BP's Alaska Operations.

[ggdwill]

This little gem was tucked away in a corner of the eigth page of today's Wall Street Journal:

Anchorage, Alaska - Stepping up its investigation into the shutdown of the Prudhoe Bay oil field, Alaska state officials issued subpeonas to BP PLC and its partners for documents on maintenance and corrosion-control programs that failed to uncover some pipeline problems.

Alaska's attorney general has been pursuing a claim against the BP-leg group to recover lost revenue related to the partial shutdown of Prudhoe Bay, the largest producing field in the U.S. The state maintains that the venture should compensate the state for lost money if company negligence is found to be the cause of sever pipeline corrosion that led to the shutdown a couple of weeks ago.

The subpeonas, issued to BP and four nonoperating partners in the field, demand "all documents" that relate to oversight of the Prudhoe Bay infrastructure that experienced recent oil spills because of corrosion.

"These are normal parts of the process of investigating events such as these," said BP spokesman Scott Dean. "BP will continue to assist and work with authorities to understand this incident."

BP's partners are Exxon Mobil Corp., ConocoPhillips, Chevron Corp. and Forest Oil Corp.

*Even though I was sitting in a beautiful munciple park this morning when I read this, all I could do was shudder. Just when you think you've seen it all, the moochers in government come through with another innovative way promote their evil agenda.

We have graduated from a political environment where the social burdens placed upon private industry were excused as a desperate last resport to where they are an institutionalized expectation. If, 30 years ago, some company had suffered a setback that hurt it's profit margin, the attitude would have been something along the lines of "better luck next time". Twenty years ago even, the same thing would have been greeted with some kind of government subsidy, disguised as some kind of populist job security programs, and every one would have been on their merry way. But none of those attitudes apparently compare to today's.

Today, the extent to which the state is involved in riding the back of private enterprise has become so entrenched that instead of failed companies crawling to government for help, governments are beginning to gang up on private industries and demand "their cut".

Maybe I have been an Objectivist for too long, but when I read this, it was truly hard to believe - especiallly in a "wild and free" state such as Alaska. How - in America - could the government of an entire state, and the millions of people responsible for it, not realize how blatantly wrong this is?

This analogy came to mind: If a young man, fresh out of highschool, decides to go to work instead of enrolling in college, and as a result of his bad - corrosive - decision, he will lack the skills to earn more than he would with a BA. It also means that he will be coughing up fewer tax dollars in the coming years. Does this mean that the government is entitled to "damages"?

Where does this insanity come from? How has the relationship between the citizen and the government become so perverted? It has been flipped on it's head and pounded into the ground.

- Grant

[Jay P]

Maybe I have been an Objectivist for too long, but when I read this, it was truly hard to believe - especiallly in a "wild and free" state such as Alaska. How - in America - could the government of an entire state, and the millions of people responsible for it, not realize how blatantly wrong this is?

(Emphasis added.)

Probably one reason is that most of the state government in Alaska is funded by loot stolen from the oil producers. And in addition, that state has a "permanent fund", which consists of money from oil production taxes and "royalties" - this fund is then used to pay a welfare check to each resident of the state every year.

[aequalsa]

(Emphasis added.)

Probably one reason is that most of the state government in Alaska is funded by loot stolen from the oil producers. And in addition, that state has a "permanent fund", which consists of money from oil production taxes and "royalties" - this fund is then used to pay a welfare check to each resident of the state every year.

This isn't exactly accurate. The money is 25% of the leases and royalties derived from the state's allowing oil companies to drill on the state owned land, which has been invested in securities and real estate. The procedes from these investments pays out to the citizens based on a 5 year average of earnings.

You can argue that the government has no right to own the land in the first place, but then, who does own it in the first place when a government purchases it? The purpose of the fund is to ensure that all the money from the sale of mineral rights is not spent by one generation. It actually seems to me to be a better way to fund government then what I am accustomed to. Seems almost like geolibertarianism in a way.

