Nor should such a scheme involve the intensive negotiations needed for the creation of regional habitat conservation plans (such as the Balcones Canyonlands Conservation Plan for central Texas), in which the future allowable uses of all the land within a designated area are determined simultaneously by committee. This type of scheme both freezes landowner options based on current knowledge (though revisions could presumably be renegotiated) and delays the exercising of any remaining property rights for as long as the negotiation process requires, which could be several years.

It is far preferable to allow individual landowners to decide, within a framework that assures that enough land within an ecosystem is set aside for habitat, whether or not to develop their property for purposes incompatible with habitat. This can be done by first determining how many acres within an ecosystem must be set aside as habitat to assure species preservation per acre that can be developed, then letting the market take over.

As part of the listing process, the FWS would be charged to determine the total acreage within the ecosystem that is or could be managed as habitat as well as the minimum acreage needed as habitat to assure species preservation. All land within the ecosystem would be restricted for development, but those desiring to develop property could rent or purchase a Habitat Preservation Credit (HPC) for each acre. These HPCs would be generated by landowners who enter into FWS-approved agreements, probably administered by state officials under delegated authority, to set aside land for habitat. These agreements might involve deed restrictions or management practices to be conducted by the landowner or the state agency.

Generators could sell or lease HPCs, probably through brokers, to other landowners or apply them to other land they owned. While the amount of land needed to create one HPC would vary according to the ecosystem's total habitat acreage need, one HPC would free up one acre of land to development. The value of the HPC to the seller would largely depend on his cost to comply with the management agreement (both maintenance costs and lost use costs weighed against lowered future property taxes); normally, this amount would be less than the full value of the affected acreage. Usually, those with the lowest costs for HPC generation would be the first to offer HPCs on the market. Since the seller's action would be voluntary in all cases, there would be no taking of the seller's property. Because buyers would be paying for the use of property not previously encumbered, the purchase (or lease) price of the HPC could be equated with a "regulatory taking" if Congress (or the state government) acts to provide for compensation in such cases.

A simple example shows how the HPC process would work: Suppose a landowner in Bexar County wanted to purchase HPCs to develop 10 acres of land currently valued at $5,000 per acre. Under a law like HR 925, his maximum out-of-pocket cost for HPCs for the 10 acres would be 20% of the property value (or $1,000 per acre); the government would be obligated to expend compensation funds to the extent that the market price for those HPCs exceeded that amount. After calling his broker, the Bexar County landowner learns that a landowner in nearby Medina County, but within the same ecosystem, is selling HPCs for $1,200. To close the deal, the broker calls up the local Texas Parks and Wildlife Department office and asks for a check for $2,000 ($200 each for the 10 acres) to match the $10.000 from the Bexar County landowner. Although the Bexar County landowner is out $10,000, he is now free to subdivide his property into five 2-acre lots that will sell for $8,000 per acre. The

Medina County landowner has had to set aside 15 acres which was lying fallow for species habitat, but he has $12,000 in cash with which to buy the new pickup truck he needs.

While the market price of HPCs would depend on development pressures in the ecosystem and the costs to landowners of creating HPCs, local governments could stimulate development in a number of ways, including setting a lower takings threshold and paying any amount over the federal threshold from local funds. Alternatively, governments could selectively lower the takings threshold for highly desired land uses needing HPCs, or provide additional habitat maintenance services to lower the selling price of HPCs.

Summary

Some might criticize the HPC scheme on grounds that landowners would have to pay for the right to use their own property. Under the present scheme, however, their property right has already been abridged without compensation, while under current proposals, they would be compensated but still lose the right to develop their property. Landowners already pay fees for exercising various development rights that generate income. In any case, the costs of HPCs would likely be far lower than the costs they are paying for Section 7 and 10 consultations under the current ESA.

The HPC scheme allows the market, and personal interests of landowners, to determine the cost to the public of species preservation and the direction that future development will take in areas in which threatened and endangered species compete with human interests for land uses. Among the advantages of the HPC market process:

* individual landowners will retain their property rights or be compensated for setting aside their property as habitat;

the cost for development rights in habitat areas will be lower in the first place and possibly mitigated through compensation payments;

reduced;

numbers;

the time frame for securing development rights in habitat areas will be greatly

species can be assured of enough land before any further diminishment of their

* the total cost to the public of species protection will be far lower than it is now or would be under other ESA reform proposals;

⚫ the public will have greater certainty that species protection plans are based on sound science and economic realities.

Key Concepts and Acronyms

Already protected habitat, including park and wildlife refuge acreage.

Safe minimum additional secure habitat in units of land area.

The Endangered Species Act of 1973 as amended.

FWS = U.S. Fish and Wildlife Service.

HPC = Habitat Preservation Credit. Each HPC allows its buyer to eliminate one acre's worth of habitat.

Management Agreement. An MA would combine some mix of deed restrictions, mandated owner activities, and permission for other people to perform certain activities on affected land.

Land area that is not habitat, and could not be made suitable habitat at a reasonable cost.

Potential habitat in units of land area.

Physical price, expressed as newly protected units of habitat per eliminated unit of habitat.

PP for species on the brink of extinction.

Unprotected habitat in units of land area.

A MARKET-BASED APPROACH TO PROTECTING
HABITAT FOR ENDANGERED SPECIES

By John Merrifield and Duggan Flanakin

"Thousands of small businesses, landowners, and threatened species are endangered by faulty regulation."

Mark Suwyn, Wall Street Journal

Introduction

During the past two years Texas has been the center of a national firestorm over the Endangered Species Act (ESA) and other federal environmental laws. The controversy over a 1994 Richards Administration proposal to classify five Texas water bodies as "outstanding national resource waters" and the uproar over the proposed listing by the U.S. Fish and Wildlife Service (FWS) of 33 central Texas counties as critical habitat for the golden-cheeked warbler played major roles in last November's statewide elections, which ended in the resounding defeat of an otherwise popular Governor.

The problem for Governor Richards was not so much that Texans opposed species protection but that they resented federal encroachments on their Constitutional liberties. The most recent Texas Environmental Survey,' conducted by Rice University sociology professor Stephen L. Klineberg, found that 56 percent of Texans favored spending more tax dollars to set aside and protect wilderness areas for endangered species in Texas, and that 64 percent agreed that some restrictions on property rights are justified to protect endangered species and wetlands. But a whopping 73 percent believed that the federal government interferes too much in our daily lives.

The ESA was enacted in response to public demands that the federal government protect threatened and endangered species and their habitat. The 1973 law has been credited with saving the American bald eagle - our very national symbol - though many suggest the ban on DDT played a greater role in the bird's recovery. Despite the hoopla, only a handful of endangered and threatened species have been helped by the ESA. This sad result is largely due to the cumbersome, even counter-productive procedures that the FWS has promulgated to implement the law. (The National Marine Fisheries Service has a smaller role, limited more to over-harvest prevention than habitat protection.) The ESA's record on maintaining the widely shared goal of biological diversity (or biodiversity) is not nearly good enough.

The debate over ESA reauthorization was placed on hold during 1994 while Congress went to war over health care but has returned with a vengeance to center stage in Washington - and in Austin as well. Widespread disillusionment with the ESA, both in Texas and around

'Rice University, Department of Sociology, "The Texas Environmental Survey (1990, 1992, 1994)" (Rice University, Houston), March 1995.