Home > Economics, Environment > Coal seam gas & property rights

Coal seam gas & property rights

August 31, 2010

In recent months there has been an increasingly heated discussion about the future of “coal seam methane” (CSM) in Queensland. In simple terms, CSM is extracted from an underground coal bed by pumping out the surrounding water, which releases the methane held in the coal bed (more details here). Given that this involves relatively less destructive mining and that the CSM industry has been an important economic success, some people see it as a good thing.

But not the Greens.

The Greens complain that CSM extraction uses up valuable farm land, reduces food security, creates low-quality waste water, may negatively impact the underground water supply, may harm endangered species and will increase our greenhouse gas emissions. Of these complaints, it seems to me that only one is a real problem.

While CSM extraction does use up land, that is the choice of the land-owner. Nobody should be forced to extract CSM, and any farmer who wishes to continue farming should be free to continue farming. Food security is a long-standing red herring. In the age of globalisation it is not necessary to produce everything you need inside our country, and that is equally true of food. We will retain food security so long as we have sufficient money to buy food, and that is an economic question of wealth, not an issue of domestic land use. Low-quality waste water can be easily dealt with through existing channels, where the manager of waste water needs to store it themselves, convert it into useful water, or receive appropriate permission to release it. The appeal to endangered species is the most blatantly emotive, and rests on the simple but unremarkable truth that all human activity will disrupt nature (though it should be remembered that we humans are a legitimate part of nature). And finally, while coal-seam methane is a greenhouse gas, it is not feasible to address climate change through restrictions on energy supply.

The real problem with CSM is the potential impact on underground water supplies. Those people who are currently using those underground water supplies have a reasonable expectations that they can expect the continued use of that resource. In a sense, the current users have “homesteaded” that water, and any damage to that water is similar to theft. The problem at the moment comes primarily from the lack of clarity with regards to property rights over the underground water.

Management of the underground water supplies is also at the core of the “soil salinity” problems in Australia.

Stating the free-market solution is easy: introduce clear property rights over the underground water. But that is a little harder than it first seems. Underground water basins can be very large, and accessed by many thousands of people. The actions of any of those people could impact the underground water levels and quality for everybody. So the solution that best lends itself is a non-profit mutual cooperative where all people currently making use of the underground water become joint members.

There would be different “water boards” for each different water catchment, and these would be run democratically by those people affected. The original allocation of rights would mirror current use, to the degree that it is sustainable. For additional use of the underground water the board would require compensation, as determined by general members. That money could be used to maintain and improve the quality of the underground water resources and also to return a “premium” to water board members.

If a free-market solution is not viable, then the second-best approach is to get the government to mimic a free-market approach — specific boards to deal with the details specific to each water catchment; non-profit; involvement of the local land-owners and water users; continuing free allocation for pre-existing users; and prices for new users.

One non-solution that is currently popular is to announce “prime agricultural land” which cannot be used for CSM extraction. This is another attack on the private property rights of ordinary Australians. If land is so “prime” that agriculture is the most obvious use, then the land-owner will keep it as a farm. If the land-owner decides to put the land to a better use, then that suggests that the land wasn’t so “prime” in the first place. The best judge of land use is generally the land-owner, not Anna Bligh and the bureaucracy. This legislation is a feel good measure that will be mostly irrelevant in the near future, but will ultimately be yet another government impediment to necessary change in the future. And it will do nothing to address the problems of weak property rights over underground water.

  1. Ben
    September 2, 2010 at 6:14 am

    “The best judge of land use is generally the land-owner, not Anna Bligh and the bureaucracy.” LOL x 12. Also, I that hear she likes telling aboriginals what to do on their land.

  2. Tinos
    September 3, 2010 at 4:44 am

    “Protecting” farmland from mining was an LNP policy at the last election.

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