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Whose Fracking Rights?

Denis and Barbara Prager fear the day that hydraulic fracturing takes place on their land in the Shields Valley of Montana. The threat of ‘fracking’ is real and there is nothing they can do. While the Prager’s own the surface rights to their property, the state owns the subsurface and mineral rights. The state has the right to use the land as is ‘reasonably necessary’ for drilling or can lease the mineral rights to a private company. Those rights are presently open for bid.

Hundreds of millions of acres of property across the nation have secure property rights that are split; different entities own the surface and subsurface rights. Battles over split estate rights emphasize the importance of well specified and defined rights. Perhaps most important is the knowledge of what rights the surface owner does and does not have.

Under split estate rules, subsurface owners have the right to use surface land as is ‘reasonably necessary’ to develop subsurface assets. Private oil and gas companies often lease rights from subsurface owners regardless of whether the estate is split or under single ownership. Either way, drilling and extraction companies are responsible for unnecessary harm done, impacting water quality, for example.

Though hydraulic fracturing has been going on for more than 60 years, it has gained recent attention due to its affordability in the current global economic and technological climate. It is interesting that while many environmentalists vie to decrease carbon emissions, they are also opposed to fracking. In truth, natural gas may be one of the greatest boons to keep America energized at low cost with fewer emissions. Given secure property rights and market transparency it can be environmentally friendly, to boot.

Cross-posted at Environmental Trends.

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Let Freedom Ring

While June brings a great group of students to Montana each year, July brings thoughts of freedom. The two have much in common. Every year PERC and Liberty Fund co-sponsor a program for students. It is a weeklong seminar that provides an opportunity for a group of undergraduate college students to become immersed in ideas about the environment and its connection to property rights, freedoms, markets, and liberty.

Together, these ideas are sometimes considered oxymoronic. But that is, in fact, not the case at all. In concert they create a path toward enhanced environmental stewardship. Secure property rights motivate investment. To steward the environment requires an investment — an investment to maintain conditions or to restore them to a previous state.  And it is the signals from market interactions that demonstrate the environmental quality that is desired.

In the end, freedom is a key. Free to act while not reducing the freedoms of others. Free to interact in the marketplace. These freedoms have enabled our country to be among the richest in the world. Freedoms that have helped us become wealthier and healthier. Freedoms that have motivated a cleaner and more pristine environment. Our ancestors fought to earn us these freedoms hundreds of years ago.

The best way to protect our future freedoms is to ensure generations from today and tomorrow understand how important they are. Help make a difference by imparting the value of freedom.

Go to www.perc.org/support2.php if you would like to help PERC share the value of freedom.

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A Life’s Work That Will Last Forever

The physical world lost a great scholar last week with the passing of Elinor Ostrom, a 2009 Nobel Laureate. Ostrom left us with scholarly works that brought economic and property rights theory into the field. Why do we see the tragedy of the commons? When do we see it? And why, in some common resource pools, is it non-existent?

Ostrom’s work helped to organize many pieces of the environmental management puzzle. She demonstrated in various places across the globe that the tragedy is not necessary for common pool resources (CPRs) but is likely when at least informal rules do not exist.

There is no single solution to motivate long term environmental stewardship. In her 1990 book, Governing the Commons: The Evolution of Institutions for Collective ActionOstrom notes that “[n]either the state nor the market is universally successful in enabling individuals to sustain long-term, productive use of natural resource systems.” Each CPR is much more particular. There is, however, a common framework to help understand why some CPRs are managed for long-term productive use while others are not. Cumulating the evidence and bringing these factors into view was one of Ostrom’s great contributions.

Examining multiple CPRs across the globe, Ostrom and associates designed a set of principles that helped predict resource stability. Provided these rights, at least informally, the CPR is more likely to be well stewarded.

  • Clearly defined boundaries and effective exclusion of un-entitled parties;
  • Locally adapted rules for transfer;
  • Collective decision making that includes resource stakeholders;
  • Accountable (even stakeholder) monitors;
  • Enforcement that assesses appropriate sanctions for resource violations;
  • Low cost mechanisms for conflict resolution;
  • Recognition of community rights by higher levels of governance;

I think of CPRs managed under these rights as managed commons. They have property rights, formal or informal, that provide the necessary incentives to steward and invest in the resource.