So the money isn't taken by force from what I can tell. The oil companies choose whether or not to lease the government property so I wouldn't feel too badly for them. They wouldn't be there if they weren't making money.

[Jay P]

This isn't exactly accurate. The money is 25% of the leases and royalties derived from the state's allowing oil companies to drill on the state owned land, which has been invested in securities and real estate. The procedes from these investments pays out to the citizens based on a 5 year average of earnings.

You can argue that the government has no right to own the land in the first place, but then, who does own it in the first place when a government purchases it? The purpose of the fund is to ensure that all the money from the sale of mineral rights is not spent by one generation. It actually seems to me to be a better way to fund government then what I am accustomed to. Seems almost like geolibertarianism in a way.

The rightful owners of natural resources are those who create value with them. So in the case of oil or mineral resources, the one who finds and develops them is the rightful owner. (Just as in the Mideast, before the oil was discovered and developed, that land had no value. The value was created when the oil companies spent their money discovering the oil fields and putting them into production. It's rightfully theirs.)

But in this scheme, the citizens of Alaska are getting money from a value they had absolutely nothing to do with creating. They have done nothing to earn it.

(For examples of the proper establishment of rights to previously unowned resources, see the 1872 Mining Laws, and also the Homestead Act of 1862.)

And yes, I do argue that the government has no business owning this land, because owning it has nothing to do with the proper functions of government. The state and federal governments together have, and ought to have, sovereignty over the land, but that is not the same as ownership: it simply means that these governments have the function of protecting rights on the land.

So the money isn't taken by force from what I can tell. The oil companies choose whether or not to lease the government property so I wouldn't feel too badly for them. They wouldn't be there if they weren't making money.

It most certainly is taken by force. The fact that they chose a course of action knowing that part of their wealth would be taken does not justify that taking.

[IAmMetaphysical]

Wow, that is really horrible. Its similar to the law that forbids city employees from striking. If thats not forced labor, I don't know what is.

[ggdwill]

I actually read an editorial in the WSJ a couple of weeks ago entitled "Alaska and You" where they discuss the fund that you guys are debating. They don't criticize the fund, or the 4 and even 5 figure annual payments that Alaskans receive itself (although they should), but instead they point out that part of the reason why the expansion of oil drilling in Alaska is moving so slowly is because the Alaskan State Gov't is benefiting from the high price of oil.

The implication being that if this fund didn't exist, then the government - the only entity capable of preventing oil expansion (most notably through it's ownership of like 90% of Alaska) - would not have an incentive to curtail development.

The editorial also spends alot of time complaining about the fact that Alaska receives more federal money per capita than any other state, yet pays very little in federal taxes.

I wish I could find this piece. I accidentally threw it away and I don't subscribe to OpinionJournal.com

- Grant

[aequalsa]

The rightful owners of natural resources are those who create value with them. So in the case of oil or mineral resources, the one who finds and develops them is the rightful owner. (Just as in the Mideast, before the oil was discovered and developed, that land had no value. The value was created when the oil companies spent their money discovering the oil fields and putting them into production. It's rightfully theirs.)

But in this scheme, the citizens of Alaska are getting money from a value they had absolutely nothing to do with creating. They have done nothing to earn it.

(For examples of the proper establishment of rights to previously unowned resources, see the 1872 Mining Laws, and also the Homestead Act of 1862.)

And yes, I do argue that the government has no business owning this land, because owning it has nothing to do with the proper functions of government. The state and federal governments together have, and ought to have, sovereignty over the land, but that is not the same as ownership: it simply means that these governments have the function of protecting rights on the land.

It most certainly is taken by force. The fact that they chose a course of action knowing that part of their wealth would be taken does not justify that taking.

To be clear, I am not a fan of government owning land either but the situation seems a bit more convoluted then simple looting. When they first purchased the state from russia there had to be some transfer of rights to private individuals. You can either give the land away or sell it. They usually sell it as in the 1872 mining law that you referenced where they sold land for $5/ acre. Them selling it indicates ownership and a right to transfer those rights. The alternative of giving it away seems prone to graft to me but might be managed well. I would guess it would be given away based on political connectedness but one can always hope more honest men will prevail.

