Monday, March 23, 2015

Risks, Rights, and Wrongs

Where left and right meet

In the Metro section of Sunday's Washington Post our representative in Congress, Gerry Connolly, writes that oil and gas development off Virginia's coast is "too risky". Without quantifying the risks, Mr. Connolly seems to equate the risks as equivalent to the environmental damage inflicted on the Gulf Coast by the Deepwater Horizon spill in 2010. Mr. Connolly continues: "Virginians would assume all the risk of offshore drilling with no reward ... Absent a royalty-sharing agreement with Virginia, the commonwealth would receive no revenue from the drilling."

Curiously this view of U.S. Government property and resources runs through to the other side of the political spectrum. Last week after the Environmental Protection Agency unveiled rules affecting hydraulic fracturing  fracking  Senator Jim Inhofe of Oklahoma introduced a bill to block the rules, saying that only the states have jurisdiction over fracking on federal lands.

What Mr. Connolly implies and what Mr. Inhofe states outright is that U.S. Government property belongs – at least in part – to the state in which the property resides or is adjacent. They're both wrong: Federal property and resources belong to all Americans with benefits accruing to all and users of that property and resources responsible to all.

What we have here is the common concept of property rights. For example I let my neighbor's grandkids bounce on our trampoline: the kids have fun and I like that. But if my neighbor's dog poops on my lawn, he better pick it up. While it's not a written contract, it's my right as a property owner to let the kids bounce (safely) and insist that someone clean up after that dog.

In 2013 Johnathan Adler published a paper entitled "Conservative Principles for Environmental Reform". In an interview Mr. Adler said, "We tend to see when federal government acts as a market participant, they tend to get better environmental results." And at the heart of market participation is enforcement of property rights.

Part of the challenge with air pollution is that no one owns the atmosphere. Yes, I breathe it but I don't own it. But if individuals or "downwind" states can show damage and are allowed to seek reparations for "upwind" polluters – even if it's for ruining my vista – then polluters incur the cost they impose.

Now some people might object to the U.S. Government owning any property and that only states should be allowed to control natural resources within their borders. Well, OK but if we go to the Constitution, Article 4 Section 3 uses the phrase, "Property belonging to the United States". It appears that the framers expected some Federal property ownership.

Mr. Connolly and Mr. Inhofe both see risk to businesses in their states, though from different sources: in Virginia, where an oil spill might causes business losses; in Oklahoma, where regulations might increase the cost of doing business. And both seem to want the impossible: businesses operating free of risk. The difference between their positions is that Virginia businesses may have costs imposed on them whereas Oklahoma businesses may impose costs on others.

In the end we have two elected officials of opposing political ilk seeing eye to eye when it comes to Federal resource ownership. But owners of property – whether public or private – are right to set the terms for transactions on their property. Likewise, from the outside, we have a right to expect compensation from any externality that may occur because of that transaction. So if I have natural resources on my land that you want to extract we can enter into a contract, abide by its terms, and guard against risk. Ideology doesn't trump business or economics.