Is the corporation which extracts a non-renewable resource from the earth entitled to take it for free, or is payment due to the commons? How should that payment be calculated? How should it change over time, especially as we approach the point where a resource is used up?

Royalties do not raise consumer prices. They reduce the profits that corporations make on our scarce resources. To whom do those resources rightly belong? How often should the level of royalties be recalculated, reset? Are 100+ year-old formulae acceptable? (Even the Jubilee came every 50 years!)

Should foreign corporations have a prior claim over living individuals? Should any corporation?

Charles B. Fillebrown: A Catechism of Natural Taxation, from Principles of Natural Taxation (1917)

Q8. How about fertility value?
A. On the surface of the globe are countless varieties of exhaustible fertility, i.e. chemical constituency, differing in kind and degree, from the nitrogen, hydrogen, oxygen, and carbon of the soil to the carbon of the coal, the gold, and the diamond. Fertility as an attribute need not be predicated of agricultural land alone. Economic fertility belongs equally to any other land which yields to labor its product whether in food, mineral, or metal. Land may be fertile in wheat, corn, and potatoes. It may be fertile in cotton, in tobacco, or in rice. It may be fertile in diamonds, in gold, silver, copper, lead, or iron. It may be fertile in oil, coal, or natural gas, in a water power or water front. The value of artificial fertility is an improvement value. The value of natural fertility of any kind is a site value.

... read the whole article

Alanna Hartzok: CITIZEN DIVIDENDS AND OIL RESOURCE RENTS

• Are citizen dividends from oil rent funds currently or potentially a source of substantial basic income?
  
• Are oil rent funds the best source for citizen dividends or should CDs be based on other types of resource rents?

At the end of the 2002 fiscal year, the state of Alaska had a deficit of nearly $400 million. State lawmakers frequently debate whether the APF should be used to help run state government, but the Fund is protected by law from being used for government expenditures. Rather than cutting into the Fund and citizen dividends, others are proposing an increase in oil rents and royalties from oil corporations.

On February 5th of this year of 2004, several Democratic Representatives filed legislation to help Alaskans recover a fairer share for their oil. That same week former Alaska Governors Jay Hammond and Wally Hickel stated that it is time to review the fairness of oil tax exemptions contained in a 1989 law known as "the ELF," or Economic Limit Factor. Their viewpoint is that ELF gives unjustified tax exemptions. The Alaska Fair Share bill would redress the Economic Limit Factor and meet the constitutional obligation to make sure Alaska¹s oil provides ³the maximum benefit to the people² as mandated by the state constitution.

Because of the ELF statute tax breaks, Alaska¹s oil production tax rate has plummeted from 13.5% in 1993 to 7.5% today, and by 2013, it would be down to 4% if the law is not changed. Also because of ELF, 11 of the last 14 fields developed since 1989 pay none or almost none of Alaska¹s 15% Production Tax. While the state¹s share for Alaska oil has fallen, corporate oil profits have soared. BP and Conoco Phillips reported net earnings of $9 billion and $7 billion respectively last year. According to the Department of Revenue, at recent oil prices of $30 per barrel the annual share corporations receive for Alaska oil would exceed total state oil revenue by $1.2 billion.

The Alaska Fair Share bill establishes a modest minimum production tax of 5% and would raise an additional $400 million in revenue this year. That approximates the current state budget gap. The bill raises more at higher prices per barrel, and an additional $100 million at average prices, according to the Department. The bill also lets the state share in profits above $20 per barrel by slowly increasing the severance tax above that price. To encourage development, the Alaska Fair Share bill reduces the severance tax rate at low prices, when companies face the prospect of reduced profits, and possible investment losses. ...

Norway, one of the world's richest economies, is a model of prudent economic management of resource wealth. So states the IMF 2000 Article IV consultation with Norway. Norway is the top non-OPEC oil exporter, the world's third-largest exporter of oil, and pumps about 3.2 million barrels per day. Norway's oil and gas industry underpins the economy, providing up to 25% of the country's gross domestic product. This country of nearly four and one half million people has a steady growth rate, almost no poverty, and negligible unemployment. Norway has a diverse economy based on agriculture, forestry, fishing and manufacturing, among other things, and its oil industry has developed amid much planning, bargaining, and public debate. ...

NIGERIA

Two thousand years ago, Pliny the Elder wrote that the two greatest curses of civilization were the discovery of silver and gold. Perhaps oil and gas should be added to the list of natural wealth that ends up damaging more then helping people in many parts of the world that are rich in subsoil resources. This has certainly been the case in Nigeria. ...

Northern and southern Nigeria are essentially two different countries. Some view the oil producing region of the Niger Delta in the south as a sort of internal colony of Nigeria. Home to 15 million impoverished people, the Niger Delta region produces 90 percent of Nigeria's wealth. Under the swamps and mangroves of one of the world's richest ecosystems lie vast reserves - an estimated 40 more years of crude and a century of natural gas. The first oil was produced here in 1956. After 40 years of production, there are rutted roads, decrepit schools, few health clinics, no conduits for running water, and polluted creeks and farmlands. There have been dozens of oil spills and gas flares spew carbon dioxide 24 hours a day. The Niger Delta is one of this country's poorest regions, despite its oil wealth. Most people are struggling to survive on less than $1 a day. Away from the main towns there is no real development, no roads, no electricity, no running water and no telephones.

Most of the oil that has earned Nigeria close to US$340 billion since production began over four decades ago has come from the Niger Delta onshore sites. Some put the number at $300 billion with about $50 billion ³disappeared overseas² meaning stolen by corrupt officials. Shell and other western oil companies extract oil worth an estimated $150 billion a year in recent years from the area. A rough estimate is that Nigeria earns some $10 billion every year from oil. ...