In this particular case, they chose to lease the rights rather then sell the land outright as the mining law would have. Ostensibly due to already having knowledge of it's multibillion dollar oil value. So these oil companies entered into these agreements with the 'owners' of the land and probably do better then if they were dealing with private owners who would rightfully demand a larger percentage if they agreed to let them drill at all. I do not see it as fundamentally different then if they had purchased the land from the government in order to drill on it.

If they owned the land and were mining on it and the government came along and wanted a piece of the pie I would be very sympathetic, but a company or individual who knowingly engages in business with the government in this manner or through a government contract doesn't elicit much compassion from me. These deals usually confer unearned rights on someone in particular in the form of government sanctioned monopolies(local or national) rather then the herd at large. That's why you will never hear me say "poor electric company with their price controls" or "poor bank with their regulations". I'm paying $3/ gallon for gas to give them record profits not because of a war in iraq or their business acumen but because the market to build new refineries is closed to new competition through environmental legislation. I just don't put them in the victim category when they are willful participents.

"competition, free enterprise, and the open market were never meant to be symboli fig leaves for corporate socialism and monopolistic capitalism."-Tom Robbins Still Life with Woodpecker

I think ideally the homestead idea where you give away small tracts to individuals if they live an work on it for a number of years might have been a better way to handle it, but since there really isn't much in the way of free valueless land left it'sprobably not likely to come up. Although if they ever came to their senses and privatized the national and state forests they might should do something like that. I wonder though, how do you fairly determine who gets which sites when giving it away if there is existing knowledge of mineral deposits or oil in certain areas?

[Jay P]

If they owned the land and were mining on it and the government came along and wanted a piece of the pie I would be very sympathetic, but a company or individual who knowingly engages in business with the government in this manner or through a government contract doesn't elicit much compassion from me. These deals usually confer unearned rights on someone in particular in the form of government sanctioned monopolies(local or national) rather then the herd at large. That's why you will never hear me say "poor electric company with their price controls" or "poor bank with their regulations". I'm paying $3/ gallon for gas to give them record profits not because of a war in iraq or their business acumen but because the market to build new refineries is closed to new competition through environmental legislation. I just don't put them in the victim category when they are willful participents.

First: if they wanted to explore for or drill for oil in Alaska, they had no choice but to deal with the government. They're only willing participants in the sense that they're paying the government protection money in order to survive. (This is like the property taxes I pay on my house. When I bought it, I agreed, as a condition of getting the loan, to pay the property taxes. I'm only willing to pay these taxes because I have no choice in the matter.) And as far as the environmental restrictions that stop the construction of new oil refineries, do you have any evidence that the oil companies are in favor of these regulations? If not, then they are the victims of these environmental laws, because the laws certainly hamper their ability to make money. (Oil refiners would like to build refineries today, but don't do it in the US because of the environmental restrictions, and all of the permissions they'd have to get in order to build one.)

Second: by what right does the government own the land, or oil rights, or rights to collect royalties in the first place? Before anybody discovered oil there, that oil was, by right unowned. It didn't have any value before the oil companies discovered it and then built the infrastructure (at great cost and risk to themselves) to extract it. So the property rights in the oil, by right, belong to the company who discovered and developed the resource.

It's similar to the airwaves. Today, the government claims ownership of all the electromagnetic spectrum, and radio stations have to get licenses to use this "public property." By right though, these resources should belong to whomever gave them value. That is: the developers of radio technology and those who supplied the capital to build the radio stations and use the electromagnetic spectrum have thereby established rights to it. But as in the case of the Alaska oil (and not just in Alaska), the government just assumes ownership over something that was previously unowned, and had no value. But they do not do this by right. And the oil company, or radio station owner, who is cooperating with the government and paying the license fee or protection money is cooperating, yes, but he has no choice.