Natural Resources

Post image for Supreme Court Overwhelmingly Votes to Uphold Rights of Private Property Owners

The Supreme Court has decided an important property rights case in favor of the private property owners and against the claim of the federal government by an eight-to-one majority. Surprisingly, the Court’s liberal Justices, with the exception of Justice Sonia Sotomayor dissenting, signed Chief Justice John Roberts’s March 10 decision. In reversing the Tenth Circuit Court of Appeals, the Court ruled, in Brandt Revocable Trust et al. v. United States, that a right of way granted to a railroad in 1908 did not revert to the federal government when the railroad abandoned the tracks in 2004.

The original right of way was over federal land, but 83 acres of that land were patented in 1976 in a land swap with the U. S. Forest Service. The Department of Justice argued that even though those 83 acres had been turned over to private owners, the right of way over that now-private land had reverted to the federal government when the railroad stopped running. Arguing for the Brandts, Steven J. Lechner of Mountain States Legal Foundation stated that the right of way was an easement granted for a particular use, and therefore had expired when its intended use, operation of a railroad, had ended.

The Chief Justice’s opinion relies heavily on the 1942 Supreme Court decision, Great Northern Railway Company v. United States (315 U. S. 262), in which the Court agreed with the federal government’s argument that the General Railroad Right of Way Act of 1875 only conveyed easements. The majority opinion stated:

More than 70 years ago, the Government argued before this Court that a right of way granted under the 1875 Act was a simple easement. The Court was persuaded, and so ruled. Now the Government argues that such a right of way is tantamount to a limited fee with an implied reversionary interest. We decline to endorse such a stark change in position….

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In the middle of this holiday season my colleague Stephanie Rugolo over at the Cato’s new project, HumanProgress.org, is spreading cheer by getting out the word about the improving human condition. She offered these thoughts which I’d like to share:

Good News to Share Over the Holidays: The World Is Getting Better

You’ve heard it all before, “The world is becoming increasingly violent,” “Work-related injuries are on the rise,” “Soon, we’ll have no more forests.” As it turns out, pessimism is often at odds with the real world.

Long term trends for nearly every indicator of human progress are positive. For instance, forest coverage in rich countries is increasing in line with the Environmental Kuznets Curve. This trend will hopefully continue in the developing world as it becomes richer.

rugolo pic 1

According to the International Labor Organization, work fatalities are way down, while economic freedom is on the rise. This should give pause to those who think that free market is synonymous with bad working conditions. Quite the opposite. Economically free countries tend to be richer than economically unfree countries, and richer countries have safer working environments.

 

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Moreover, there has been a dramatic decline in violence. Conflicts between major powers, which used to be commonplace, are non-existent. Deaths due to genocide are way down, too.

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So cheer up and enjoy the holidays!

A ongoing battle in court and public opinion rages in California over the environmental status of the Sacramento-San Joaquin River Delta (both rivers meet, and flow into San Francisco Bay; a rather rare type of system seen in only a handful of places around the world, like the Ganges–Brahmaputra).

The status of a small fish called the Delta Smelt, as well as salmon, have led to less water allowance for Central Valley agriculture via California’s great waterworks infrastructure, an ongoing shock to the most productive agricultural region in the world.

There’s little free market in water anywhere, but we can reconcile that over time via a tad more “separation of water and state.” I testified in the Water and Power Subcommittee of the U.S. House of Representatives Water and Power Subcommittee this week on these concerns. The specific vehicle was H.R. 3176, the Reclamation States Emergency Drought Relief Act.

My written testimony is linked here (prepared in just a couple days so please excuse typos!); and oral remarks appear below.

I am Wayne Crews, VP for Policy at the Competitive Enterprise Institute, and I thank the committee for the invitation to address federal drought relief funding and planning.
I come at this issue from the perspective of one who spends most time on tech and frontier industry policy issues, including compiling an annual federal regulation report called Ten Thousand Commandments.

Given environmental barriers to urgently needed water in the West, I completely understand the desire for the funding in H.R. 3176; and granted, the dollars sought are trivial in context of current budget battles.

But I caution against fostering any further “Declaration of Dependence” on federal dollars in any sector.

