Oil Spills and Richard Epstein

I stumbled upon this paper (here) a couple of weeks back and finally read it this weekend. The subject of the paper is offshore lands and the present regulatory scheme that governs it, more precisely the regulation of offshore drilling. The driving force behind the regulation of offshore lands was, according to the author, the 1969 oil spill off of Santa Barbara. Information on the spill can be found (here). The author contends that the present system of “leasing” rights to use of offshore lands is wrought with complex regulatory rules. These rules have created a system where environmentalists have been able to shape policy without having to incur any substantial costs and leave the public with the additional costs of an inefficient policy. The author termed this scenario a “political externality.” He contends that the way to solve this inefficiency is to free up these offshore lands from regulation and allow the market to allocate by price not political decree.

The author recognizes that the prospect of oil spills in the future is a particular fear among those potentially harmed. According to the author, a private property system for offshore lands would create an incentive to “take precautionary measures that reduce the likelihood of accidents” and in the case of an accident would be better equipped to compensate those effected by the damage. He contends that a regulatory system cannot accomplish both these tasks. Indeed, it is only under a property rights system the individual has the incentive to make sure his property doesn’t interfere with yours and if it does then we can rely on the courts (tort law) to determine restitution. This part of the paper I really enjoyed because he relies on Richard Epstein a lot and I am reading Epstein for another class and I really like his views on government.

Environmental groups would not be silenced, of course, by adopting a property rights regime for offshore lands. Of course environmental groups have different motives but they would have the same ability as “big oil” to purchase these areas if they felt inclined to do so. In fact the Nature Conservancy bought a small oil field in Texas that is the breeding grounds of a rare species of chicken and has collected some “$5.2 million dollars in royalties over the last seven years. The Nature Conservancy claims that careful management is allowing it to protect the prairie chicken while working on the land to raise money for other conservation efforts.” Indeed, only under a property rights regime can we ensure that all have an economic opportunity to pursue scarce resources.