What has become of Nigeria¹s oil wealth? Nigeria was rated the world¹s most corrupt country (out of 52) by Transparency International¹s Corruption Perception Index. Much has been made of the fact that money generated from Africa's oil reserves has been lost in corruption, mismanagement and violent conflict. In Nigeria, an estimated $4 billion in government funds was stolen by the dictatorship of General Sani Abacha in the 1990s. Some estimate that as much as $50 billion in oil revenue has been stolen since Nigeria first began production. ...

But the most delightful distinction about Canadians is the strong and explicit recognition among almost everyone, even if he's an economist, who discusses this subject, that different resource endowments are the basis of inter-provincial differences. Equalisation in Canadian politics means sharing the economic rent. Everybody talks that way. Canadian economists even when they come to the States talk that way. Just as though rent were a permissible word in polite discourse. It's very refreshing. However there's a very selective attitude towards rent -- towards what rents are shareable, I should say.

• Rents from oil and gas are fair game.
• Forest revenues are fair game.
• Mineral revenues of other kinds are fair game.
• Water power is fair game.

But now how about the rents that are generated by the valuable lands of Montreal, or Toronto, or some of those other big and powerful cities in the east? They are not fair game. As a matter of fact, if you pore through the fine print of the equalization law, which I did on the airplane, you find the most interesting exception to what's included in the formula. I'll explain the formula to you in a moment if you are still awake. ...

The conclusion of all this is that the Canadian system is really better in terms of its Georgist implications because the payments to the provinces, with all the faults that I've described, are essentially based on population. Population is in the formula. And if you compare this with the way things are done in the States, population plays a very minor role in the formula for equalisation payments in the United States.

Peter Barnes: Capitalism 3.0 — Chapter 3: The Limits of Government (pages 33-48)

Limits of Public Ownership

Because of historical circumstances, America has a long tradition of public land ownership. When Europeans first arrived, North America was held in common by an assortment of tribes. As these tribes were dispossessed, the federal government acquired their territories. Some of the federal holdings were given to states as they entered the union. Though most of what the federal and state governments owned was then sold cheaply, much was retained. Today, nearly a third of the land in the United States is government-owned.

To say that land — or any asset — is “government-owned,” however, isn’t to say it’s managed on behalf of future generations, nonhuman species, or ordinary citizens. Consider what the federal and state governments have done with the lands they own.

Outside of Alaska, about 5 percent of government-owned lands have been designated as wilderness. In such areas, humans may enter on foot but not use motorized vehicles. Mining, logging, and hunting are also prohibited. On the other 95 percent of government-owned land, private and commercial use is regulated by various agencies. National forests are managed by the U.S. Forest Service, grazing and mineral lands by the Bureau of Land Management, hunting and fishing by the U.S. Fish and Wildlife Service.

As a general rule, politics — not fiduciary duty — determines what uses are permitted and what prices are charged. A classic example is the Mining Act of 1872, under which private companies can stake claims to mineral-bearing lands for $5 an acre, and pay no royalties on the minerals they extract. Every attempt to reform this antiquated law has failed because of the mining companies’ political clout.

In the same vein, the U.S. Forest Service has for decades been selling trees to timber companies for below-market prices. On top of that, it spends billions of tax dollars building roads in virgin forests so timber firms can harvest the people’s trees. This is, of course, economically irrational and a huge subsidy to private corporations. It also addicts Americans to cheap forest products and destructive logging methods. These practices occur because the Forest Service is not a trust committed to ecosystem preservation, but a politically influenced agency dedicated to “multiple use” of government-owned forests.

There are exceptions to this dismal pattern. One involves trust lands given by the federal government to states. Such gifts began with the Land Ordinance of 1785, which reserved one square mile per township for the support of public schools. Later, the Morrill Land Grant College Act of 1862 gave more land to states to support colleges of agriculture and mechanics. And in 1954, Congress gave Texas title to oil-rich coastal lands, providing that all revenue from them be placed in an endowment, or permanent fund, that generates income for public schools forever.

Today, twenty-two states hold about 155 million acres in trust for public schools and colleges — which is to say, for future generations. Like the federal government, the state trusts lease much of their land for oil drilling, timber cutting, and cattle grazing. The trusts’ duty is to preserve not the land itself but the income streams it generates. This creates beneficiaries (educators, students, parents) who monitor the land managers closely. One result, according to University of California professor Sally Fairfax, is that state trust lands are better managed than federally owned lands. Whereas the U.S. Forest Service “has been hiding the ball on cash flows and returns to investments for most of this century . . . the state trust land managers know how to keep books and make them public.” Further, even though the state trusts aren’t bound to protect ecosystems per se, they tend to do so because they have a long-term calculus.

An interesting variant of the typical state land trust is the Alaska Permanent Fund, created in 1976 to absorb some of the windfall from leasing state land to oil companies. The aim was to create an endowment that would benefit Alaskans even after the oil is gone. To this end, the Permanent Fund invests in stocks, bonds, and similar assets, and off the earnings pays yearly dividends to every resident. Originally, the dividends were to be allocated in proportion to the recipients’ length of residence in Alaska, with old-timers getting more than newcomers. But the U.S. Supreme Court ruled that, because of the Equal Protection clause of the Fourteenth Amendment, Alaska couldn’t discriminate against newcomers that way. The dividend formula was then changed to one person, one share. ... read the whole chapter

Mason Gaffney:  Oil and Gas Leasing: a Study in Pseudo-Socialism