The regulatory reforms and infrastructure liberalization actually needed for plentiful, adaptable, environmentally conscious western water should dominate attention.

The good news is, water is not getting more scarce overall; it’s an earthly constant.

The bad news is, we artificially interrupt access to water. So management and allocation of that constant supply does matter.

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Post image for Some Genuine Vindictiveness in Park Closings

The Washington Times story on the attempted forced shut down of the Pisgah Inn on the Blue Ridge Parkway in North Carolina may provide some insight into the attitudes of the National Park Service in shutting down private concessionaires on federal lands that still have open access for the public.

NPS chief spokesman said: “NPS [is]a single entity….We do not believe it is appropriate or feasible to have some parts of the system open while other parts are closed to the public.”

If other words, if we suffer, you suffer. Appears to be some genuine vindictiveness there.

Perhaps NPS is worried that if the public sees how well the private concessionaires are running campgrounds, picnic areas, hotels, stores, bookshops and properties such as the Claude Moore Colonial Farm in McLean, Va., which was closed even though it takes no federal money and has no federal employees — they might begin to wonder why we don’t simply privatize all the National Parks and National Forests. Where is the constitutional authority for the Feds to raise trees and own campgrounds anyway?  And there is certainly nothing inherently unique or difficult about these things that make it so the private sector cannot do them. Indeed, the private sector does them much better. Ask your local timber company when was the last time it let forests die from insects, beetles or disease or burn down in catastrophic wildfires.

And perhaps instead of Republicans introducing bills to provide lost pay to furloughed non-essential Federal employees, they should provide for reimbursement for forcibly closed private concessionaires. With the money to come form budgets of NPS and USFS.

Last week I testified in the Water and Power Subcommittee in the House of Representatives (hearing linked here). The concern was water availability and federal funding for for research and development in desalinating (de-salting) seawater and brackish water for human consumption or use in irrigation or industry.

I argued against the funding and pointed out that water shortages are almost always rooted in poor pricing for water. Without market pricing, scarcities and havoc will rule. I call for the separation of water and state. My long-form written testimony is linked here, and my oral comment appears below.

I am Wayne Crews, VP for Policy at the Competitive Enterprise Institute and I thank the committee for the invitation to speak on federal desalination efforts that, while they won’t break the fiscal bank, distract from the infrastructure and regulatory liberalization actually needed, and embrace principles at odds with an adaptable and lightly regulated water sector.

Desalination does boast impressive working applications, but it is an energy-intensive, by-product-laden way to make expensive potable water.

Happily, water is not getting more scarce overall; it’s an earthly constant.

But pricing and allocation of that constant water supply do matter. We should avoid having Government Steer While the Market Merely Rows.

When linking any research to human needs, private investors can test low-probability projects, counting on the rare success to offset multiple failures. We have to be good at killing bad projects. That requires market processes.

Federal funding, further, fosters needless conflict: over the merits of basic vs. applied research, over government vs. industry science; over assignment of intellectual property, and here, even over coping with environmental harm associated with the sourcing and externalities of desalination itself.

Politics has trouble with tradeoffs: Why brackish groundwater desalination instead of seawater, or smaller scale solar still-type projects, or why not countless alternative water investments and strategies? The dilemma affects all policy areas; Why not nanotech? Or biotech? Or methane hydrates? Or Robotics?

Fortunately, taxpayer subsidies appear not to alter the ratio of GDP spent on R&D.

So we should avoid fostering any “Declaration of Dependence” on federal dollars in any sector.

Also, all innovations bring risks. Government funding can magnify risks and environmental problems by propelling technologies ahead of the free market’s ability to properly assimilate them. In genuine markets, disciplines like liability, insurance, waste stream recapture and environmental stewardship must evolve alongside frontier technologies.

Rather than the National Research Council’s recommendations and the National Labs “roadmap,” I advocate the separation of water and state.

Water resources and environmental amenities should be better integrated into the property-rights, wealth-creating sector, an evolution derailed in the progressive era.

First, better pricing of existing supplies can make shortages vanish. Despite everything, gallons cost less than a penny, but they fill swimming pools and quench lush lawns in arid areas.

