Whose Fracking Rights?

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Denis and Barbara Prager fear the day that hydraulic fracturing takes place on their land in the Shields Valley of Montana. The threat of ‘fracking’ is real and there is nothing they can do. While the Prager’s own the surface rights to their property, the state owns the subsurface and mineral rights. The state has the right to use the land as is ‘reasonably necessary’ for drilling or can lease the mineral rights to a private company. Those rights are presently open for bid.

Hundreds of millions of acres of property across the nation have secure property rights that are split; different entities own the surface and subsurface rights. Battles over split estate rights emphasize the importance of well specified and defined rights. Perhaps most important is the knowledge of what rights the surface owner does and does not have.

Under split estate rules, subsurface owners have the right to use surface land as is ‘reasonably necessary’ to develop subsurface assets. Private oil and gas companies often lease rights from subsurface owners regardless of whether the estate is split or under single ownership. Either way, drilling and extraction companies are responsible for unnecessary harm done, impacting water quality, for example.

Though hydraulic fracturing has been going on for more than 60 years, it has gained recent attention due to its affordability in the current global economic and technological climate. It is interesting that while many environmentalists vie to decrease carbon emissions, they are also opposed to fracking. In truth, natural gas may be one of the greatest boons to keep America energized at low cost with fewer emissions. Given secure property rights and market transparency it can be environmentally friendly, to boot.

Cross-posted at Environmental Trends.

Holly Fretwell is a Research Fellow at PERC and an adjunct instructor at Montana State University where she has taught  introductory economics, macroeconomics, natural resources and environmental economics. She works with the Foundation for Teaching Economics, giving workshops for  high school teachers to improve their skills in teaching and...
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