Elinor Ostrom will be greatly missed. Her spirit and great contributions to economics and the social sciences will forever remain with us. She has organized ideas about CPRs in a manner that will help increase consistency of future research. She has created a great platform of understanding from which much research will continue to flourish.

Cross-posted at Environmental Trends.

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Glass to Cash

As a Bozemanite I live 700 miles from the nearest glass remanufacturing center. In Golden, Colorado glass bottles are melted and reused to produce new bottles. That is a lot of miles and gallons of gas away. Not many would argue that it makes economic or even environmental sense to truck the stuff across country. Nonetheless, we still hear that recycling is the right thing to do.

Certainly, glass can be used in other ways. The nearby town of Livingston grinds up bottles to replace gravel to be used in landscaping and bedding materials. A new firm in Bozeman, Ecomatrix Solutions, has advertised its need for recycled glass for manufacturing “sustainable” cement to be used in countertops and architectural panels. The problem they’ve encountered with the Livingston glass is contamination from grime and paper labels. They are setting up a new supply channel to resolve the issue.

Locals that want to recycle glass can remove labels and wash their used bottles. Ecomatrix will pick up the cleaned glass at no charge. They may even provide a product discount or cement pot in return for the efforts.

“If we’re collecting it clean, de-labeled and all we have to do is reduce it to the sizes we need, it’s saving energy, it’s savings all across the board,” says Ecomatrix founder Jon Cross. Energy savings for Ecomatrix, yes, but energy used by others.

The costs and benefits of recycling vary over time and space. Instead of generically teaching kids to recycle more, perhaps it would behoove us to help them question why, where, and how we recycle. This might just encourage new innovations for reuse instead of spending more resources to recycle for the sake of recycling.

Originally posted at Environmental Trends.

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Energy Independence: A Proverbial Icon

According to Steven Chu, the U.S. Secretary of Energy and a Nobel physicist, “The most direct way to reduce our dependency on foreign oil is to simply use less of it.”  That makes sense. The arguments in support of energy independence, however, do not.

We hear that “[e]nergy independence means energy security (supply and price stability).” But restricting oil supply to within U.S. borders is more likely to increase instability than decrease it. We typically think of a diversified financial portfolio as stabilizing investment value. A shock impacting one market sector and, hence, investments in that sector, is less likely to have a significant impact on a diversified portfolio. The same is true with energy. If there is a shock in one region, say, the United States (remember Hurricane Katrina), having a diversified supply portfolio can help stabilize available resources and therefore price. Restricting supply to a specific region means shocks to that region are likely to have a significant impact on resource availability and price.

Consider this:

Despite its immense appeal, energy independence is a nonstarter—a populist charade masquerading as energy strategy that’s no more likely to succeed (and could be even more damaging) than it was when Nixon declared war on foreign oil in the 1970s.

Sounds right-wing but this statement is from Mother Jones. The author, Paul Roberts, is smart enough to have figured out that many of the government backed alternative energy sources have secondary consequences that may in fact be worse than energy dependence.

He goes onto say:

nearly every major energy innovation of the last century—from our cars to transmission lines—was itself built with cheap energy.

Indeed, cheap energy and innovation have brought us great prosperity.

Nonetheless, “between 2001 and 2006 the number of media references to ‘energy independence’ jumped by a factor of eight,” and energy independence is continually emphasized by politicians. Why is energy independence so appealing? “[B]ecause it offers political cover for a whole range of controversial initiatives,” says Roberts. Though the Mother Jones article is four years ago, these statements still make good sense. Energy independence is a proverbial icon that provides votes for politicians but does little to stabilize energy prices or supply.

See additional “Charticle” on energy independence here.

Originally posted at Environmental Trends.

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Celebrating Humanity in the Environment

A curious model for conservation is taking the stage. It is grounded in protecting landscapes and species but adds humans to the mix. Though not a new idea, it is often dismissed, even discouraged, by environmental thinkers. This conservation ethic has the power to enhance resource stewardship and environmental quality.

The new paradigm acknowledges humans as an important part of nature and is grounded in a realistic view of the state of the world. The resilience of nature is recognized with an understanding that some places are more fragile than others. The idea concedes that increased conservation will come when people personally recognize the benefits. This ethic has been supported by three iconic conservation players.

