Archive for the ‘ANWR’ Category

Breaking the impasse on ANWR and OCS (Part III): WSJ op-ed supports Alaska-style direct pass-through of royalties from oil/gas produced from OCS leases

September 8th, 2008 No comments

Last week the Wall Street Journal ran an op-ed by James P. Lucier, Jr., a managing director of Capital Alpha Partners, LLC, in Washington, D.C.

Lucier`s piece describes how Alaska shares its oil revenues with residents, and suggests that John McCain adopt a page from Alaska`s book to get popular support for oil and gas drilling in the OCS (on top of revenue sharing with the relevant states).  Here are Lucier’s key points:

this year every Alaskan will receive a $1,200 check as a share of the oil bonanza. (The check comes in addition to the
approximately $2,000 every Alaskan will receive this year as a dividend from the Permanent Fund, which was established by state constitutional
amendment in 1976 as a way of sharing the state’s mineral wealth with the people.)

A direct share in oil profits for every citizen is the ultimate incentive for more drilling. That’s why in Alaska drilling for
oil seems almost universally popular, while other states are drill-phobic.

The real comparison is …  between Alaska’s constitutional rule — that the people must share
directly in the state’s mineral wealth — and Mr. McCain’s proposal that coastal states should share in federal offshore oil revenue. His
plan is for the funds to be used for public purposes like roads, schools and conservation. A share of royalties dramatically improves
the coastal states’ incentive to support drilling. But if Mr. McCain offered every individual American a royalty check too, he might find it
easier to sell his program.

(emphasis added)

As I’ve previously noted, this makes eminent sense to me!

Let`s hope this good idea for royalty-sharing snowballs.  It`s something alot of people could get behind, even enviros – and if extended could vastly improve federal land management and could as well point the way to a rebated carbon tax.

Categories: ANWR, carbon pricing, Lucier, OCS, oil, royalties Tags:

Solar vs. deserts; or how "public" ownership of resources produces zero-sum political fights over preferences

September 1st, 2008 No comments

Ron Bailey, Science Correspondent of Reason Online, reported recently “how some environmental
groups are fighting the development of utility-scale solar power in the
Mojave Desert.”

As I have posted elsewhere on the role our government plays in compounding our disputes over differing preferences, I copy my comments on Bailey’s thread here:

TokyoTom | August 18, 2008, 6:34am | #

real problem with many of these environmental fights is that either
governments own the resources or the economic actor is highly
With the deserts privatized and freer markets, we’d see
solar if it made economic sense (including the costs of paying off

While we are unlike to see complete privatization of state or federal
lands, we’d see greater citizen enthusiasm if the states and the feds
would be so kind as to rebate a hefty chuck of the land-use royatly
payments to us (with a cut to the related bureacrats
to incentivize
them to get good rates and to make sure proceeds are actually
collected; citizens and public prosecutors would be similarly

It is the lack of sufficient revenue sharing by a greedy federal
government that has led state governors to block further OCS leasing,
and has given enviros no incentives to agree on ANWR drilling
(as I
note in the linked blog post).

Likewise, a rebated carbon tax would be a million times better than the
ethanol mandates, renewable mandates, the Warner Lieberman pork and the
Pickes’ ad blitz for solar hand-outs. The problem is a government that
wants to have a finger in every pie – citizens ought to be insisting on
a direct cut, instead of letting politicians direct all of the spoils

(which is the REAL cause of the constant deadlock).

(emphasis added)

Categories: AGW, ANWR, federal land, OCS, royalties, solar Tags:

Breaking the impasse on ANWR and OCS exploration and development Part II; a response to Bob Murphy

July 29th, 2008 No comments

On the main Mises blog, Bob Murphy has just advocated opening ANWR and the OCS to oil and natural gas exploration and development, for the purpose of providing “rapid relief at the pump”.  As my comment has been held up – it only had two links for Pete’s sake! – I’ve decided to post a back-up copy here.

My comment (with minor tweaks) follows:

Bob, I agree generally with your analysis, but you really fail to address or answer the question of WHY the government should open up ANWR or the OCS – you state that the best reason to do so is because opening up more federal lands for drilling will “alter current behavior, leading to rapid relief at the pump.”

