Mineral Royalties: Historical Uses and Justifications
Jayn Foley Hein & Caroline Ceco
Governments and private landowners have collected royalties on mineral resources for centuries. When comprehensive measures to account for the environmental externalities of mineral extraction are politically or practically unavailable, federal and state governments may consider adjusting royalty rates as an expedient way to account for these externalities and benefit society. One key policy question that has not received attention, however, is whether a royalty rate can and should be manipulated in this way, assuming statutory discretion to do so. This article fills that gap by evaluating the argument for increasing federal or state fossil fuel royalty rates through historical, theoretical, and practical lenses. To that end, this article in turn considers the meaning of royalties, the economic justifications for royalties, the legislative history of the implementation of federal royalties, and the considerations that private landowners have relied upon in setting royalties. This article concludes that it would be appropriate for governments to adjust mineral royalty rates to account for negative externalities not otherwise addressed by regulation or to otherwise promote public welfare. Such use of royalties is consistent with the historical record. Royalties have been used as pragmatic policy tools from almost their inception, and federal and state governments have often exercised their existing statutory discretion to adjust mineral royalty rates to promote public welfare.
Following the 2010 BP/Deepwater Horizon oil spill, the Federal Government issued a drilling and permitting moratorium in the Gulf of Mexico that resulted in significant economic losses for many businesses that serve the oil and gas industry. The Oil Pollution Act should have covered these economic damages; however, the Eastern District of Louisiana held otherwise. This article details how the Oil Pollution Act should have been applied to those who suffered economic loss as a result of the oil spill following the six month moratorium in the Gulf.
Williamson County Regional Planning Commission v. Hamilton Bank of Johnson County relegated Fifth Amendment takings claims to a second-class of federal rights. Before a takings plaintiff can sue in federal court, she must first seek compensation through an “adequate state procedure.” Many federal courts have held that requirement to mean a takings litigant must first seek compensation through state courts if that state provides an inverse condemnation proceeding. However, if a takings litigant sues in state court, she will be unable to sue in federal court because of issue preclusion. This effectively shuts the federal courthouse door to many property owners. Only two Supreme Court justices have shown any interest in revisiting Williamson County . Thus, land use attorneys who are concerned about federal court access for takings plaintiffs should craft a case that would attract the Supreme Court’s attention. This Article argues that land use lawyers should present the Court with a case in which the property owner has used a non-judicial procedure to seek compensation (such as asking for compensation from a county board). The Court could then rule that such a non-judicial procedure is an “adequate state procedure” that satisfies Williamson County’ s requirements. This ruling would minimize the negative effects that Williamson County has wrought on takings plaintiffs.
The purpose of this research is to identify the confluence of the law and economics disciplines, using these distinct channels of scholarship not as an empirical vessel to determine the “value” or “valueless” nature of water, but rather as a means to reconcile externalities among interested parties and to identify management strategies that embrace sentiments of economic efficiency throughout the arena of global hydrocommerce. The various perspectives on water, particularly with regards to an increasing global population and demand for freshwater, elicits an intricate mosaic of tensions concerning the availability, accessibility, provision, and protection of this fundamental natural resource.
Billions of individuals around the world lack access to basic water and sanitation services. Despite the prevalence of these atrocities, access to water is both an individual human right and necessary for human survival. The legal basis for the human right to water, in terms of availability, quality, and accessibility, was adopted by the U.N. in its General Comment No. 15. Despite recognition by the U.N., more than 1.1 billion people do not have sufficient access to clean water, while 2.6 billion people have no provision for sanitation. Against this tragic and inexcusable backdrop, the public sector either lacks the financial resources to provide water or continues to operate water distribution schemes with undesirable inefficiency. From a pragmatic standpoint—and to ensure that citizens have access to clean water—there exist circumstances, both in reality and in the text of the General Comment, whereupon governments should be compelled, or at least be encouraged, to solicit capital investment from the private sector in order to construct adequate water infrastructure and manage water distribution services.
Researchers estimate that over the next twenty years almost $22 trillion (USD) will be necessary to fully modernize global water delivery and wastewater systems. Water scarcity, an individual’s lack of access to clean water, arises due to economic and physical constraints, while being influenced by managerial, institutional, and political factors. At its core, the primary challenge for nations concerning their respective water distribution schemes is a lack of adequate financial resources. In developing countries, an estimated ninety-seven percent of all water distribution is managed by public-sector suppliers. The inept realities concerning these water distribution systems in developing countries, and the fact that over a billion people still lack access to this essential resource, suggests that governments retain at least some responsibility in the persistence of the global water crisis. Reconciliation is the next step in the human right to water argument—from its theoretical origins to its pragmatic implementation—and may be realized through a law and economics analysis in support of private-sector participation in the delivery of water and funding for the provision of adequate infrastructure. Much like distinct tributaries to a mighty river, the legal and economic disciplines maintain differences in methodology, scientific approach, and objectives; but as these disciplines converge, their tributaries form the river’s main stem, with potential to influence an entire watershed of jurisprudence.