June 27, 2014

ON DISPLAY IN COLORADO: America’s Unique Advantage in the Shale Boom.

The battle over hydraulic fracturing in Colorado is a demonstration of a unique advantage that the U.S. has in exploiting its shale resources. A number of the state’s cities have enacted moratoriums on fracking, citing environmental concerns over the controversial drilling process. But for many property owners, whose land rights also include ownership of underground hydrocarbons, these bans are an unwelcome barrier between them and a potentially life-changing payday. . . .

Greens will contend that property rights mean little if and when activities on your land affect your neighbor’s, and to an extent they’re right—localities need to ensure that wells are sited smartly, cement casings are installed correctly, and wastewater is disposed of responsibly.

But the fact that Americans are afforded mineral rights is a key factor in what has been, so far, an inimitable formula for shale success. Many in the U.S. take it for granted that they have ownership of more than just the surface of their property, but in other countries, these mineral rights default to governments. That’s made it difficult for drilling companies to make headway, because landowners don’t have the same incentive to sign off on disruptive drilling. In the U.S., individuals are compensated by these companies for the risks they assume. Compare that with the UK, where a lack of mineral rights has led to local protests so vociferous that they’ve managed to block drilling altogether.

If you’re a Green — or Vladimir Putin, or the Saudis — those protests are to be encouraged.