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Fall 2012

ISSN 0890-913X

Volume 28, Number 1

Categories: Fall 2012 | Law

Timing “Externalities” Imposed by Mineral Ownership Law: Coasean Versus Lockean Remedies

John Brätland, U.S. Department of the Interior

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TheJournalofPrivateEnterprise28(1),2012,61–77Timing“Externalities”ImposedbyMineralOwnershipLaw:CoaseanVersusLockeanRemediesJohnBrätlandU.S.DepartmentoftheInteriorAbstractFragmentedandincompatiblepropertyinterestsofland-ownershiplawimposeexternalitiesinwhichsurface-royaltyownerscanprecludetimingadaptationsinthemanagementofmineralresourcessuchaspetroleum.Thisexternalitytakestheformofamisallocationovertimebecausethecapitaldecisionsrequiredforeconomicconservationareforeclosedtoextractiveenterprises.Resourcesarenotmanagedinasociallybeneficialway.CanextractiveenterprisesviablyinitiateCoaseanbargainswithsurfaceownerstoobtainrequisiterightstoefficientlyallocateresourcesovertime?Thepaperconcludesthatabasisforbargainingbetweensurfaceownersandextractiveenterprisesdoesnotexist.However,aneconomic(andjust)solutionisfoundinneo-Lockeanoriginalappropriationinwhichthefirsttodiscoveranddevelopresourcesacquireequitableandsecureownership.JELCodes:D02,D23,K11,L72,Q32Keywords:Economicwaste;Economicconservation;Coaseanbargains;Extractiveenterprise;Surfaceowner;Originalappropriation;Impliedcovenants;Petroleum;RoyaltyestateI.IntroductionInaneconomicsense,amineralresourcesuchaspetroleumisconservedbytheresourceowner’seffortstomaximizethecapitalizedvalueoftheresource.Thesedecisionsrequirejudgmentregardingprospectivemarketuncertaintyandtheflexibilitynecessarytoadapttochangingmarketconditions.Inotherwords,economicconservationrequiresadaptivemanagerialdecisionsinthetimingandscaleofexploration,development,andproductionandthepropertyrightsnecessarytodoso.Buttheinstitutionsofland-ownershiplawforeclosethisadaptationandhenceimposeatimingexternality.ThisforeclosureofadaptationisWilliamBlackstone’sjuristiclegacydeclaringthatsurfaceownersalsoownallthatisbelowandwithin61

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Metadata [hide]

Title	Timing “Externalities” Imposed by Mineral Ownership Law: Coasean Versus Lockean Remedies
Authors/Creators:	John Brätland, U.S. Department of the Interior
Year:	2012
Volume:	28
Number:	1
Pages:	61 - 77
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	Economic waste, Economic conservation, Coasean bargains, Extractive enterprise, Surface owner, Original appropriation, Implied covenants, Petroleum, Royalty estate

Citation:
Brätland, John / 2012. "Timing “Externalities” Imposed by Mineral Ownership Law: Coasean Versus Lockean Remedies." The Journal of Private Enterprise, 28(1): 61-77.