A landowner’s right to frack

Since beginning this forum several months ago, one of the biggest surprises to me is the extent of the controversy over tapping into the Marcellus shale formations for trapped natural gas. The land rush to acquire drilling rights and the ensuing energy boom throughout much of the northern Appalachian region has generated concerns in the environmental community regarding the impact of tracking on water supplies and air quality. Approximately 25,000 wells are being cracked annually and 4 million gallons of fluid were injected under pressure into each of those wells.

Hydraulic fracturing

Regulators have been caught off-guard by the explosion of activity in this area and have sought to play catch up for the past several years.

EPA has just issued the first regulations regarding air pollution emissions at fracking sites. However, the agency is prevented from addressing the more serious concerns about fracking’s impact on water because in 2005 Congress at the urging of Vice President Cheney exempted gas drilling from the Clean Water Act.

Some 200 local governments have stepped into the regulatory void and banned fracking in their jurisdictions. This movement is likely to grow with the recent New York court decision upholding the Town of Dryden’s ban on tracking there. That decision in turn generated a reaction by the Joint Landowners Coalition of New York. The JLCNY’s Declaration of Landowner Rights calls for “a uniform standard for natural gas development” arguing that local bans such as the one in Dryden result in “a confusing legal patchwork that impedes private property rights, hinders progress and limits viable economic opportunity”.

It will be interesting to see how the struggle to manage this latest energy boom plays out among the local, state and federal levels of government. If history is any guide, the gas drilling industry will prefer the certainty and uniformity available only from the federal government.

 

 

 

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Are courts environmentally uninformed?

The recent Texas Supreme Court opinion dealing with beach erosion has gotten me thinking (again) about whether our courts have kept pace with our vastly increased knowledge of how various ecosystems work and are interrelated and how we continue to depend on them for our very existence. I question whether judges are giving adequate weight to the wealth of scientific knowledge that has appeared since the publication of Rachel Carson’s Silent Spring.

In this particular case, the majority in a sharply divided 5-3 decision tried to make a distinction between a shift in shoreline that occurs gradually (erosion) and one that occurs suddenly (avulsion). In the case of the former, the state’s easement for public access will move with the erosion; but now the court has held the easement will be extinguished in the case of avulsion.

Port Aransas, Texas

Geologists have been quick to point out that there is no bright line between erosion and avulsion (and that the latter is a concept typically used in riverine not coastal situations). James Gibeau, a coastal geologist with the Harte Institute, went even further accusing the justices of being “. . . way out of step with mainstream science”.

The aftermath in this instance is the significant weakening of Texas’ 53-year old Open Beaches Act and the potential for lengthy and costly legal disputes over whether a particular shoreline movement is the result of erosion or avulsion. More troubling, however, is a pattern in judicial decisions in which courts seem reluctant to embrace the most current scientific understanding of our natural world. That failure puts the environment and all of us who depend on it at unnecessary risk.

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Walking, obesity, and the “right to roam”

Slate is running a series of articles on walking. Americans walk less than citizens of any industrialized country. Studies have shown that the average American adult takes 5,117 steps each day as compared to the nearly 10,000 steps both Australians and Swiss take daily. Greater levels of walking (as well as cycling) has been shown to be linked to lower levels of obesity. As an inveterate walker (75 minutes a day, everyday), I read the series with great interest and thought of how difficult the layout of many of our cities makes it to be a walker. When I walk in Phoenix with cars a couple feet away from the narrow sidewalk whizzing by me at 45 mph, I realize it may be the most dangerous activity I will engage in that day.

Walking in Nashville

So I could help but envy residents in the United Kingdom when a few days later I read an article about the ongoing struggle to implement the “right to roam” laws that have been enacted in England, Wales and Scotland. These measures created a right to walk on vast swaths of privately owned land including mountain, moor, heath, down and common land. A massive mapping effort was undertaken to identify exactly what areas would be open to the public.

