The Bureau of Land Management and the state of Wyoming will work to protect more than two million acres of habitat occupied by the greater sage grouse under an agreement announced Thursday that could mark a turning point in the relationship between Western states and the federal government.

The agreement, under which BLM will adopt a Wyoming-crafted plan to conserve sage grouse habitat, represents the first state-federal deal to protect millions of acres of land from development in hopes of keeping the greater sage grouse off the endangered species list. But conservationists were quick to criticize a deal they said handed too much land to developers without going far enough to protect the species.

It’s the latest step in a years-long debate over whether to include the sage grouse on the endangered species list. About the size of a chicken, the sage grouse is considered an indicator species for the larger sage brush ecosystem, which is threatened by oil and gas, mining and renewable energy development.

The federal Fish and Wildlife Service, which ultimately is responsible for deciding whether to include an animal on the list, has been considering the several subspecies of sage grouse for about 15 years. In 2005, the agency decided it would not list the grouse as threatened. Environmental groups filed a lawsuit, and a federal judge overturned the finding two years later. In 2010, the agency said the bird warranted protection.

Under an agreement between Fish and Wildlife and the environmental groups, the agency has until the end of September 2015 to propose rules governing the bird’s habitat or to decide to change its mind.

Much of the habitat the sage grouse occupies is also prime territory for developers, who want to establish alternative energy outposts, dig mines or explore for oil and natural gas, all of which is fueling an economic explosion in Western states. Some estimates suggest a decision to list the greater sage grouse as threatened — and, thus, close off those lands to development — could cost states billions of dollars and thousands of jobs.

The 11 Western states with sage grouse populations have been working with Fish and Wildlife, BLM and other federal agencies to develop conservation plans that would protect both sage grouse habitat and developer rights while avoiding a listing on the endangered species list. The agreement between Wyoming and BLM, signed Thursday, represents a step toward striking that balance.

“This is a reasoned plan that recognizes multiple-use for these public lands,” Wyoming Gov. Matt Mead (R) said in a statement. “The plan strikes a balance between energy production, livestock grazing, recreation and conservation. It incorporates Wyoming’s plan for protecting greater sage grouse.”

The deal signed Thursday will update the Lander Resource Management Plan, a 30-year old document covering 3.5 million acres of Wyoming territory, south and east of Yellowstone National Park. About 2.4 million acres of that land is considered core habitat for the greater sage grouse, a bird under consideration for listing under the Endangered Species Act.

The new rules would prohibit development in several key areas and limit habitat disruption in more than 5 percent of the so-called core habitat area. It would keep development at least 1,000 yards away from a known breeding ground, or lek, and minimize noise and seasonal development during prime breading times. They also protect land that covers four congressionally-designated National Historic Trails — the California, Mormon Pioneer, Oregon and Pony Express, all of which run through Wyoming.

The rules carve out exceptions for three areas with promising natural resource development potential. BLM recently approved operation of a new uranium mine in the Gas Hills Uranium District, and areas known as Beaver Creek and Lysite are potentially lucrative oil and natural gas sites.

The agreement may be a sign that BLM and Fish and Wildlife are working with states, but conservation groups were quick to criticize what they said was a deal that would continue allowing development on crucial habitat.

“The sage-grouse portion of the Lander RMP falls short by allowing oil and gas development and other activities too close to important sage-grouse habitat,” said Ken Rait, director of the Pew Charitable Trusts’ U.S. Public Lands Project. “Rather than protecting these birds, the BLM is handing some of their last remaining habitat over to the oil and gas industry,” added Randi Spivak of the Center for Biological Diversity.

Ross Lane, director of the Montana-based Western Values Project, said the plan does not take into account current science on the health and welfare of sage grouse habitat. The plan only closes about 200,000 acres from oil and drilling development, and Lane said the fact that large overhead transmission lines are still permitted in core habitat fails to address concerns about sage grouse well-being.

The new Lander plan is the first resource management plan adopted by BLM, with 14 more covering areas across the West under consideration. BLM has been working with a bipartisan group of Western governors, led by Mead and Colorado Gov. John Hickenlooper (D), that includes both conservationists and industry leaders.

The debate has taken on a new urgency in recent years as sage grouse populations have cratered. The number of sage grouse patrolling the West has plummeted 90 percent in the last century; Wyoming reported a decline from more than 44,000 male birds in 2006 to just 18,000 in 2013, after years of rapid development in grouse habitat.