Farmers, miners & private property rights

Menzies House Editor in Chief John Humphreys looks at Tony Abbott's comments that farmers should be able to control access to their land:

 The debate about mining on agricultural land has long frustrated me. While one side argues to help the “farmers” and the other side wants to help the “miners” it seems everybody has abandoned the most obvious solution — clear allocation of private property rights. As nobel prize winner Ronald Coase explained, conflicts over resources can be solved by allocating private property rights and then allowing trade so that the resources end up going where they are most valuable.

So my suggested approach to the mining/farming debate has been to strengthen the private property rights of farmers so that they have the “right to say no” regarding access to their land. Miners can then deal directly with farm-owners to come to mutually beneficial deals regarding access. Unfortunately, this approach has been ignored by both sides of politics. Until now.

Yesterday Tony Abbott supported the idea that farmers should be able to control access to their land. The Courier Mail reports him as saying: “If you don’t want something to happen on your land, you ought to have the right to say no.” Good stuff.

Abbott goes on to say that he wants a review of foreign investment rules, which I think is unnecessary. But the main point is that the “market solution” is now on the table.

The government immediately came out against the idea, claiming that it would put mining investment at risk and would lead to less revenue for State governments (mining royalties will bring in $2.8 billion for the Queensland government this year). But this misunderstands how a market works. Giving farmers the right to say “no” doesn’t mean that they will say no. Indeed, the likely outcome is that the vast majority of farmers will say “yes”… but only at the right price.

The main consequence of the market solution won’t be less mining; it will be higher payments from miners to land-holders to ensure that everybody is happy with the outcome. Farmers win because they will get the compensation that they are after, and miners win because they will still be able to go ahead with the vast majority of their projects. This means investment will continue and the government will keep their revenue.

In a few cases, land-owners may say “no” at any realistic price. But that’s not a problem. If a farmer values their land more than a mining company, then it is appropriate (and utility-maximising) to have no mine. And if the government really wanted to ensure a mine went ahead against the wishes of the land-holder, then they always have the option to buy the land.

One criticism of the “market solution” is that it is basically giving something to farmers (stronger property rights) for free. That is true, but it’s not a problem. The virtue of private property rights is not that the government gets to earn money by selling them; the virtue comes because a system of private property works best to allocate resources where they are most valuable. Farmers would support this reform because it is good for them personally, but we should all support this reform because it is good policy to strengthen private property rights.

John Humphreys is the Editor in Chief of Menzies House. John is currently completing a PhD in economics at the University of Queensland, where he received his economics honours degree from before going on to work as a Policy Analyst with the Commonwealth Treasury, Consultant with the Centre for International Economics and a Research Fellow at the Centre for Independent Studies.

Comments

[Clinton Mead]

1.

The question however is whether property owners have an absolute right to the ground below them. We don't insist aircraft obtain permission from every property owner they flyover.

Perhaps this is not a great analogy, but I don't think this is black and white.

At least in recent times, I believe the law has been that property owners do not own the mineral resources below their property, so suddenly giving them ownership of these resources is perhaps somewhat like to a free grant of property from the state to certain people (which will need to be paid for by other taxpayers).

This is more like redistribution of wealth than property rights.

However, I think there is one thing I agree on. Farmers should be fully compensated for any damage miners do to their property, and should have redress through the courts (or perhaps also another tribunal if the court system is too onerous on farmers).

There should be no artificial legislative limits on the mining company's liability. The last thing we want is a situation like with the BP oil spill where such practices were encouraged by legislative caps on damages at $75 million per spill.

[bluebell]

2.

How about we leave the last miserable 4% of Australia in the hands of agriculture. We have been building suburbia on our most fertile soils. Look at the south east corner of Queensland - it used to be prime dairy country.

Here is an ancient Native American Indian Cree proverb which goes something like this:

Only when the last tree has died
and the last river has been poisoned
and the last fish has been caught
will you realize that you can’t eat money

There will come a day when this country won't be able to feed itself. At least the Chinese are planning for that very day by BUYING up our agriculture land, as they are doing worldwide.

What are we doing?

Raping and pillaging for the short term shiny dollar.

[Hugh]

3.

New Zealand has the right idea. Their government has given themselves the right to say NO to mining when the size of the parcel of land reaches a certain size in square hectares, if this mining destroys productive farmland.

Here in Australia we have something similar, but mining companies get around this by buying up smaller parcels of land under the threshold and then combining them together.

New Zealand aggregates these parcels together as a whole.

Australia doesn't.

Hence miners can get around our regulations, buying up huge tracts of lands in small parcels and ripping up productive fertile crop farming land to strip open cut mines that despoil the land for all time.

Foreign companies and foreign governments have marked out roughly one third of NSW and QLD (all the best bits for farming) and earmarked them for coal seam gas mines, which not only desecrate the landscape, but also poison the water table with their "fracking" process of acidification.