Patrick Moore, a co-founder of Greenpeace, was raised in a logging community and earned a PhD in resource ecology and forestry. “The central teaching of ecology is that we are part of nature and interdependent with it,” writes Moore in his 1995 book, Pacific Spirit. He believes that both protected forests and managed forests involve human action, which can enhance the benefits provided to society.

Fifteen years after its founding, Moore parted with Greenpeace. He was disturbed by the misinformation that was being disseminated and the unwillingness of organization leaders to compromise to work toward realistic solutions. Abject opposition to logging is one case in point. Stiff regulations can make forests a liability by decreasing permissible harvest and increasing management costs. Moore sees the forest and the trees that provide habitat, ecosystem services, and wood products. Trees are renewable and through proper forest management we can harvest timber while enhancing environmental quality.

Using statistical information Bjorn Lomborg, a statistician, has systematically analyzed global environmental issues. As a student, Lomborg was pessimistic about the future of the environment. He also was once a Greenpeace supporter. Following years of data collection and analysis, Lomborg changed his tune. “We are not overexploiting our renewable resources,” he writes in his 2001 book, The Skeptical Environmentalist. Though we often hear otherwise, his analysis shows that global forest coverage has not changed much in the last 50 years. He also believes that “there do not seem to be any serious problems with the nonrenewable resources.” Although some regions are better cared for than others, there are more reasons for optimism than pessimism. Lomborg concludes that we are living in a healthier, wealthier, and cleaner environment than ever before thanks to human innovation.

Similar to Lomborg and Moore, Peter Kareiva puts humans at the center of conservation. Kareiva is the chief scientist for The Nature Conservancy, the world’s largest conservation organization. He sees a global landscape that has been touched by humans. The only conservation that makes sense to Kareiva is one that considers human needs and desires. “Protecting biodiversity for its own sake has not worked,” he co-writes in the Fall 2011 issue of Breakthrough Journal. To enhance conservation in today’s world requires us to “embrace human development” and “to integrate the value of nature’s benefits into [corporations] operations and cultures.”

It is time for conservationists from all walks to shed old paradigms of doom and gloom and look at the world as it really is. Though humans have touched nearly every place on earth, our increased prosperity has brought enhanced environmental quality. We are all a part of nature and nature will be as we steward it. Therefore, incentives for conservation must be aligned with human needs and good stewardship.

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No New Coal: New Source Performance Standards Don’t Clear the Air

The current administration continues to push for cleaner air. That means reducing carbon emissions according to the 2009 EPA ruling that defines carbon dioxide as an air pollutant. It should be no surprise then, that the New Source Performance Standards (NSPS) on newly constructed power utilities reduces allowable carbon emissions.

The new emission levels, however, are below what is technologically feasible for coal burning plants. This effectively means that no new coal power plant can be constructed until new technology is developed and economically feasible. That is estimated to be ten or more years away. “[I]t is odd that they [the EPA] think it’s a good idea to ban new coal-fired power plants,” says Jeff Holmstead, former EPA air chief.

There are multiple consequences from this ruling. Whether they are good, bad, or otherwise depends on your perspective.

1. Increased power demand will have to be satisfied from alternative fuels. Coal currently provides about half of all US electricity consumption.

2. Natural gas is presently the most cost effective substitute for coal. Gas powered plants already meet the new emission standard. An increase in demand for electricity will increase the demand for natural gas. (Natural gas providers have an interest in this ruling.

3. Renewable energies, such as wind and solar, are more than twice as expensive as gas and coal and we do not have the technological capability to store the power during down times. These renewable energies require backup power sources.

4. Natural gas, similar to coal, is a fossil fuel that must be ‘mined’ from underground. Each has their own environmental consequences.

5. Unless new supply meets increasing demand, electrical rates will rise. (At present the slow economy has kept demand relatively low and natural gas production has been booming.)

6. The rule impacts only new emission sources. Existing coal fired plants remain regulated under the old rules; they can continue to produce at current emission levels.

7. Because new plants cannot be built to meet the standards, existing plants with older technology, hence more emissions, will stay online longer.

8. The fastest growing countries continue to build new coal powered electric utilities to energize manufacturing at the lowest cost and compete at the global level.

