Saturday, November 17, 2012
Yesterday, Case Western Reserve University School of Law hosted a symposium called The Law and Policy of Hydraulic Fracturing: Addressing the Issues of the Natural Gas Boom. As Steve noted on Property Prof, Professor Thomas Merrill (Columbia) was slated to give the keynote. Case Western's Jonathan Adler was part of the event, and he posted an extensive commentary on Merrill's remarks over on the Volokh Conspiracy. Looks like it was a fascinating talk with lots of observations on how to deal with the potential environmental impacts of fracking, and a perhaps counterintuitive suggestion on the possible upside of the gas boom with respect to climate change. But here, I'll focus on some of Merrill's observations on why fracking developed in the U.S., because it may have a lot to do with property law and land use regulation. As Adler describes:
Why did fracking arise in the United States? Contrary to some analysts, Professor Merrill does not believe it is attributable to federally funded research and development. . . .
Professor Merrill also doubts industry structure has much to do with fracking’s rise either. . . .
A more likely factor is the way U.S. law treats subsurface rights. The U.S. is something of an outlier in that subsurface minerals are the property of the landowner, and not the government. This results in decentralized ownership and control over subsurface rights facilitates experimentation and innovation in figuring out how to exploit and manage subsurface resources.
Further decentralization, and experimentation, results from the federalist regulatory structure. Different states have different regulatory approaches than others, creating opportunities for further innovation and the opportunity for jurisdictions to learn from one another. The existence of a few jurisdictions that will allow a new technology to be tried provides a laboratory from which others may learn, whereas under a more centralized regulatory structure such innovation is unlikely to get off the ground.
The existence of a relatively open infrastructure network – a pipeline system that is subject to common-carrier rules – also plays a role in facilitating entry into the market. These factors have a common theme: decentralization. Taken together, Merrill suggests, they are the most likely source of fracking’s rise in the United States.
Looks like another fascinating event, with participation from a number of land use, environmental, and energy scholars on the subsequent panels. I look forward to the symposium isse in the Case Western Law Review.