Interesting, but unexamined.  Is it the government’s job to open up lands that political decisions, on the basis of competing values, have kept off the market, simply to provide relief to the complaining parts of the market (fuel users)?  If so, should the government also open up the SPR whenever markets climb and users complain?  Are there other markets that the government should also try to manage for the benefit of consumers?  And how do we choose between what markets and market segments to listen to – what happens if, say, environmental demands rise suddenly after an oil spill – should the government then rapidly move producing areas off lease and into reserves?

You also conclusorily state that it is an “absurd situation where 94 percent of federal land, and 97 percent of federal offshore waters, are not being leased by energy companies.”  How is it that you have the wisdom to know how much and where the unidentified oil and gas resources lie, so you know what percentage of federal lands SHOULD be under an energy company lease?  And what about the small consideration of other values for the land in question – have you decided that energy trumps all?

Finally you conclude that “the ideal solution would be to completely privatize federal lands, so that the decision of whether or not to drill would no longer be a political one.”  As my initial questions to you may indicate, I actually agree with you on this, but the reason for privatization is NOT to provide relief to consumers and other users at the pump, but in order to end incompetent and politicized and sometimes logjammed federal management, while improving management of both environmental and other resource values.

Not only have I done a more thorough job of explaining WHY the feds and our Congresscritters ought to open up ANWR and the OCS, I’ve also explained HOW we can move past the existing deadlock – in a proposal I laid out last week in my blog here:  “Breaking the senseless impasse on ANWR and OCS exploration and development – a tax and rebate proposal”.

A deal on OCS seems easier to do than ANWR, because all that is needed to get the coastal states to agree is greater revenue-sharing with the states.

An ANWR deal should happen just out of fairness to the Inuit who own some land that is now bottled up in ANWR. [If they were given fee simple, then they could start drilling immediately, and while they’d have a right to access and transport across the wildlife reserve, they’d carry the liability for all environmental damage.  Sitting on ANWR makes it more likely that environmentally riskier OCS exploration and development in the Arctic Ocean will proceeed.]

By the way, has it ever occurred to you to wonder how much COAL leasing would occur if private parties and not the federal (and state) government owned the Western lands on which production is occurring?  With all of the royalties flowing into the coffers of federal and state governments?

Or to wonder how much extremely destructive coal production would occur in West Virgina and the rest of the Appalachians, if the governments were not being paid tremendous sums to turn a blind eye and to deny justice to those who are suffering all of the costs of the ongoing violation of private health and property rights and the transfer of costs and risks?  I addressed some of those issues here:  Almost levelled, West Virginia: Crooked justice allows mountain-top removal practices to freely injure homes and health“.



As I noted on my related post, enviros should move on ANWR because they can get a better deal – on federal resource management generally, and even on climate change – than by sitting pat.  And Austrians and others ought to support both such movement, and the type of changes in federal resource management that I’ve outlined.

Breaking the senseless impasse on ANWR and OCS exploration and development – a tax and rebate proposal

July 16th, 2008 10 comments

It’s long been obvious that:

(1) government policy concerning the use of public lands is highly bureaucratized, often inept and subject to behind the scenes sweet deals favoring insiders;

(2) discussions about how the public lands should be used often very politicized;

(3) politicization is especially prominent with respect to public lands that have potentially high commercial value but where development requires additional approvals from legislators or others outside of the Administration/regulatory bureaucracy – such as the Arctic National Wildlife Refuge (ANWR) and the native lands within it, which cannot be explored without Congressional approval, and the Outer Continental Shelf (OCS), further development of which has been blocked both by Executive Order and by annual moratoria imposed by Congress, with the strong backing of many coastal states that wish to protect their tourism industries; and

(4) supporters on both sides – whether for development of ANWR and OCS or for the continued preservation of wildlife, recreation or tourism values or protection of other objectives – have perfectly legitimate interests, and excellent arguments to make (and some not so excellent) in support of those interests.