The new emission standards are similar to previous regulations in a couple of ways. First, there are some “strange bedfellows” lobbying for the new air regulations. Alternative power providers benefit from reduced competition, regardless of environmental consequences. Second, by discouraging new coal burning facilities, the rule discourages investment in cleaner coal and keeps existing utilities online longer.

Originally posted at Environmental Trends.

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A Wealth of Land

The U.S. federal government owns and manages more than one-fourth of the nation’s acreage. The bulk of it rests in the West. In fact, more than half of the West is federally owned. Yet the acts that enabled states to be a part of the nation promised transfer of public domain title.

Federal land management is not the panacea it is sometimes perceived to be. Federal lands reduce the tax revenues available to states. The government does not pay property taxes. In lieu of taxes, a portion of revenues earned from resource use on federal lands is paid to the states to help pay for education and other state institutions. But revenues are down, way down, from historic trends when timber and grazing were dominant land uses. Various federal compensation packages have attempted to alleviate the lost revenues but state funds remain low.

Last week, the Utah Transfer of Public Lands Act was signed into law. The bill requires the federal government to honor its promise under the Utah Enabling Act of 1896 to transfer title of the public lands to the state. The land transfer is not about developing the land. It is about managing the land to enhance resource value. It is about managing the lands according to the desires of neighbors, rather than politicians living hundreds of miles away. It is about management by those who receive the greatest benefit from good stewardship and bear the greatest burden from poor stewardship.

As Utah legislator, Rob Bishop, said, “It is time for a shift in the paradigm about use and control of our public lands. Utah has proven to be a far more effective steward of our lands and resources than the federal government and there is no good reason why ownership and control cannot be returned back to state and people where it rightfully belongs.”

Originally posted at Environmental Trends.

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The ‘Fire Service’

The first national forests were set aside more than 100 years ago. Under Forest Service management they were intended to provide a continuous flow of water and timber for Americans. By the 1980s the agency provided about 25 percent of US softwood lumber consumption. The timber budget was the largest of all agency activities (see chart). Timber harvest on the national forests has declined by more than 80 percent since 1985. The current agency mission is ecosystem protection but spending has shifted to wildfire management which now makes up nearly half of the agency’s budget. More than half of that is for fire suppression. Nonetheless, wildfire burned nearly 70 million acres over the past decade.

Are Americans getting what they pay for on public lands? Even the General Accounting Office [PDF] questions that:

Historically, the Forest Service has not been able to provide Congress or the public with a clear understanding of what the Forest Service’s 30,000 employees accomplish with the approximately $5 billion the agency receives each year.

Originally posted at Environmental Trends.

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Whoo Decides How Much Is Enough?

From the New York Times in September:

Looking around the stand, Laurie Wayburn, co-founder of the Pacific Forest Trust, which manages this 2,200-acre forest plot for the Fred M. van Eck Forest Foundation, sees a variety of things: thick, straight trees that will generate millions of dollars for the foundation; a healthy forest that filters drinking water and stores carbon dioxide; and a maturing, complex habitat for a variety of animals, including the endangered northern spotted owl.

The adage that northern spotted owls compete with forest jobs should be left to rest. There is value in old-growth forests, but to argue that preserving land is the only way to safeguard the owl is myopic. Forests are dynamic and so are species. Interestingly, science is too.

Science is the knowledge and inquiry of the natural world. Science demonstrates what is and what could be under varying conditions. Science does not, however, measure relative values.

Science cannot tell us whether timber jobs or acreage set aside for spotted owls is better. That is value based. Nonetheless, the Endangered Species Act makes it clear that species on the brink take precedence over other land uses.

In the early 1990s it was heartily argued that the northern spotted owl was competing with timber jobs. Indeed, it was determined that the primary threat to the northern spotted owl was decreased old growth as a result of timber harvest. A couple of decades later the forests have changed, the management has changed, the threat to the owl has changed, but policy argues for more of the same: preservation.

What does science tell us about the forest policy to protect the northern spotted owl?

