitat designation [as taken from
the ISC report and used by Schamberger et al. 1992]. Using a multi-regional I – O model, Wa-
ters et al. 1994 focused on linkages between the rural and urban areas in the Pacific Northwest.
Waters et al. 1994 found that the effects of critical habitat designation were smaller than re-
ported by Schamberger et al. 1992. There are two relevant issues. First, given direct impacts will
be proportionately smaller when applied to a larger economy. Second, larger regions are typi-
cally characterized by more diverse economies that can better absorb an exogenous shock; thus,
economic impacts associated with a given critical habitat will be smaller if the impacted region is
larger. Waters et al. 1994 employed a general equilibrium modeling approach, which allows the
reallocation of resources from setting aside critical habitat. The single industry approach of Scham-
berger et al. 1992 does not. Since resources are reallocated rather than destroyed, general equi-
librium approaches will generate lower estimates of impacts. However, as the Colorado study
demonstrated, focusing on a large region poten- tially obscures the geographic distribution of im-
pacts associated with critical habitat.
In addition
to the
substantial exclusions
through the final critical habitat designation pro- cess, the Endangered Species Committee exemp-
tion process was also invoked in the owl case Thomas and Verner, 1992. Under Section 7 of
ployment in the logging industry within the re- spective county. At-risk counties were identified
on the basis of the overall health of the local economy and its judged ability to absorb impacts.
Impacts were reported at a county level so that the at-risk counties could be readily identified.
In the northern spotted owl study Scham- berger et al., 1992, the objective was to identify
impacts at a very local level and to concentrate on a vulnerable declining industry. The exclusion
process resulted in a substantial fraction of the proposed critical habitat being excluded. The cho-
sen criterion for excluding habitat was a ‘mean vulnerability score’, calculated as a weighted in-
dex of several measures Schamberger et al., 1992 p. 23. In general terms, higher values are associ-
ated with counties that are rural communities with high unemployment rates and that are highly
dependent on timber from federal public lands. Specifically, counties were identified as ‘vulnera-
the ESA, the USFWS consulted on 44 timber sales on Bureau of Land Management [BLM]
lands in southwestern Oregon and judged that allowing timber cutting here would jeopardize the
owl’s recovery. Thus, these sales were precluded. The BLM appealed asking for a review by the
Endangered Species Committee to determine whether these sales were essential to the local
economy, and whether the sales should proceed despite the USFWS determination of jeopardy
Thomas and Verner, 1992. Prior to the spotted owl case, the Endangered Species Committee had
never granted an exemption. Extended public hearings were held in 1992. Juxtaposed with spe-
cies preservation arguments, was the concern for preserving employment in the forest products sec-
tor. The Committee eventually sought middle ground by approving 13 of the 44 timber sales.
8
However, dispute over the northern spotted owl was the direct impetus for the multi-species,
ecosystem-oriented Clinton Forest Plan, which regulated timber production on all federal lands
in the Pacific Northwest Marcot and Thomas, 1997. Passed in 1993, this legislation took effect
in 1994 with a district court ruling that the plan did not violate the ESA. Of note, the Clinton
Forest Plan included a compensation plan to aid those hardest hit by species preservation actions.
Specifically, up to 1.2 billion in federal funds was allocated over five years for job retraining for
those who lost jobs in logging-related industries.
9
6. Discussion and conclusions
