A “Deal” or a Steal?

By Sean Paige | On Nov 27, 2012 | No Comments | In blog

The Denver Post in yesterday’s editorial calls a plan to retire Thompson Divide energy leases ”novel” and “laudable” and that’s true in at least one sense. The coalition of interest groups that wants to block drilling in the area is willing to pay lease holders to relinquish their rights to drill, which is a marginal improvement over the way these things are usually done, as in the Longmont case, which is to simply regulate the lease holders out of their property rights, without acknowledging that a government “taking” has occurred or bothering to pay those who get screwed any compensation.

This is somewhat “novel,” given that outright theft of resource rights is much more the norm. And it would be great if such an approach actually caught on. Imagine the change it would bring to Resource War dynamics if applied across the board. If those who sought to deny companies the right to drill (or to mine, or to log, or to fish commercially, for that matter) were expected to pay fair market value for those rights or privileges, the days of cost- and risk-free obstructionism might quickly come to an end.

Those who want something stopped would have to pay for that, making whole those who they seek to deny a livelihood, a lease right or a profitable opportunity. Those preaching preservation uber alles would have to put their money where their mouths are. Something resembling a true “market” might evolve, in which the comparable worth of various options could actually be tested and weighed. And I’m sure green groups would quickly become much more discriminating about what they choose to protect. But that’s not likely to happen when these groups can achieve the same ends on the relative cheap, by using the public process or the courts – by using tools of government coercion – to simply regulate their way to victory, as we see happening in Longmont.

But the Thompson Divide case is only a marginal improvement over the usual modus operandi, despite the breathless editorial.

The lowball price the opposition is willing to pay for the coveted leases, which is what energy companies acquired them for way back in 2002, doesn’t reflect their fair market value, at lease in the eyes of lease holders. That has some of them balking at the “deal.” Another unmistakable sign that this might be more of a shakedown than a voluntary, mutually-beneficial, free exchange — which is how I define a market transaction, in contrast cialis sample pack to the DP’s definition — is the government hammer looming in the background, in the form of a piece of legislation that would require reluctant parties to sell, something The Post only mentions in passing (see italics below).

“But for the free-market idea to grow from concept to reality will require at
least two things to happen:

First, Congress must pass legislation drawn up by Democratic Sen. Michael
Bennet that would protect unleased land in the Thompson Divide from future
development and allow for the buyback and retirement of existing leases. (That
effort would be buoyed by support from Rep. Scott Tipton, R-Cortez, who should
do more to push for a plan that enjoys wide support in his district.)

Second, the companies that hold existing leases would have to agree to sell
them to the coalition.”

It’s that second part, in italics, that makes this appear more Don Corleone than Adam Smith. Where government coercion, or the threat of government coercion, is involved, it can’t be said to be a free market transaction. If the legislation included any provision that forces reluctant sellers to accept the deal, those pushing the plan are just ”making them an offer they can’t refuse,” which is extortion not free exchange.

So, although this pay-to-play approach is certainly preferable to outright theft, it’s still not fair, market-based or freely-undertaken, which makes it less of a game-changer than the editorial suggests. And it’s doubtful it will ever widely catch-on. Why, after all, would Gang Green or the friendly neighborhood NIMBY begin to pay for what they now can more easily and cheaply take through force, simply by bringing a lawsuit or manipulating the public process? For now, at least, groups opposed to Thompson Divide drilling seem willing to play nice. But what happens if certain lease holders refuse to sell? Will the groups and politicos pushing this plan take “no” for an answer?  Not likely. It’s then that more coercive means of getting their way will be employed, in adherence to the old Al Capone addage that you get further with a gun and a smile than you get with just a smile.

I strongly endorse the idea that energy obstructionists should pay free-market price for denying energy producers their rights, just as city officials should compensate property owners when they execute a “taking” through the power of eminent domain. Cooperative conservation is much better than coercive conservation, obviosly. But this, sadly, is an exception that proves the rule.


Written by Sean Paige

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