But it has not been so obvious that the different interests are in fact irreconcilable, especially when one notes how well conservation groups that own land have been able to balance their conservation objectives with active resource extraction – which can be done carefully while providing revenues for other activities.  In fact, I suppose that if any of the major environmental groups had been given title to ANWR, development would have been well underway years ago (as I have previously suggested).  Likewise, the states that have until now blocked further OCS development have done so in good part because the federal government takes the lion’s share of the royalty revenues, while leaving the states and local communities with the short end of the stick and the risks of feared development disasters.

So – for the rather simple reason that there is no private owner of the resources at stake, but instead a politically-controlled legal owner (the U.S. citizens via their government) and an array of shadow owners (the various interest groups and bureaucrats) who have been unable either to conclude any deals or to force their preferences down the throats of those they disagree with – we have deadlock, with valuable resources sitting in the ground, and possibilities for mutually beneficial deals lost.  This is a rather basic analysis that has been recognized by libertarian thinkers and free market environmentalists like John Baden for quite some time.

Recently, in response to a proposal by Iain Murray of CEI that ANWR and the OCS be opened to development, I indicated some further thoughts on possible paths forward:

The key is to end politicized control, not to run roughshod over conservationists.  If we are serious about ANWR, we ought to simply cede it to the Sierra Club or The Nature Conservancy.  They would certainly pump from it AND protect it, and use the revenues to support more important conservation projects.   As for the OCS, exploration is limited only because states don`t want to bear the burden of pollution risks with a slim share of revenues.  With more generous revenue sharing, more OCS development will occur.

However, I’d like to change tack a little bit, as these disputes are part of the bigger problem of federalized management, and we are unlikely to see Congress act in the near future to privatize ANWR or other federal lands, or even to turn them over to environmental groups to manage.  We face a real problem with respect to most of federal lands that revenues from resource extraction go into the big black hole of general funds, with very little ability of the resource managers to capture the benefit of managing well, and very little incentive by American taxpayers to make sure that resources are well-managed, priced to receive good returns and do not leave taxpayers generally holding the bag for environmental risks.  A litany of horror stories could easily be assembled on these points. 

How can we get started on improving incentives on our government resource management projects?  Well, a small idea occurs to me:

I’ve recently reviewed a slew of recent arguments on the climate change front and noted wide-ranging support (driven by equity, efficiency and expedience) for a federal carbon pricing scheme (whether by carbon taxes or by emission rights under a cap and trade scheme), particularly if all of the funds raised by the tax or permit sale are passed through to Americans on a per capita basisWhy couldn’t we apply the same concept to ANWR and the OCS lands, with a small percentage being kept by the relevant oversight agency to fund and incentivize oversight? 

If royalty revenues are passed through to citizens, Americans will directly benefit from moving ahead (without encouraging government bloat), so that development will not be seen as simply a giveaway by politicians to evil oil and gas companies.  Further, citizens (and entrepreneurial prosecutors) will have greater incentives to monitor government performance (as in not giving away the resources too cheaply, and actually collecting revenues owed), and will able use the dividend checks to fund, to their hearts’ content, further environmental protection.  In the case of the OCS, clearly a greater cut of the royalties ought to go to citizens in the relevant coastal states to compensate them for the relatively higher environmnetal risks they bear.

To incentivize the environmental groups to support this type of approach, as well as to provide better assurance of environmental oversight, I would suggest that new leases to explore or develop in ANWR and the OCS include as a contracting party an environmental group, either as the direct lessee (subcontracting to a preferred oil and gas company) or as environmental risk manager, in either case capturing a share of the royalty.  The environmental groups will reap some benefit (that they can use for other projects) and will be subject to oversight by their members, and to competition from other environmental groups to protect wildlife and other values.

Such schemes would incentivize all stakeholders to work together in a win-win manner, while minimizing environmental risk, and directly rewarding citizens and leading to improved resource management.

Maybe the strong desire of many to see carbon pricing at the federal level can be leveraged to enhance both environmental protection AND economic growth, while streamline government and rewarding good resource management, at least in the case of ANWR and the OCS.  (Next up, federal lands – forests, hard rock mining and oil and gas – generally!)

Just a thought.