INTRODUCTION

A majority of species listed under the ESA depend on private land for a majority of their habitat (U.S. Fish and Wildlife Service 1997). Conserving endangered species on private land has triggered fierce debates in the courts and in Congress. The courts have wrestled with the question of the reach of the ESA on private land. In Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, the Supreme Court ruled that the ESA allowed the government to prohibit otherwise legal land uses on private land if such use significantly modifies habitat in a way that would harm a listed species. Congress has wrestled with the question of whether the government must pay compensation to private landowners who face restrictions on land use to conserve listed species. At present, such compensation is not required.

The current structure of the laws governing species conservation on private land creates several incentives problems that are likely to lead to inefficient outcomes. The fundamental problem with current law is that landowner cooperation with conservation policy is necessary for an efficient result, but such cooperation is unlikely to occur. Before the government can restrict an activity on private land, it must find convincing evidence that the activity will cause “harm” to a listed species. While it is not exactly clear what constitutes convincing evidence, the courts have generally insisted on a showing that a listed species inhabits the area and that the proposed activity would have a detrimental impact on the species (Polasky and Doremus 1998).