Right to roam map

While landowners have fought the increased access, the laws have resulted in significant increases in acreage open to the public. One wonders if these laws will help reverse a trend in Great Britain that has seen walking decrease by 25% over the past quarter century.

If you want to check out how friendly your neighborhood or community is for walking and walkers, you may want to check out its Walk Score.

 

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Continuing collision of property regimes

An article this past week on the Conservative government’s proposal to adopt legislation authorizing private ownership of property on First Nations reserves in Canada is a reminder that the collision between European and Native American property regimes is an ongoing struggle. Last December the Harper government voiced support for the First Nations Property Ownership Act as a way of spurring economic development on the reserves. Leaders of the Assembly of First Nations have already gone on record as opposing blanket private property rights in lieu of communal ownership though a handful of the more than 600 First Nation reserves are apparently willing to make the switch. One concern is that such a change would lead to ownership of reserve land by non-natives.

First Nations treaties and land claims

At the very heart of the conflicts between Native Americans and Europeans settlers was a profound difference in the way the two cultures viewed the relationship between humans and the land. It is not that Native Americans did not recognize property rights; they had developed a property regime that was based largely on communal forms of ownership. Europeans arrived just as the longstanding feudal system of property rights was coming to an end and were eager to use what they perceived as the blank slate of North America to implement a property regime based primarily on private property rights.

One of the great ironies of U.S. history is that a country that prides itself on being a bastion of property rights owes its very existence to displacing (often by force or fraud) a system of property rights that was in place before the country came into being. Both Canada and the United States have long struggled with the residual Native American enclaves (reserves in Canada and reservations in the United States). The Bureau of Indian Affairs management of Native American lands in the U.S. has been nothing short of a scandal. While Canada in recent years has gone to great lengths to recognize First Nations continuing sovereignty in meaningful ways (in its 1982 Constitution and by entering into self-government agreements with a number of reserves), this latest proposal makes clear the uneasy coexistence to these two very different property regimes.

 

 

 

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One stick short

Updated: April 24, 2012

Updated to reflect that D.R. Horton's has given back mineral rights on 22 lots.

Updated: April 21, 2012

Updated to include D.R. Horton's response to questions about its disclosure practices.

Property is often defined as a bundle of rights which include the rights of possession, control, exclusion, enjoyment and disposition. These rights may all be held by one party but often are held by a variety of parties. For example, a farmer may own the right to live on his land and grow crops there but may have granted an easement to a third party to use a private road that runs across the farm and to a utility to place a transmission line on the farm.

The bundle of property rights

When someone purchases a house, he typically have his attorney review title to the land to determine what other parties may own an interest in the land. Recently a homebuyer in North Carolina noticed that the homebuilder had reserved the rights to minerals under the parcel including oil, gas, water, natural gas, and coal. While it is not unusual in certain regions of the country to discover that the mineral rights were separated from the rest of the property rights by some previous owner, that was not what happened here. This involved a national homebuilder, D. R. Horton, and was a new separation of mineral rights. Not only that but the mineral rights were then being transferred to an affiliate, DRH Energy Inc., to facilitate the future removal of such materials from below the surface of the homeowner’s land. One enterprising journalist has determined that this kind of transfer has occurred on at least 425 lots in Wake, Durham and Chatham counties.

In responding to parallel inquiries by the N. C. Attorney General and the Real Estate Commission, D. R. Horton has stated that it makes multiple oral and written disclosures but will add an additional written disclosure that prospective buyers will have to sign before entering into a purchase agreement for a house. After further internal investigation, D. R. Horton has announced that it is giving back mineral rights on 22 lots on which it failed to make disclosures in the sales contracts.

This is a measure of the renewed interest in subsurface rights as a result of the widespread tracking activity to capture gas trapped in the Marcellus Shale formation. Given the emerging concerns about the environmental impacts of tracking, homeowners like this one are left to wonder whether the value of their property may be adversely affected if the party holding the mineral rights elects to exercise them in the future. Equally concerning is the possibility that the homeowner will have difficulty obtaining a mortgage since lenders such as the North Carolina Housing Financing Agency.