Second, improving water infrastructure can reduce the waste that now depletes some 17 percent of the annual supply, as noted in a Competitive Enterprise Institute report by Bonner Cohen.

Third, better transport, including pipelines and canals, trucking, and crude oil carriers can secure supply more cheaply than desaliniation.

Fourth, improved trades between cities, farmers and private conservation campaigns can be essential to pricing and value.

All these can supplement direct sourcing alternatives including gray and wastewater treatment and reclamation, stormwater harvesting and surface storage.

And obviously, we should address onerous permitting regulations that inflate desalination’s costs and defy the good in the process.

A couple quick general observations:

First, as CEI’s founder Fred Smith puts it, instead of trying to improve speeds by picking the particular R&D horses to run on the economic racetrack, we should improve the business and regulatory track so everyone can go faster, and let jockeys keep more of their earnings.

That means tax and regulatory reform. In my written testimony, I cover options to liberalize and enable a private sector flush with research cash.

Second, this is the water and power subcommittee, and I think it’s vital to step back and explore dismantling regulatory silos that artificially separate our great network industries like water, rail, electricity, transportation and telecommunications. Investment in desalination while leaving antique 19th and 20th century infrastructure regulation intact is curious policy.

As a free society becomes wealthier, cross-industry creation of infrastructure should become easier, not harder. The vastly poorer America of 100 years ago built overlapping, redundant tangled infrastructure; we might have had eyesores, but never a natural monopoly problem.

Again our primary challenge is to integrate modern water resources further into the market process and the sophisticated property rights and capital market systems of the modern world. We need competitive markets to discover, not merely desalination’s value relative to sourcing alternatives, but to discover the true value of water itself.

Post image for Virginia’s Uranium Mining Moratorium Should Be Buried, But What About Property Rights?

The earth below the United States contains 5 percent of the world’s known recoverable uranium deposits. More than a quarter of U.S. uranium is found in southern Virginia at Coles Hill near Chatham in Pittsylvania County. The two uranium deposits at Coles Hill are valued at $7 billion and together constitute the seventh largest deposit in the world.

Yet all of it is still in the ground. Over 30 years ago, Virginia placed a moratorium on uranium mining in the state. This prohibition was to be lifted once the state went through the arduous process of drafting uranium mining regulations. Unfortunately, Virginia never got around to writing the rules and the “temporary” ban is still in place. The property owners at Coles Hill and some outside investors formed a company in order to mine uranium once the moratorium is lifted and the onerous regulations recommended by the Uranium Working Group [PDF] are promulgated, but still face stiff opposition from the sadly typical alliance of anti-development environmentalists and ignorant NIMBYs.

This underscores the problem with relying on unreliable and arbitrary regulatory regimes for the ostensible purpose of protecting residents and the environment. Few dispute that responsible, safe uranium mining is possible and indeed practiced throughout the world, especially in major uranium-producing countries such as Australia and Canada. Instead of increasing regulation on mining, however, a more thoughtful approach would focus on strengthening property rights so that those doing the mining face incentives to extract natural resources without harming adjacent property owners.

Robust private property rights — those which are well defined, well defended, and voluntarily transferable — are the most critical underpinning of any free society. It should not be surprising that they are also the best tools to protect others and the environment from potential hazards. (For a brief discussion and defense of free-market environmentalism, see “Liberty, Markets, and Environmental Values” by Mark Pennington.) Pollution in this context constitutes a trespass against those rights and the injured owner can file suit to halt harmful activity and collect damages. But relying on the regulatory state in an attempt to protect the environment essentially grants polluters additional rights while preventing property owners from exercising their rights to defend their own property from pollution. This false commons is forced upon society by government and the predictable tragedies result again and again. Unfortunately, these state-caused disasters often only embolden far-left environmentalists in their calls for doubling down on failed regulations.

A firm engaged in uranium mining under state and federal regulations has the incentive to follow the regulations to the letter, regardless of how arbitrary or counterproductive they may be. In contrast, robust property rights would incent miners to allocate resources efficiently (after all, pollution is just a form of waste), take immediate risks into account, and prevent expensive trespasses against neighbors.

