Get oil rent and/or pay airport rent is another way
|October 22, 2008||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
Get oil rent and/or pay airport rent is another way
How we allocate land revenue now stirs up animosity
People treat oil as private property of the lucky, but some face up to airports as common property. We trim, blend, and append two 2008 articles, one on the problem, one on the solution, the former from USA Today of Sept 9 by Andrea Stone, the latter from Aviation Maintenance Today (AMT)of Oct 10.
by Stone and AMT
- Oil boom creates millionaires and animosity in North Dakota
At the edge of the nation’s breadbasket, Cold War missile silos have been joined by drilling rigs. After decades of watching their children flee the prairie for brighter futures elsewhere, North Dakotans in the state’s sparsely settled west find themselves sitting pretty. An oil company staked a claim there in March.
A local farmer owns shares in 10 new wells. So does that make his family millionaires? “I guess so,” says the laconic bachelor, who plans to stay in his double-wide mobile home with the deer trophy head and gun safe in the living room. “It’s not something we talk about.” Homesteaders look to reap as much as $1 million a year per well from oil leases and royalties. “It’s like winning the lottery.”
JJS: But should the ones who happen to be above oil be the only ones to be paid or should a larger community benefit from something created by none and needed by all?
When the US government gave away land at the turn of the last century, most deeds included the earth above and below. But farmers hard up for cash during the Dust Bowl 1930s or after World War II sold the mineral rights, often for a dime or 50 cents an acre. Such rights now are worth up to $1,500 an acre or more.
JJS: But can holders of rights give them away? Can recipients of rights sell them? If theyre rights, arent they inalienable, like ones right to draw a breath of fresh air?
Ten oil-patch counties have grown as workers stream in or natives stick around for jobs that pay an average $79,624 annually, more than double the non-industry wage. Restaurants, motels and hospitals helplessly watch employees leave for higher-paying oil jobs. A nursing home recently offered $1,000 signing bonuses for housekeepers.
Schools started the fall short of teachers priced out by a housing shortage that has seen rents double as oil companies snap up whole apartment buildings for their workers. The disparity creates a lot of animosity.”
JJS: However, if people, remembering that owners owed, shared their social surplus — all the money we spend on the nature we use — then such equality would create a lot of goodwill. But meanwhile, note how location soaks up increases in income. Its an iron law of economics overlooked at ones peril.
In 1951, geologists first discovered the Bakken Formation, a West Virginia-size oil deposit that spreads 24,000 square miles. Lying two miles below parts of the Dakotas, Montana and Canada, its the largest contiguous oil deposit in the lower 48 states. At an estimated 4.3 billion barrels of recoverable oil in a deposit, its about half what the USA uses in a year.
It took the recent spike in gas prices and new horizontal drilling techniques to make drilling economical. Part of an oil boom that began mid-2006, by August 80 rigs were drilling in North Dakota. As long as oil prices stay above $75 a barrel, companies will continue to drill into the concrete-hard deposit of siltstone and sandstone between layers of shale and use water and sand to fracture loose its oil.
JJS: And continue to cause animosity until we grasp that natural revenue is to be shared. Its our earnings by our labor and capital that we have total right to, without our having to pay any tax on that. Encouragingly, the idea of corralling the rental value of a limited resource is spreading, along with the way to corral it.
- FAA Issues Final Rule on New York Airport Congestion Management
To address congestion in the New York City area, the Federal Aviation Agency (FAA) issued a new rule for John F. Kennedy (JFK) and Newark Liberty (Newark) International Airports that: extends the caps on the operations at the two airports, assigns to existing operators the majority of slots at the airports, and annually auctions off a limited number of slots in each of the first five years of this rule.
The FAA has determined that the allocation of a relatively small number of slots via the auction of a leasehold best effectuates the efficient allocation of slots, both through the initial allocation and through the development of a robust secondary market. An auction is intended simply to distribute slots to the air carriers who value them the most, thus encouraging their most efficient use.
Two airports and airlines oppose the rule, claiming slots are not property when created and held by the Government but only become property when transferred to a carrier.
JJS: Theres a common misunderstanding of property. Property is what you make or buy from its maker. Space is something we dont make and hence can not buy but must share. The most efficient way to do that is to pay compensation to those whom one excludes. Itd work on oil fields, too — on all the earth!
Jeffery J. Smith runs the Forum on Geonomics.
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