Natural Resources

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

by Marc Scribner on January 16, 2013

in Economy, Environment, Features, Natural Resources, Private Conservation, Property Rights

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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.

LOST Washing Up To Our Shores Once Again

by Riley Walters on October 1, 2012 · 1 comment

in Environment, International, Natural Resources

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.

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

by Matt Patterson on August 23, 2012 · 1 comment

in Features, Natural Resources, Zeitgeist

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“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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Decoding The Malthusian Fallacy

by Luca Gattoni-Celli on August 6, 2012

in Economy, Natural Resources, Zeitgeist

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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Remembering Elinor Ostrom

by Fred Smith on June 12, 2012

in Economy, Environment, Features, Natural Resources, Personal Liberty, Private Conservation, Property Rights, Zeitgeist

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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.

The Remote Sensing Problem

by Rand Simberg on May 7, 2012

in Features, Global Warming, Natural Resources, Space, Tech & Telecom

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Over at the Washington Post, in discussing the coming crisis in weathersats, the editorial board can’t resist taking an ignorant dig at George W. Bush:

The reasons for this outlook are many — some overspending on certain projects to the harm of others, costly congressional mandates that diverted resources, and a recent rocket accident. Even if those factors were ignored, says Dennis Hartman, the chair of the panel that produced the report, agency budgets would still be too low to keep the country’s earth observation system in reasonable shape. The NRC proposes restoring NASA’s earth observation satellite funding to the level seen in the late 1990s — before President George W. Bush reprogrammed money from those satellites into things such as manned spaceflight to Mars. That level stands at about $2 billion. [Emphasis added]

There were problems with George Bush’s space policy, but shifting funding to humans to Mars was never one of them. Bush’s plans were for a lunar return, not a Mars mission, though one was envisioned as a follow on in the 2020s.

NASA has spent exactly zero dollars toward sending people to Mars, unless you count the money wasted on an unnecessary new heavy-lift rocket which might, theoretically, play a role in such a mission decades from now, but whose primary mission is to sustain what remains of the Shuttle workforce with its jobs in key states and districts.

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When Commodities Analysts Should Stick To Commodities

by Rand Simberg on May 1, 2012 · 2 comments

in Natural Resources, Space, Trade

Some analysts at Barclays attempt to understand the business case for Planetary Resources, and massively fail:

Their calculations are based on Nasa’s forthcoming OSIRIS-REx mission, which aims to launch a probe in 2016 to pluck samples from an asteroid called 1999 RQ36 and bring them to Earth.

The mission’s acronym stands for “Origins-Spectral Interpretation-Resource Identification-Security-Regolith Explorer” and Nasa hopes it will be home by 2023, with a couple of ounces of dirt. By then, the cost will have reached $1-billion – made up of $800-million for the vehicle, plus another $200-million for the rocket launch.

Since that outlay will return just a couple of ounces of material, the Barclays’ analysts say they could use it as a baseline to estimate break-even prices for asteroid mining. Using the metrics proposed by Barclays, the Financial Times commodities team estimates that copper prices would need to skyrocket from today’s $3.81 per ounce to $476-million for a similarly-funded space mining project to cover its costs. [Emphasis added.]

Ummmmmm…no.

First, this is a NASA mission, and NASA costs are always a poor proxie for how much it would cost private enterprise to accomplish something similar. For instance, SpaceX has spent about a billion dollars total developing two new launch vehicles and a reusable return capsule that it flew in late 2010, and is planning to fly to ISS next week. The Falcon 9 rocket itself cost the company about $300M. But conventional NASA/Air Force cost models predicted that it should have cost somewhere between $1.7B and $4B if developed under a traditional government contract. That is to say, it might have cost an order of magnitude more.

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How to Fix U.S. Water Policy? Less Government, More Market Pricing

by Wayne Crews on April 18, 2012

in Deregulate to Stimulate, Economy, Environment, Features, Natural Resources, Property Rights, Regulation

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Late last week I received an invitation to testify in the Water and Power Subcommittee of the House of Representatives Natural Resources Committee on H.R. 2664, “The Reauthorization of Water Desalination Act of 2011.” We’ve posted the full 20-page testimony; my oral remarks before the committee appear below. The push for politically juiced desalination projects is a diversion from the actual problem; the absence of market pricing to allocate water scarcity.

I am Wayne Crews, VP for Policy at the Competitive Enterprise Institute and I thank the committee for this Tax Day invitation to speak on H.R 2664, a $2 million annual desalination program that, while it won’t break the bank, embraces principles at variance with a lightly regulated and adaptable water sector.

While it does boast crucial working applications, desalination remains an energy-intensive, by-product-laden means of making expensive usable water, despite being an ancient process.

Happily, there’s no need for panic; Water is not getting more scarce overall; it’s an earthly constant, and the nation uses even less than it did in the 1980s.

But pricing and allocation of that supply do matter. To advance tomorrow’s water policy, we must, as we say at CEI, avoid having government steer while the market rows.

When linking research like desalination to human needs, private investors can test low-probability projects, counting on the rare success to offset multiple failures. Progress requires good at killing bad projects.

Federal funding to overcome so-called “market failure” in research, on the other hand, fosters numerous avoidable conflicts: over the merits of basic vs. applied research, over government vs. industry science; over assignment of intellectual property; Over public access to data. Meanwhile, taxpayer subsidies appear not to alter the ratio of GDP spent on R&D after all.

Government steering can create artificial booms, and politics has trouble balancing research portfolio tradeoffs: Why H.R. 2664’s brackish groundwater desalination instead of seawater or countless alternative water investments? The problem affects other sectors: Why nanotechnology instead of biotech? Or the hydrogen economy? Or Robotics?

