Friday, January 13, 2012

The Energy Treasures Beneath Our Feet

From an editorial by Pete Jermann, a self-employed craftsman and home-schooling father from Olean, New York (full article here, shorter version here):

"To look on the treasures beneath our feet as a threat to our comfort rather than a contribution we can make to a more vibrant world economy, one that multiplies wealth rather than redistributes a static wealth, is simply selfish.

When we accept no risk in our own backyards, we have no right to expect it of those whose backyards have provided us with the gas we use to heat our homes, the electricity we use to drive our appliances, and the fuel we use to go to and fro.  In all fairness, if we are not willing to accept this risk, we should turn out our lights, turn off our home entertainment centers, turn off our heat and learn how to scratch a basic existence out of our own backyards.
 

The Marcellus Shale and many other resources in this country can be mined responsibly, but none of it can be done completely without risk.  There is neither progress nor freedom without risk.  It is foolhardy to think that a life without risk is even possible.  It is foolish to think that risk always favors the do-nothing position.  The risk of doing nothing is the risk of poverty and stagnation.  I think history will show that to be the greater risk. 

The perfect world will be found in neither poverty nor prosperity.  But one is better than the other.  Prosperity will always be messy.  There will always be accidents waiting to happen and unforeseen consequences.  However, history shows — particularly the history of the United States — that more people live better lives when they are willing to take those risks and deal with the consequences as they occur."

27 Comments:

At 1/13/2012 10:12 AM, Blogger Tom said...

There is very little risk from fracking. As in infinitesimal. The more you look, the less you find.

 
At 1/13/2012 3:25 PM, Blogger juandos said...

Ahhh, the joys Pete Jermann suffers through for living in New York state...

 
At 1/13/2012 5:06 PM, Blogger Sean said...

I thought the idea of property rights was to make sure that the risks of such actions go to the responsible, to the benefactors. All you capitalist-anarchists out there... how is the ownership for risk/reward here supposed to be established so we can get on with life?

 
At 1/13/2012 6:43 PM, Blogger Benjamin said...

I find that everyone, when it comes to their own neighborhood, becomes a greenie-weenie.

As the titans of West Palm Beach, "Should we drill for oil 200 yards offshore?"

In Newport Beach, CA, a GOP stronghold, one much get approval from city voters before building a structure of greater than 125,000sf.

And don't even think about a seaside sky rise.

Conversely, what do property rights mean, when even private property owners cannot refuse the Keystone pipeline permission to cross private land?

 
At 1/14/2012 10:44 AM, Blogger Hydra said...

Conversely, what do property rights mean, when even private property owners cannot refuse the Keystone pipeline permission to cross private land?

==================================

It means that keystone should pay a fair rent to the landowners for their use of it. A piece of the action as it were, rather than a one time payment. And it means when they are done, they should restore the land to itsp previous condition as much as possible.

100% dominion over your property is not possible, otherwise no one would be allowed to do anything: people like Larry would claim there is no right to pollute and if so much as one molecule of SO2 from your auto lands on my property I have the right to shut you down entirely.

That is a ridiculous position, of course, and Jermann has hit it onthe head exactly when he says "When we accept no risk in our own backyards, we have no right to expect it of those whose backyards have provided us with the gas we use to heat our homes, the electricity we use to drive our appliances, and the fuel we use to go to and fro."

We are going to have to accept some risk, and that means some damage to the value of our property, in order to allow others to provide us with the things we need. If a dam is built upstream of you to provide you with electricity, you run some risk the dam will fail.

Sean asks the correct question: how is the ownership for risk/reward here supposed to be established so we can get on with life?

Certainly the people who use electricity are benefactors as are the people who own the stock in the company. The risks and rewards they take ought to be proportional: Larry cannot claim that he has the right to prevent even one molecule of SO2 to despoil his foliage.

Even if he goes off the grid entirely and foregoes the electrical benefit entirely, he still has not that right, because the costs he would impose on everyone else would be all disproprtionate to his benefit. It would violate the golden rule.

At the same time, the owners of forests that ARE seriously damaged by SO2, and use very little electricity do have a legitimate beef about having risks imposed on them which ought rightly to be billed to others.

Neither is it correct to simply dismiss the problem as Tom does: his argment is just as weak as Larry's is. (For those who have not seen it, I am referring to arguments Larry has made, not in this post.)


All of this goes back to Seans question : "how is the ownership for risk/reward here supposed to be established so we can get on with life?" My response woul be that we agree to work at it, to earnestly try to esablish the costs and benefits of (even subjective) risks,using the best tools we have, and we should continue to work at it until it costs more to make the determination than the benefit is worth.