While this vision of a free society is far different from our current reality — meaning a complex regulatory regime will be practically necessary for uranium mining to take place in Virginia anytime soon — it is important to remember that it is an absence of liberty, rather than an excess, that increases harm done to people and the environment in the first place.

The United National Convention of the Law of the Sea (UNCLOS) celebrated its 30th anniversary this year. Simultaneously, there has been a push for the U.S. to ratify the Law of the Sea Treaty (LOST). Though signed, the treaty was never ratified by the U.S.; and for good reason. LOST redistributes wealth away from developed states, such as the U.S., and discourages innovation and investment.

LOST replaces hundred-year-old sea boundaries for member states, regardless of being a coastal or land-locked state. This can potentially reduce the extent of sovereign territory of the U.S. For example, Niger, a predominately desert country in Sub-Saharan Africa, at least 400 miles away from the nearest ocean coast-line, is allowed the same relative amount of ocean territory as Greenland, the world’s largest island.

LOST also creates a governing board for the ocean, the self-declared Authority. The area outside of states’ sea-boundaries, known as the Area, is to be mined by the Authority-created Enterprise. The Enterprise is a business organ which excavates for the Authority.

At the Authority’s discretion, developed states are to pay dues, and state and private deep-seabed mining companies are to pay “royalties” towards the creation of the Enterprise.

An application must be submitted for a company to mine in the Area. Each application costs $500,000 regardless of whether a company is already in contract with the Authority. Applications must contain detailed information on two potential sites. The Authority decides which site may be mined and which site may be mined by the Enterprise. The quantity expected to be excavated, any tools and methods, and all other technological knowledge which may be used at both sites must also be included in the application. This lessens incentives to innovate new technologies for mining; new technologies made fair-use for all competing mining companies.

Institutions to teach companies’ technology to both Enterprise employees and developing states are also to be established.

In addition, five years after excavating minerals from a site, a 1 percent “royalty” fee will be imposed. This will increase 1 percent annually up to a maximum of 12 percent. That, or as prescribed in LOST, a USD$1 million annual fee, whichever is greater.

This money helps fund the Authority. The Authority also distributes these royalties to developing states, as well as the Enterprise, based on their “needs.” The Authority can determine whether a developing state is exempt from application and royalty fees. The Authority is mainly composed of members from developing states, thus putting developed states on the hook while developing states are void of all fees.

The outcome to ratifying LOST is the end to private companies’ investment in the Area. Technological advances which may have been used for such mining projects will be stopped. Minerals which could have been excavated will be left untouched and the jobs and wealth created to excavate these materials will never come to exist. Not only has LOST created a governing board for the largest surface area of the world, it drives away from the largest area to which investment looks promising. It’s time for LOST to be buried at sea.

Post image for If Demography Is Destiny, We’re Screwed (So To Speak)

“Things will get better.”

Such sentiments frequently fall from the lips of ever-loving economic optimists who — while noting the current distressed condition of things — nonetheless insist that recessions have come before, and have always been followed (eventually) by recoveries. I know a few of these optimists, and they’re quite right — to a point.

Because what these sunny souls forget is that every recovery depends upon a plentiful supply of Earth’s most precious resource — human beings. And it is a resource that is becoming increasingly scarce, especially in the industrialized democracies.

Until recently, the United States was famous for bucking the plummeting birth-rate trend that has haunted other advanced countries for years. But apparently Americans are now caving to the peer pressure (“Come on, Yanks! Everyone’s — not — doing it!”). According to a recent report in newgeography.com:

“…the 2010 Census showed that in the past decade America’s birthrate slipped below at least one European country (France) and under the pace necessary to replace our current population.”

Never mind, you say, immigration can make up the difference, right?  Maybe not:

“Immigration, both legal and illegal, is also slowing, in part due to plunging birthrates in Mexico and other Latin American countries.”

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The writings of Reverend Thomas Robert Malthus (1766-1834) inspired Victorian historian Thomas Carlyle to condemn economics as “the dismal science.” Witnessing the deplorable crowding, poverty, and disease of England’s dirty cities and struck by a grim historical record of famines and epidemics, Malthus embodied academic pessimism. The work that made his reputation and popularized his name was An Essay on the Principle of Population. Malthus felt he was a Cassandra, admonishing utopians to beware of a catastrophic inevitability they could not see: The human population would inevitably exceed the carrying capacity of its environment.

