Subsurface Property Rights: The Sine Qua Non of the American Energy Renaissance

by William Yeatman on December 22, 2014

Last Sunday’s (invaluable) Platts Energy Week with Bill Loveless featured an enlightening interview with Platts Director of News John Kingston, in which the reporter rightly identified subsurface property rights as the key to the American energy renaissance.

Per Mr. Kingston,

It was the right of private people to own their own mineral rights which really has been one of the sources of the boom. It turns out that was the key to our energy policy.

Hear, hear! By allowing private parties to own subsurface mineral rights, and thereby profit off oil & gas production, the U.S. incented both output and innovation. Alas, a major reason technological breakthroughs in oil and gas production—collectively known as “fracking”—have not spread the world over is that in many countries, subsurface mineral rights are owned by the state. And because private parties in such countries don’t have “skin in the game,” they’ve every incentive to oppose drilling below their lands, as they’d bear the burden of drilling (i.e., proximity to an industrial practice) without any of the direct benefits.

The extent to which infelicitous property rights regimes have inhibited oil and gas production is the thesis of Guillermo M. Yeatts brilliant book, Subsurface Wealth: The Struggle for Privatization in Argentina.

Pathway December 22, 2014 at 9:46 pm

And in the western US the mineral rights are owned by the federal government under the Homestead Act and drilling on most property has ceased do to actions taken by the BLM under the Obama administration.

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