It seems to me, that one way to do this is to declare as property, and distribute, many things which are not considered property today.

For example, some people think it is in their interests not to allow building development in their district, and they therefore get a perceived benefit for free, which is paid for by others.

Development rights, therefore, should be declared as property and distributed as shares to the citizens. If a developer can buy enough shares to represent one unit, then he has purchased the right to build at fair market value, and the only remaining issues are building and safety codes.

Likewise with drilling permits: if people own them as shares rather than government, then we will find out rather quickly whether people are in favor of drilling (at a certain price) or not. Governments role is reduced to ensuring there is not frud in the market for drilling shares.

 
At 1/14/2012 6:16 PM, Blogger Ron H. said...

"It means that keystone should pay a fair rent to the landowners for their use of it. A piece of the action as it were, rather than a one time payment. And it means when they are done, they should restore the land to itsp previous condition as much as possible."

You are describing what most of us recognize as a *contract*. You haven't addressed the more basic issue of eminent domain. If your land can be taken or used without your consent, then it isn't really yours, is it?

"Sean asks the correct question: how is the ownership for risk/reward here supposed to be established so we can get on with life?

Certainly the people who use electricity are benefactors as are the people who own the stock in the company. The risks and rewards they take ought to be proportional: Larry cannot claim that he has the right to prevent even one molecule of SO2 to despoil his foliage.
"

Ronald Coase addresses these issues in one of his most influental works, The Problem of Social Costs. See page 2 for an example involving a rancher and a farmer.


"It seems to me, that one way to do this is to declare as property, and distribute, many things which are not considered property today."

And who should do this declaring and distributing? The ever benevolent and wise central planners?

"For example, some people think it is in their interests not to allow building development in their district, and they therefore get a perceived benefit for free, which is paid for by others.

Development rights, therefore, should be declared as property and distributed as shares to the citizens. If a developer can buy enough shares to represent one unit, then he has purchased the right to build at fair market value, and the only remaining issues are building and safety codes.
"

Developement rights are already property, and are only restricted by zoning and those building and safety codes you mentioned.

"Likewise with drilling permits: if people own them as shares rather than government, then we will find out rather quickly whether people are in favor of drilling (at a certain price) or not. Governments role is reduced to ensuring there is not frud in the market for drilling shares."

While I'm all in favor of anything that reduces the role of government, It's not clear how this would work with respect to drilling in ANWR or offshore.

 
At 1/15/2012 11:55 PM, Blogger Hydra said...

You are talking to someone whose family has been hit with eminent domain siezures, twice, with a third event a near miss.

The problem is not that there is an eminent domain law, but that it is administered unfairly.

For example, in my state the same three judge panel that approves a taking, also sets the price.

That panel is part of the state corporation commission.

You can sue for a higher value, but if you win, you cannot recover your legal fees.

With a pipeline our transmission line, you will get a one time payment, for an easement on your property. You still own the property, and you still pay the taxes on it.

Your payment will be based on the previous use, It a portion of the value of the new use.

If the pipeline actually took the land, then they would have to pay tax on it, and at the value of the new use.

And, the pipeline can later run cable through their easement, by renting it to someone else, with no additional payment to you.

If they pay a fair price, then I am indifferent to eminent domain, but that is not the case.

 
At 1/16/2012 12:32 AM, Blogger Hydra said...

I am aware of coase and his argument. It matters not who has ownership, but only that there is ownereship, so that bargains can be struck.

Government should do the distribution, similar to the OK land grants.

Government does not own the drilling rights: we do. Government should issue shares wherever drilling is an issue, and the land is not owned.

350 million shares per square mile. A Driller would need to accumulate a controlling interest by buying shares.

If people are in favor of drilling they will sell their shares. Those opposed to drilling can donate their shares to Sierra Club or Nature Conservancy, and write off the gift at current prices. NC in turn could trade blocks of shares to gain control over the areas they think most critical. Governments role is reduced to recording who owns the shares.

 
At 1/16/2012 2:51 AM, Blogger Ron H. said...

"If they pay a fair price, then I am indifferent to eminent domain, but that is not the case."

Then you believe that you don't really own the property. Government can take it all, or use it as they wish.

It's hard to imagine how seizing property for a private pipeline is public use.

 
At 1/16/2012 2:53 AM, Blogger Ron H. said...

"For example, in my state the same three judge panel that approves a taking, also sets the price.

That panel is part of the state corporation commission.

You can sue for a higher value, but if you win, you cannot recover your legal fees.
"

This is the same government you think there should be more of. Amazing.

 
At 1/16/2012 3:12 AM, Blogger Ron H. said...