This natural inequality of the two powers, of population, and of production of the earth, and that great law of our nature which must constantly keep their effects equal, form the great difficulty that appears to me insurmountable in the way to the perfectibility of society.

Surrey’s sour scholar essentially believed that human population grew exponentially, whereas agricultural productivity grew arithmetically, i.e., in a straight line. He was partially right. England’s population growth was undergoing a historical uptick during Malthus’ lifetime. However, agricultural productivity was too. Like civilization itself, urbanization was driven by rural agricultural and urban industrial productivity increases and the surpluses attending them. The same process drew Malthus’ eye, ironically enough.

This pattern repeated in the 1970s. Productivity increased in previously undeveloped areas. Population growth swung upward. Cities became crowded. Demographers and economists went into a tizzy. Then huge segments of the global population surged from miserable poverty to genuine prosperity.

Malthus made other contributions to his field, a true intellectual force. How did the latter halves of the previous two centuries so wildly, wonderfully contradict dismal expectations? Here we find the fatal flaw of his argument, and the worldview of many environmentalists. They appraise humanity as an “infant, mewling and puking in the nurse’s arms,” helpless, mouth open, desperately consuming the resources around it.

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Post image for Remembering Elinor Ostrom

Among the individuals with whom I wish I could have greater opportunities to exchange ideas is Elinor Ostrom. She passed away today, and now I must pursue that conversation indirectly — via her writings, her colleagues, and my recollections of those few conversations I did have the opportunity to enjoy.

Her work — for which she received the Nobel Prize in Economics – dealt with the way in which cultural enclaves often evolved institutional and technological solutions to resource management. And, not surprisingly, ideologues of various sorts claimed her work validated their world view.

Communitarians saw her work as “proving” that the classical liberal institutional view of private property, based on a formal rule of law, was not essential to ensure efficient allocation of resources. All one needed, they claimed, was to return to the common property world of yesteryear. Conservative agrarians also found much support from her research for their perspective. And, indeed, her work could be read that way – but it didn’t have to be.

Classical liberals, myself included, viewed her work far differently — as  evidence that the core institutions of a liberal world had developed (in embryonic form) much earlier than first thought. They were not imposed from above, but rather evolved as man began the long path toward modernity.

Moreover, some of her work did touch upon modern property rights — illustrating how commons could evolve into properties that could be restricted by use, by time, and in other ways that moved toward the formal property rights of today, ultimately meeting my friend Rick Stroup’s 3-D definition of property — definable, defensible, and divestible.

CEI’s Center for Private Conservation benefited greatly from some her insights. Once, she and Vincent, her husband, visited CEI and gave an impromptu seminar.

One question that I wished I’d pursued further with her concerns the transition from tribal common property management regimes to the modern private property regimes of today. Under what conditions do such transitions occur? What leads groups to accept a shift of this sort and what advantages (and penalties) does it create?

My own thoughts are that culturally enforced resource management rules can often be very creative and efficient — still, they rely on the culture being closed to outside transactions with others not sharing these cultural values. In a global mobile society, this suggests such closed systems are not likely to survive. However, unless the conditions for the transition to the modern formal rules have arrived, the situation can actually worsen. Fisheries, tropical forests, wildlife — all illustrate how the Tragedy of the Commons re-emerges when the old order collapses without anything to take its place.

Thus, CEI’s interest in pursuing the question: How can one assist isolated tribal enclaves to join an open world economy — when that shift is wise? The question is relevant in many areas of policy: how to better allocate the electromagnetic spectrum, offshore fisheries,  surface waters, and myriad other areas where property rights remain somewhere between the cultural controls Ostrom explored and those favored by classical liberals.

The right to trade a resource that is often restricted to one class of users (agricultural uses of water, for example) might be extended to urban or industrial users, but that liberalization threatens existing  arrangements and requires some trust that the new rules will be at least as effective. The very slow evolution of such liberalized trading policies suggests how little we understand social change. Ostrom had much to say about all this, and left us a rich legacy on which to ponder.