 

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Property rights in space

Until the advent of air travel (first by balloon and later airplanes), landowners were said to own not only the surface of their land but also the ground beneath it and the air above it (cuius est solum eius est usque ad coelum et ad inferos). This broad definition would have required airlines to acquire easements along their flight paths had it not be narrowed by courts. It is one of many examples of how courts have been practical rather than ideological when faced with new technologies whose adoption would have been slowed or made impossible by a strict application of traditional property doctrines.

The Final Frontier

I suppose we should not be surprised that with the emergence of commercial space travel that some are calling for recognizing private property rights in space. Rand Simberg has authored a new study for the Competitive Enterprise Institute on “Homesteading the Final Frontier”. He calls for a federal law that would recognize private claims to extraterrestrial property in order to encourage private investment in reaching and exploiting resources located on the moon, asteroids and other planets.

Simberg believes that the 1967 Outer Space Treaty only precludes claims of national sovereignty not private claims. The 1979 Moon Treaty does prohibit private claims in space but the United States is not a signatory to this treaty which is unsigned by any of the countries capable of space exploration. Advocates of space exploration and human settlement on other worlds have applauded Simberg’s analysis.

It will be interesting to see whether space ends up being treated more like Antarctica as a commons for all or like the Western Hemisphere after its discovery by Europeans as a blank slate available for divvying up (of course, that involved ignoring the presence of millions of Native Americans and their long established property regimes).

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Marcellus Shale – gas or mineral?

Much of the northern Appalachian region is in the midst of an energy boom as companies race to exploit the region’s Marcellus Shale formation which contains vast quantities of natural gas. The government’s estimate of the amount of gas increased 150-fold over the past decade. You have undoubtedly read about the environmental concerns starting to be raised about hydraulic fracturing which requires the injection of large quantities of water and chemicals to release the trapped gas.

Marcellus Shale - concentrations of gas

Energy companies have invested billions of dollars in acquiring mineral rights and putting in place the necessary infrastructure to access the gas reserves. The validity of at least some of those mineral rights has been called into question by the Pennsylvania Supreme Court’s decision to review whether the long established Dunham Rule applies to Marcellus Shale gas. That rule required the landowner to expressly state it was transferring mineral rights and oil and gas in the deed of conveyance. In this case the party holding the mineral and oil (but not gas) rights under a parcel is arguing that the Marcellus Shale gas is not free flowing and therefore should be treated like a mineral not like a gas.

Until the Court rules, there will be a great deal of uncertainty among holders of mineral rights that did not include the word “gas” whether or not they also hold gas rights. Holders of mineral rights that expressly included oil and gas clearly own the right to the Marcellus Shale gas whether the Court finds it to be a gas or a mineral.

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Texas Supreme Court tries to play King Canute

Legend has it that King Canute of Denmark demonstrated his limitations to his courtiers by sitting at the edge of the sea and commanding the tide to stop. When the water inevitably continued to rise and dampened his feet, he contrasted his limited powers with the unlimited powers of God.

In an opinion announced this week, the Texas Supreme Court has asserted its power to stop nature and the oceans from redrawing property lines. The Court held that while hurricanes may change the physical location of beaches that will not change the location of the public portion of the beaches as they existed prior to the hurricane. Of course, those public portions may well be underwater permanently as a result of the storms. The upshot of this ruling is that the State of Texas will not be able to enforce its Open Beaches Act which had been used to reestablish public access in the wake of hurricanes even if it meant requiring landowners to demolish structures that were encroaching on the water’s edge post-storm.

West Galveston beachfront after Hurricane Ike

This was the rehearing of the Court’s initial decision which sparked an outcry from state officials and environmental groups alike. The result was the same though the three dissenting judges voiced strong objections.