"Government does not own the drilling rights: we do. Government should issue shares wherever drilling is an issue, and the land is not owned. "

That should work about as well as carbon trading schemes. Who gets shares? Is ANWR unowned? How about within the exclusive economic zones offshore? Is that unowned? How about on private property? What if I want to drill in my yard?

"If people are in favor of drilling they will sell their shares. Those opposed to drilling can donate their shares to Sierra Club or Nature Conservancy, and write off the gift at current prices. NC in turn could trade blocks of shares to gain control over the areas they think most critical. Governments role is reduced to recording who owns the shares."

You must not see the nightmares this would create.

 
At 1/16/2012 7:20 AM, Blogger Hydra said...

If you own the land then you control it, until it is taken and paid for through eminent domain.

Otherwise, this is no different than trading millions of shares if anything else. Why is that a problem?

People already gift properties to conservation groups, so nothing is different there. And conservation groups already make decisions as to which properties to keep and which ones to trade for properties of greater environmental value. As I understand it NC allows drilling and hunting on some of its lands, for which it gets good revenue.

It ought to work as well as trading sulfur emmissions, fish stocks, or snow insurance.

What is it you are afraid of that huge numbers of Americans would prefer to pay for conservation, than be paid for drilling?

 
At 1/16/2012 7:25 AM, Blogger Hydra said...

It does not matter what I believe, government can take property. Jefferson wished it to be otherwise, It that did not happen.

However, there is some political will to reform the system an make payments more fair. I believe we should work to that goal, father That riding wishful horses.

 
At 1/16/2012 10:15 AM, Blogger Hydra said...

The system we have now consists of competing interests raising money to buy votes from government practitioners in order to enforce their vision of property rights.

And you don't think this system is a nightmare?

Why is my suggestion any more of a nightmare than any other market involving millions of transactions, and hundreds of competing interests?

 
At 1/16/2012 2:57 PM, Blogger Ron H. said...

"Otherwise, this is no different than trading millions of shares if anything else. Why is that a problem?"

Why is that a problem? This concept you seem to have trouble understanding.

 
At 1/16/2012 3:31 PM, Blogger Ron H. said...

"People already gift properties to conservation groups, so nothing is different there. And conservation groups already make decisions as to which properties to keep and which ones to trade for properties of greater environmental value. As I understand it NC allows drilling and hunting on some of its lands, for which it gets good revenue."

If you think this already works well, why do you see a need for another layer of complication?

People can already allow drilling on their property. NC and other such groups can already conserve land by BUYING it, but most prefer to enlist the force of government to get what they want at little cost, by restricting what people can do with their own land.

"It ought to work as well as trading sulfur emmissions, fish stocks, or snow insurance."

And how well are those first two working out? Examples please.

Trading in snow insurance is not like the first two, as you are merely hedging against risk, not changing the supply of weather.

"What is it you are afraid of that huge numbers of Americans would prefer to pay for conservation, than be paid for drilling?"

I have no problem with a property owner doing whatever they wish with their own property. We have already discussed the rights of others. My problem is with government regulations that restrict property rights with little or no cost to the proponents of those restrictions. The correct way to dictate the use of property is to buy it.

 
At 1/16/2012 3:39 PM, Blogger Ron H. said...

"The system we have now consists of competing interests raising money to buy votes from government practitioners in order to enforce their vision of property rights."

That's correct. It's human nature at work. The solution is to reduce the value of those in government by reducing their power, shrinking government, and reducing regulation.

The larger and more powerful government gets, the more valuable that power becomes.

Your constant call for newer and better regulations and artificial trading systems, means you favor providing more government influence to be bought and sold.

 
At 1/16/2012 3:49 PM, Blogger Ron H. said...

"Why is my suggestion any more of a nightmare than any other market involving millions of transactions, and hundreds of competing interests?"

This may be hard for a government cheerleader like you to understand, but just because there is trading in something, artificially constructed by government, doesn't mean it is a market based system. Markets emerge by themselves, when a need arises, not when government bureaucrats decide there should be one.

 
At 1/17/2012 11:26 AM, Blogger Hydra said...

Markets emerge by themselves, when a need arises, not when government bureaucrats decide there should be one.

================================

No they don't. That is why we have market externalities, and why the government has to decide to create new markets.

So it is not a perfect market: neither was what came before it. When you stop worshipping at the altar of perfect markets you will discover that even Jesus had to take a dump.


Besides, this is not a case like sulfer trading or greenhouse gas trading: these are real resources that are going to be extracted and sold.

The only thing we are arguing about is who owns them and who benefits from the sales. there is nothing artificial about that.

