Free Market Failure #37,485
January 22, 2012 10:50 AM Subscribe
Oil and gas drilling rights leases are leaving thousands of rural landowners totally fracked.
This post was deleted for the following reason: Not that this doesn't suck, but maybe a post that actually talks about the issues instead of just a single link GRAR might actually encourage discussion? -- jessamyn
Many cite economic theory to support claims of market efficiency. The fundamental theorem of welfare economics states that markets allocate scarce resources and distribute goods and services efficiently – but only under very restrictive conditions. As is often the case, the devil is in the details. As the market for fracking leases reveals, we neglect the necessary assumptions behind “fundamental theorems” at our peril. What any economist can tell you is that the efficient markets theorem is true only if: (1) All markets are in equilibrium. (2) All buyers and sellers have perfect knowledge. (3) All buyers and sellers behave rationally. (4) All markets are perfectly competitive. And last, but not least, (5) there are no “externalities” in any markets. The real world conditions that satisfy these conditions are the exception not the norm. Moreover, the first theorem of welfare economics says nothing about whether or not outcomes will be fair. Even if an outcome is “efficient”, it still may well be grossly unfair if efficiency gains are distributed inequitably.DING DING DING. I have been saying this for years.
posted by deanklear at 10:56 AM on January 22, 2012
This just in: being greedy and/or stupid has consequences.
posted by jimmythefish at 10:58 AM on January 22, 2012 [1 favorite]
posted by jimmythefish at 10:58 AM on January 22, 2012 [1 favorite]
How about a more thoughtful post with some other links and some context? This is a big, complicated issue, and a single link to an opinion piece is a pretty thin FPP.
posted by twsf at 11:03 AM on January 22, 2012 [3 favorites]
posted by twsf at 11:03 AM on January 22, 2012 [3 favorites]
There's a good documentary about fracking called Gasland. Here's the trailer; here's the entire film on the site for VPRO Backlight. I can only hope it works outside of the Netherlands. If it does, the English-language film starts after a one-minute introduction in Dutch.
posted by goodnewsfortheinsane at 11:10 AM on January 22, 2012
posted by goodnewsfortheinsane at 11:10 AM on January 22, 2012
Fewer than half the leases require companies to compensate landowners for water contamination after drilling begins. And only about half the documents have language that lawyers suggest should be included to require payment for damages to livestock or crops.
Most leases grant gas companies broad rights to decide where they can cut down trees, store chemicals, build roads and drill. Companies are also permitted to operate generators and spotlights through the night near homes during drilling.
In the leases, drilling companies rarely describe to landowners the potential environmental and other risks that federal laws require them to disclose in filings to investors.
Most leases are for three or five years, but at least two-thirds of those reviewed by The Times allow extensions without additional approval from landowners. If landowners have second thoughts about drilling on their land or want to negotiate for more money, they may be out of luck.
Free market failure? More like failure to understand implications of signing a contract failure. Or failing to do due diligence failure. Or failing to have your own representation at contract negotiation failure. Or failing to even read the contract failure.
posted by Talez at 11:20 AM on January 22, 2012 [1 favorite]
Most leases grant gas companies broad rights to decide where they can cut down trees, store chemicals, build roads and drill. Companies are also permitted to operate generators and spotlights through the night near homes during drilling.
In the leases, drilling companies rarely describe to landowners the potential environmental and other risks that federal laws require them to disclose in filings to investors.
Most leases are for three or five years, but at least two-thirds of those reviewed by The Times allow extensions without additional approval from landowners. If landowners have second thoughts about drilling on their land or want to negotiate for more money, they may be out of luck.
Free market failure? More like failure to understand implications of signing a contract failure. Or failing to do due diligence failure. Or failing to have your own representation at contract negotiation failure. Or failing to even read the contract failure.
posted by Talez at 11:20 AM on January 22, 2012 [1 favorite]
At least American landowners own the mineral rights associated with their land
Well, they sort of do. There's a difference between surface rights and mineral rights, and some people are discovering that they've purchased land with only surface rights.
And that doesn't even get into forced pooling, a kind of eminent domain grab for mineral rights which can leave landowners unable to refuse any use of their land for drilling and such even if they do own the mineral rights.
It's all quite complicated and is only going to get more ugly as our most easily exploited resource sources are expended and the search for more which had been previously ignored or overlooked gets more aggressive.
posted by hippybear at 11:22 AM on January 22, 2012 [1 favorite]
Well, they sort of do. There's a difference between surface rights and mineral rights, and some people are discovering that they've purchased land with only surface rights.
And that doesn't even get into forced pooling, a kind of eminent domain grab for mineral rights which can leave landowners unable to refuse any use of their land for drilling and such even if they do own the mineral rights.
It's all quite complicated and is only going to get more ugly as our most easily exploited resource sources are expended and the search for more which had been previously ignored or overlooked gets more aggressive.
posted by hippybear at 11:22 AM on January 22, 2012 [1 favorite]
I just purchased renter's insurance in California. While examining the paperwork, I noticed that earthquakes are not covered, require an additional fee, and the deductibles are ridiculous. I decided against buying.
When the Big One comes I now know exactly who to blame - the failure of the free market.
posted by falameufilho at 11:33 AM on January 22, 2012
When the Big One comes I now know exactly who to blame - the failure of the free market.
posted by falameufilho at 11:33 AM on January 22, 2012
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posted by atrazine at 10:55 AM on January 22, 2012