The Political Economy Of Fracking

Author : Hannah Jacobs Wiseman
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)

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Download or read book Governing Fracking from the Ground Up written by Hannah Jacobs Wiseman and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In The Political Economy of Local Vetoes, 93 Texas Law Review 351 (2014), David Spence asks how we can regulate drilling and hydraulic fracturing for oil and gas in a manner that ultimately maximizes net benefits -- assessing whether state or local veto authority over oil and gas development will achieve this result. Although Spence does not directly invoke the Calabresi-Melamed framework, his arguments fit rather neatly within it. One way to achieve an efficient level of oil and gas development, Spence suggests, is for states to use some of their fracturing-related surplus to compensate local governments for the concentrated costs they experience. This is what Calabresi and Melamed would call a liability rule. Spence focuses instead on what one could label as a property rule -- whether giving local or state governments the authority to ban oil and gas development and fracking will best promote Coasean bargaining. Spence concludes that in light of strong preferences at the local level, giving local governments veto power will lead to more bargaining, and thus more efficient outcomes, than will state-level decision making. Spence's Article is thorough and persuasive, but I would slightly reconstruct his account in three modest ways. First, when focusing on the question of whether states should preempt local governments, we must not forget other actors. Fracking generates benefits and costs not fully internalized by local governments and oil and gas producers, and state, regional, and federal regulatory actors need a voice in the bargaining process. Second, we must look more closely at the role of regulation -- not just an up or down veto -- by local governments. Local governments understand the concentrated impacts of oil and gas development, and, rather than fully banning this development, many cities and towns have regulated the practice in a sophisticated manner. It is also important to more closely consider the transaction costs that local governments and producers face in bargaining. And finally, as academics and courts continue to wrangle over the proper allocation of fracking entitlements, we must turn to the Coasean scheme that Spence only briefly addresses -- the scheme that very few states have adopted, in which states compensate local governments for their losses -- while waiting for an improved governance solution.