We should avoid fostering a “Declaration of Dependence” on federal dollars, because that will further mask water market prices.

Also, even as government funding comes with regulatory strings attached, it adds to risks and environmental problems by propelling risky technologies ahead of the free market’s ability to properly assimilate them. (The market’s role in regulation is something we might discuss in Q&A.)

This is important, because we observe in H.R. 2664 the seeds for new regulation propelled by the sourcing and externalities of desalination itself. Instead, market disciplines like liability and insurance must evolve alongside technology.

To me, preferred alternatives to subsidized Desalination are those institutionalizing the separation of water and state.

First, better pricing of existing supplies can make crises vanish; refer to my written testimony on this. Despite everything, gallons of water cost less than a penny, filling swimming pools and hydrating lush lawns in arid areas.

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

Third, better transport, including pipelines, trucking, and crude oil carriers can aid supply. Where’s the water pipeline aorta alongside and perpendicular to Keystone, one might say.

Fourth, improved trade between cities, farmers and NGOs can be essential to pricing and value.

A fifth option would be water sourcing alternatives including gray and wastewater treatment and reclamation; stormwater harvesting, and private conservation such as instream flow purchases.

Finally, we should reduce onerous permitting regulations that inflate desalination’s costs and defy the good in the H.R. 2664 vision. Otherwise, as water expert David Zetland notes, “if it’s possible to get [regulatory permitting] approval [to] raise prices so far, why not just raise prices and skip the project?”

A couple general observations:

First, as CEI’s president Fred L. Smith Jr. puts it, instead of trying to improve speeds by picking the particular R&D horses to run on the infrastructure racetrack, improve the business and regulatory track so everyone can go faster, and let jockeys keep more of their earnings. In the Appendix of my written testimony, I cover liberalization options to better 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 artificially separating our great network industries. That is, any investment in non-shovel-ready desalination while settling for 19th and 20th century infrastructure is sub-prime policy, particularly given that, as a free society becomes wealthier, creation of infrastructure should become easier, not harder.

The America of 100 years ago, with its paltry GDP, built overlapping, tangled infrastructure; we might have had an aesthetic problem, but never a natural monopoly problem.

The modern challenge is to welcome water resources further into the market process. We urgently need competitive market discipline to discover, not just desalination’s value relative to sourcing alternatives, but to discover the true value of water itself.

Further Space Property Rights Responses

by Rand Simberg on April 9, 2012 · 4 comments

in Deregulate to Stimulate, Natural Resources, Property Rights, Space

Since my previous post on media reaction to CEI’s press briefing on Thursday, Popular Science has provided a good report as well.

But in this post, I want to address co-speaker Jim Dunstan’s critique of the concept, which he presented at the event, and is now available on line at TechFreedom.

I should start by noting that Jim is a long-time associate, fellow free-market space advocate, and (I hope) friend. I didn’t want to get into the weeds of a debate on the subject at the event, particularly because he didn’t put forth any new arguments — his statement was simply a reiteration of the argument that I had already refuted in the paper itself. But briefly, like other critics, he cites the combination of Articles II and VI of the Outer Space Treaty to debunk the potential loophole that I postulate in the Issue Analysis:

The negotiators of the Outer Space Treaty (OST) knew that such [property rights] claims would never stop unless the countries agreed once and for all, that:

Outer space, including the [M]oon and other celestial bodies, is not subject to national appropriation by claim of sovereignty, by means of use or occupation, or by any other
means.

Article II of the OST couldn’t make it any clearer.

But wait, Rand and others argue that Article II of the OST only prohibits national appropriation, so individuals are free to do whatever they want in space. Well, not so fast. Article VI of the OST states:

States Parties to the Treaty shall bear international responsibility for national activities in outer space, including the [M]oon and other celestial bodies, whether such activities are carried on by governmental agencies or by nongovernmental entities, and for assuring that national activities are carried out in conformity with the provisions set forth in the present Treaty.

Since launching states are required to ensure that their nationals conduct their activities in conformity with the provisions of the OST, and the OST denies states the ability to appropriate celestial bodies through use, occupation, or by any other means, there is no way that the United States could directly recognize land claims in outer space that were made based on use and occupation, as the legislation Rand proposes would do. The “loophole,” as Rand calls it, simply doesn’t exist.

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Regulation of the Day 199: How to Catch a Tuna

by Ryan Young on November 21, 2011 · 4 comments

in Natural Resources, Regulation, Regulation of the Day

Carlos Rafael owns over 40 fishing boats that work the waters off of New Bedford, Connecticut. One his boats recently caught an 881-pound bluefin tuna — one of the biggest catches ever made (the record is 1,496 pounds). Authorities quickly confiscated the fish.

Fishing is a heavily regulated industry, and Rafael took every precaution to make sure his giant catch was within the rules:

Rafael, who in the last four years purchased 15 tuna permits for his groundfish boats to cover just such an eventuality, imme­diately called a bluefin tuna hot line maintained by fishery regu­lators to report the catch.

When the weather offshore deteriorated, the Apollo decided to seek shelter in Provincetown Harbor on Nov. 12. Rafael imme­diately set off in a truck to meet the boat…

However, when Rafael rolled down the dock in Provincetown there was an unexpected and unwelcome development. The authorities were waiting.

So he had a permit, he let authorities know right away, let them know it was an accidental catch, and they still took it away. Why?

Because Rafael’s men caught it with a net. Bluefin tuna are only allowed to be caught with fishing rods.

A dejected Rafael told the Cape Cod Times, “We didn’t try to hide anything. We did everything by the book. Nobody ever told me we couldn’t catch it with a net.”

At this point, it appears that Rafael will not be charged with a crime. The government, however, will sell his fish and keep the money. Most people would call this stealing; the government calls it asset forfeiture.

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