  • Owls like mature, old-growth forests. But they also like managed forests.
  • In 1990 it was presumed that decreased old growth acreage in the Pacific Northwest was the primal threat to the northern spotted owl. In 2011 it was determined that the barred owl, a competing species that displaces the spotted owl, is the greatest threat.
  • Under the 1994 Pacific Northwest Forest Plan, 24 million acres of federal land was designated as northern spotted owl habitat. Seven million of those acres prohibit timber harvest. Harvest in the Pacific Northwest has declined by more than 80 percent as a result. Timber consumption has not similarly declined, so timber is cut elsewhere to meet demand.
  • Forests are dynamic and have changed between 1994 and 2003. About three percent of the habitat set aside for owls was lost to wildfire and insect infestation. Set aside forests are aging and becoming more vulnerable to fire and insect infestation over time. Newly matured national forest acreage suitable for owl habitat increased by about eight percent.

The critical habitat revisions proposed by the US Fish and Wildlife Service in 2011 aims to set aside more land for the owl, increase active management, and remove the barred owl.

Science cannot provide the policy solution to saving the northern spotted owl. It is inherently preference based.

Originally posted at Environmental Trends.

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Who Owns the Truffula Forest?

The Lorax, a Dr. Seuss classic, is hitting the big screen this weekend. The Lorax is an odd, little character that intrepidly opposes a thneed manufacturing plant (whatever that is!) run by the Oncelor.

Similar to most environmental story plots, this one has a good environmentalist, the Lorax, that holds the moral high ground and a bad, greedy, profit mongering, capitalist, the Oncelor. In this story the Oncelor produces thneeds that appear to be in high demand. During production he clear cuts every last Trufulla tree, smogs the air, and clogs the water. As a result of the Oncelor’s insensitive activities the Brown Bar-ba-loots go hungry for there is no more Truffala fruit, the Swomee Swans can no longer croak a note, and the gills of the Humming Fish have become gummed. All in the name of profit. This, in the end, is also lost because the Oncelor puts himself out of business by extricating every last Truffala tree which are a needed input for thneed production.

In his strategy to garner attention for conservation, Dr. Suess misses the fundamental motivator: incentives. Industry and profit are not necessarily bad and harmful to the environment. Environmental problems are the result of conflicting demands on resources. Given well specified rights, negotiation will motivate the highest valued resource use. If the Truffala forest was open access for anyone to cut, it is possible that the Oncelor and others would race to harvest every last tree. Given ownership, however, the Oncelor is more likely to invest in future trees to ensure the possibility of future production. Weyerhaeuser, for example, is proud to announce that they plant millions of trees every year. They do so not to prove their conservation ethic, rather as an investment in timber for future production.

A bit of green PR doesn’t hurt, either. The list of movie sponsors is a bit surprising, to say the least. As you can imagine, the motivator of many of these sponsors is not just good green ethics as much as good for the bottom line. And that’s OK. If you want to change behavior, change the incentives. Profit is a good motivator. If you want to understand the fundamentals of environmental problems look at the property rights and follow the incentives. Well specified property rights encourage long-term stewardship and ensure accountability. That is the moral of my story.

I have not yet seen “The Lorax” movie but will think about how the storyline may differ given well specified property rights when I do. Indeed, the global trend over several decades has been better property rights, more economic freedoms, and increased prosperity. I do care about the environment, both near and far. And I see things getting better, they really are!

Originally posted at Environmental Trends.

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Pipeline Dreams

The Center for Biological Diversity announced that they, together with some 40-plus other organizations, were able to rally 793,000 signatories for a petition against the Keystone XL pipeline. The proposal is building a pipeline from Alberta, Canada to the Gulf Coast where it can be refined and distributed in the United States and abroad. What is troubling isn’t the number of signatories, or the method to garner attention, rather the complacent view.

The group claims that the pipeline will “increase US dependence on fossil fuels.” The Wilderness Society comments that U.S. politicians are forcing unwanted oil on American consumers. The recent increase in gas prices leads me to believe there is still plenty of demand for auto fuel in the US. In fact, we have few good substitutes to fill the tank.

U.S. demand for fossil fuels is not going to decline as a result of blocking the Canadian pipeline proposed by TransCanada. Sans the Keystone line crossing America, gas will be transported in other ways from other places with their own environmental impacts.

TransCanada has made clear intentions to mine the oil and send it to be refined, whether across the US. to the Gulf Coast, across the Pacific to China, or both. The claim that stopping the Keystone pipeline will reduce carbon emissions is merely a pipe dream.

Originally posted at Environmental Trends.