 
At 1/17/2012 11:29 AM, Blogger Hydra said...

I am not a government cheerleader. This is a way to REDUCE government control of the market and provide MORE individual property rights.

Government's core responsibility is to protect property rights, and my proposal reduces government control to doing just that.

 
At 1/17/2012 11:38 AM, Blogger Hydra said...

That's correct. It's human nature at work. The solution is to reduce the value of those in government by reducing their power, shrinking government, and reducing regulation.

===============================

That is no solution if it winds up giving power to others who have no accountability to the public. Thatt is no solution if reducing regulation increases the ability to impose undue costs on others. You are pointing out the supposed benefits of reduced regulation while ignoring the costs.

You are also ignoring history: we got all these regulations for good and plentiful reasons. Half of them demanded by businesses and half of them demanded because of businesses. And most all of them boil down to arguments over property rights.

My plan reduces government power by devolving more property and more kinds of proerty to the public that rightfully owns them.

All the government has left to do at that point, is track the ownership and prevent stealing.

 
At 1/17/2012 11:39 AM, Blogger Hydra said...

If you think this already works well, why do you see a need for another layer of complication?

===============================

It is not another layer. It is expanding the same operations to a different theater.

 
At 1/17/2012 11:45 AM, Blogger Hydra said...

I understand voluntary. Under my plan no one would have to sell their shares to drillers if they did not want to. No one would have to sell or give their shares to conservation agencies if they did not want to.

Unlike todays system, those who want to deny drilling can do so by withholding their shares and absorbing the COST of doing so. Today they get to deny drilling basically for free. My plan puts a price on saying "No".

Under my plan the market would decide where and when drilling takes place, and it is arguably more efficient than the market in buying and selling politicians.

 
At 1/17/2012 11:56 AM, Blogger Hydra said...

My problem is with government regulations that restrict property rights with little or no cost to the proponents of those restrictions. The correct way to dictate the use of property is to buy it.

================================

And that is exactly what my plan does. It makes the proponents of conservaton pay the cost, which they now do not. When conservatonsis eventually sell out, the drillers will pay the price for reducing conservation.

Fair is fair.


The correct way to dictate the use of property is to buy it, sure enough. But that means someone has to own it. Why does the government get to sell resources that belong to all of us? We should REDUCE governments role to distributing newly defined resources equally, and then let the market take over.

Ideally, if the government sells public resources, then we get a dividend second hand, in reduced taxes, but we know that isn't happening, AND the government gets to decide whe gets such benefits as are available. so, again, my plan REDUCES the role of government.

With a lot more property and a lot more kinds of proeprty, government property protection would have to expand, but the KIND of work it does would be greatly reduced and simplified.

 
At 1/17/2012 2:24 PM, Blogger Ron H. said...

"No they don't. That is why we have market externalities, and why the government has to decide to create new markets."

Then you don't understand the term "market".

Government, is nothing more than people who are just like the rest of us, and who have no better insight than anyone else. They create so called "markets", at the urging of those who have a particular interest in that "market".

"So it is not a perfect market: neither was what came before it. When you stop worshipping at the altar of perfect markets you will discover that even Jesus had to take a dump."

But you are just guessing. I don't believe there's a lot of information available on Jesus' toilet habits.

"Besides, this is not a case like sulfer trading or greenhouse gas trading: these are real resources that are going to be extracted and sold."

Why not just auction parcels of federal land directly, and be done with it? The most interested parties would bid the highest. There is no reason for government to "own" land.

As original ownership would now be nearly impossible to determine, assuming government ownership is as good a starting place as any, absent other claims.

"The only thing we are arguing about is who owns them and who benefits from the sales. there is nothing artificial about that."

You don't think 350 million owners per square mile is artificial?

What about ANWR and offshore?

 
At 1/17/2012 2:56 PM, Blogger Ron H. said...

1. "That is no solution if it winds up giving power to others who have no accountability to the public. "

2. "My plan reduces government power by devolving more property and more kinds of proerty to the public that rightfully owns them."

Those are inconsistent.

"You are also ignoring history: we got all these regulations for good and plentiful reasons."

Nonsense.

"And most all of them boil down to arguments over property rights.

My plan reduces government power by devolving more property and more kinds of proerty to the public that rightfully owns them.
"

Isn't government supposedly the agent of the public? The "public", meaning each of us, already has those rights. You are trying to deal with something as a collective, as usual.

"All the government has left to do at that point, is track the ownership and prevent stealing."

Government can't prevent stealing, only punish it. When's the last time the police prevented someone from breaking into your house? You, on the other hand, can prevent it.

 
At 1/17/2012 2:59 PM, Blogger Ron H. said...

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