Why Does The US Have The Lead On Shale Gas?

The United States (US) is now ranked as the world’s leading producer of natural gas.  The Wall Street Journal (WSJ) says that this lead is partly due to the abundant shale resources we have—though many other countries have those too.   Partly due to our technological leadership in developing hydraulic fracturing (fracking)—but these techniques are known all over the world now.  The edge is really a result of private ownership of subsurface mineral resources.   Almost no major country recognizes full subsurface private property rights, except the US.  Quoting from the WJS: “….this blessing of American jurisprudence helps explain one of the few bright patches in the Obama economy—the booming production of shale gas and increasingly, oil.”

There is a profit motive driving the property owner as well as the driller. Typically the property owners get a royalty checks from the driller representing a percentage of the worth of the value of oil produced. Often the royalty percentage is 12.5%.  (My home in Texas was built well after the East Texas oil boom.  By then all the subsurface mineral rights had been sold/leased and my deed spelled out that I had no ownership. There were number of wells back in the woods behind my house. Someone was getting royalty checks, but alas, it was not I.)

But many people in North Dakota (Bakken Shale) and Pennsylvania (Marcellus Shale), for example, have leased their mineral rights and natural gas is being produced.  And the landowners are getting royalty checks!

France and Bulgaria have banned fracking. Because these governments own the subsurface property rights, there has been no pushback from the landowners.   In other countries where fracking has not been banned, the governments are moving at a glacial pace.

Quoting the WSJ: “ ….the deeper lesson is that this is a revolution that came about not through government planning or foresight, but through a combination of individual risk-taking and private property. “

Thank heavens for these privately owned resources.  Unfortunately, favorable outcomes are not happening where the US government has control of natural gas and oil.  The Obama Administration puts up road blocks in the way of the exploitation of resources found in places like  Off-Shore, Federal lands, and the Arctic National Wildlife Reserve.

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