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3 THE HABITAT TRANSACTION METHOD: A PROPOSAL FOR CREATING TRADABLE CREDITS IN ENDANGERED SPECIES HABITAT Todd G. Olson Consultant Olson Policy Consulting Dennis D. Murphy Director Center for Conservation Biology, Stanford University Robert D. Thornton Partner Nossaman, Guthner, Knox & Elliott Section 10(a) of the Endangered Species Act (ESA) provides the only direct means for private parties to obtain federal permits to "take" endangered or threatened species incidentally to otherwise lawful activities. The Secretary of Interior issues such take permits if an applicant offers to implement a habitat conservation plan (HCP) that the Secretary finds to be incompliance with the standards set forth in Section 10(a) of the ESA. Only a handful of Section 10(a) permits have been issued since the introduction of Section 10(a) into the ESA in 1982. In most cases, the HCPs on which those permits have been based have involved a small number of landowners and have been based on the conservation of habitat in preservation zones in exchange for permission to develop lands in development zones. The preservation program is typically financed either by direct exchanges of land for permission to take habitat, or by fees charged when land is developed in development zones, which are then used to acquire land in preservation zones. This approach works well as long as the owners of land within preservation zones are willing participants. In the case of the one continuing HCP in which the preserva- tion zone includes thousands of private landowners-the short-term HCP for the Stephens' kangaroo rat in western Riverside County, California-many of the landowners in the preservation zone do not see any benefits from the HCP, and hence, oppose it. As a result, those administering that plan now seek an alternative to the strict designation of preservation zones for purposes of the long-term HCP currently under development. A challenge for the ESA and for those who implement it is coming in a new wave of HCPs that deal with multiple listed and unlisted species and, like the Stephens' kangaroo rat HCP, large numbers of landowners. Such efforts include multiple- species plans being developed in Kern, Riverside, and San Diego counties, to offer 27