The Court gives the State two options: (i) reacquire the public beach access easement by paying the landowner or (ii) relinquish public beach access in the affected area. Given the cost of purchasing such easements and the dynamic nature of beachfront ecosystems, over time this ruling is likely to dramatically restrict the ability of Texas residents to access the oceanfront.

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Planet Under Pressure

The just concluded Planet Under Pressure conference in London resulted in the first ever State of the Planet Declaration. Among its eye-catching statements was this one:

“Consensus is growing that we have driven the planet into a new epoch, the Anthropocene, in which many Earth system processes and the living fabric of ecosystems are now dominated by human activities.”

This is intended to set the stage for the U.N.’s upcoming Rio+20 Conference.

The briefing papers prepared for Rio+20 make clear that an interconnected, international approach will be required to address environmental systems that we now know are international in nature. The Earth system is defined as

“. . . the Earth’s interacting physical, chemical and biological processes, and includes humanity. The system consists of the Earth’s land, oceans, atmosphere and ice. It includes the planet’s natural cycles – carbon, water, nitrogen, phosphorus, sulphur and others – and the geophysical processes that occur deep below the Earth’s surface. Life itself is an integral part of this system. Our interconnected social and economic systems are part of the Earth system. Many human systems are now driving change in the Earth system. While the system has always changed, what is happening right now is unique.”

To protect the continued viability of this Earth system, researchers have introduced the concept of boundaries for nine planetary boundaries. Already three of them have been crossed – climate change, loss of biodiversity and disruption of global cycles.

Of course, the warning and recommendations of these conferences will give Agenda 21 conspiracists more fodder. But the message is clear, local and national institutions and approaches to these problems are doomed to failure because the system at risk does not exist at the local or national scale, it exists at the planetary scale.

What interests me about this is the disconnect between our current property rights regime which focus on the micro scale  (i.e., the rights of individuals to small, arbitrarily defined plots of land) rather than on a systems scale. As we began to learn more about the interconnected nature of the environment, we have overlaid a regulatory regime on top of the property regime to try to strike a better balance. [For an exhaustive treatment of this effort, see my dissertation.] This approach has had limited success and in the United States runs into the Fifth Amendment’s protection against takings without compensation. I believe that just as we recognized new property rights with the advent of technologies such as air travel, telecommunications and the internet, we need to recognize a new category of property rights the recognize the components of the Earth system and that transcend and overlay parcel scale property rights.

 

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U.S. ranks #36 worldwide in protecting physical property rights

Hernando de Soto is a Peruvian economist who founded the Institute for Liberty and Democracy and who gained international notoriety and acclaim for his thesis that economic development and a vibrant market economy depend on the ability of poor people to gain legal recognition of their land rights and be able to use it as collateral for loans. One of the offshoots of his work is an annual International Property Rights Index. The 2012 Index ranks the United States #18 overall among the 130 countries analyzed and #23 for physical property (i.e., land). The study found a strong correlation between higher property rights index scores and GDP per capita. You can read the full copy of the report here.

 

In arriving at its rankings in the physical property area, the IPR looks at the strength of a country’s property rights systems, judicial protection for those property rights, and how clearly property rights are defined. In the sub-area of protecting physical property rights, the United States ranks #36. I suppose it may surprise some who see the United States as the ultimate bastion of private property rights that its ranking is not higher. Those who believe our system of private property is under constant attack from local, state and federal governments.

An example of these concerns was provided by a just announced Supreme Court decision holding the the compliance orders of the EPA are subject to judicial review. The case involved an Idaho couple and their attempt to construct a house on a small lot (< 1 acre) in a residential subdivision where other houses had been constructed. After they began bringing fill to the site, the EPA issued an order demanding that the lot be restored to its original wetlands condition and threatened fines of up to $75,000 per day for failing to do so. A unanimous court ruled that the landowners were entitled to their day in court to determine whether their lot contains any wetlands.

 

Sacketts' home near Priest Lake, Idaho

 

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