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PART IV -ECONOMIC EVALUATION PROCESS Introduction Section 4 (b)(2) of the Act directs the Secretary of the Interior (Secretary) to consider economic and other relevant impacts in determining whether to exclude proposed areas from the fwal designation of critical habitat. The Service, as delegated by the Secretary, may exclude areas from critical habitat designation when the costs or impacts of designation outweigh the benefits, provided that exclusion will not result in extinction of a species. An economic analysis was conducted on the costs of the proposed critical habitat designation. The study region for the economic analysis encompasses Utah, Arizona, and Nevada. Linkages between the biological requirements for recovering the listed fishes and the economic activities in the region were assessed, and these formed the basis for the economic analysis. The biological requirements include adjustments in water- diversions in the Virgin River Basin and/or mitigation of nonflow-related activities within the 100-year floodplain. The effects of recovery efforts on future water depletions in the basin were also taken into consideration. The impacts of these possible changes on current and prospective economic activities were estimated using input-output models for each county and the region (Virgin River Basin). Direct and indirect impacts on employment, wages, and State and Federal revenues from business and personal income taxes will also be factored into the exclusion process. The results of these models are found in the economic analysis document. Exclusion Process This section outlines the methods and procedures that will guide the Service in determining whether or not to exclude an area (or areas) from designation as critical habitat for any or all of the Virgin River listed fishes. Section 3(5)(A) of the Act defines critical habitat as: (i) the specific areas within the geographic area occupied by the species...on which are found those physical and biological features (I) essential to the conservation of the species, and (II) that may require special management considerations or protection. Section 3 further states that in most cases critical habitat will not encompass the entire range of the species. Section 4 (b)(2) of the Act directs the Secretary to consider economic and other relevant impacts in determining whether to exclude proposed areas from the final designation of critical habitat. The Service, as delegated by the Secretary, may exclude areas from critical habitat designation when the costs or impacts of designation outweigh the benefits to the species, provided that exclusion will not result in its extinction. The determination on whether to exclude a reach (defined as a continuous habitat segment within a river, tributary, stream, or spring system) or portion of a reach considers: (1) the benefits of including that reach; (2) the costs of designating that reach as critical habitat; and (3) the effects of excluding that reach or the cumulative effect of excluding more than one reach on 24