Australia could be the food bowl of the world. But we are selling it off to China for a bowl of rice and soon will not have enough farmland to feed ourselves!

[Sandgroper]

4.

This is primarily related to coal-seam gas fracking. It is criminal that miners can come in & poison underground water supplies, even if they never mine there. End of story.

[Alex Davidson]

5.

The solution to this issue lies in understanding what ownership means and how it comes about.

We need to dispense with the feudal/monarchistic idea that ownership comes about through declaration, and realise that until someone marks out clear boundaries, and proceeds to exercise control over a resource – i.e. transform it in some way – all resources are in fact un-owned.

Minerals in the ground are not "owned by all Australians" as the left and the free-lunch brigade unceasingly keep proclaiming. They only become owned when someone sees value in them, marks out boundaries, and makes the effort to extract them. As long as that process doesn't infringe upon another owners ability to exercise exclusive control over their land, then there isn't a problem.

In cases where mining activity would limit another's exclusive control over their property, e.g. through requiring access or affecting the productive ability of the property, then of course miners must negotiate terms with the owner.

A lot of the talk about this issue is nothing more than advocacy for crony corporatism – government using its monopoly on the use of force to assist mining companies to disregard the sanctity of property. It bodes ill for our future prosperity and freedom.

[pk]

6.

"Farmers should be fully compensated for any damage miners do to their property, and should have redress through the courts (or perhaps also another tribunal if the court system is too onerous on farmers).

Yeah, good luck with that. You are talking billions dollar companies - do you have any idea how long they can tie a case up for in court? Do you have any idea of how many farmers could afford the kind of lengthy legal proceedings compensation cases involve? Do you grasp the concept that once a water table or river or landsite is ruined - it might very well be ruined for 100 + years? What does the farmers do then? And what happens if the company goes bankrupt?

Here's what they get away with in 3rd world countries...

http://www.guardian.co.uk/commentisfree/2011/aug/04/shell-nigeria-oil-spills

http://upsidedownworld.org/main/news-briefs-archives-68/2522-tragic-bp-gulf-spill-casts-light-on-chevron-disaster-in-ecuador

...don't think they can't try it on here...........and funnily enough we have to pay via our taxes for these mining and oil companies to keep clean. How much will we have to bolster the EPA- yet more public service jobs being created - because private industries cannot be trusted to not ruin our land and water......

http://www.brisbanetimes.com.au/news/queensland/blue-mine-booboo-has-farmers-seeing-red/2009/03/23/1237656821706.html

[bluebell]

7.

I can envision a day when the masses will rise up - that will occur when food comes in such short supply that only the rich will afford to dine. The rot is already starting....and if you think the riots in England was an anomaly think again. We were too smart for our own good. The powers that be elected to go high tech, decimating millions of jobs in the West...they then off shored many of their operations to third world countries like China for the dirt cheap wages. Sure, it has lifted many millions out of poverty. But it had left millions in the West dependent on welfare to survive. Couple that with the collapse of moral norms and you have a recipe for disaster. I read a book many years ago called The Sky Above and the Mud Below. This book fortold what is to come if greedy governments and corporations neglect their populations. Rampant greed will be the final undoing of humanity.....the new Chinese rich are already behaving in the same manner. The greed of the stock market is fleecing the retirement funds of millions of working class people - and now governments are looking to do exactly the same thing. The US government is looking at tapping into pension funds. Corruption is rife at all levels, especially the stock market with insider trading and short selling. When people lose complete confidence in the system then the backlash will begin.

Quite frankly we don't deserve this planet......at least the animals don't willfully destroy for personal gain.

[DavidLeyonhjelm]

8.

John's proposal is right. I made the same point with additional context two weeks ago here: http://www.menzieshouse.com.au/2011/07/reconciling-a-farmyard-brawl.html

[Andy Semple]

9.

ANNA Bligh has declared mining exploration will be off-limits in populated areas of Queensland.
http://www.theaustralian.com.au/business/mining-energy/greens-dig-a-hole-for-tony-abbott-on-farmers-rights/story-e6frg9df-1226115217554
I hope she also toughens the rules on Industrial Wind Turbines too – these bird killing totems are worse than Coal Seam Gas mining.
At least the miners rehabilitate the land once the mining is finished, unlike these wind totems who are installed by a $2 subsidiary company. Who pays for their removal when they breakdown?? These multinational companies should be forced to pay a bond to ensure the money is there to safely remove wind turbines after their expiry date.
Also, local planning laws should not be ignored by the Industrial Wind Turbine companies. If a local community doesn’t want them, then that should be the end of it – no Wind Turbines get installed.

[bluebell]

10.

[ANNA Bligh has declared mining exploration will be off-limits in populated areas of Queensland.]

As long as her precious south east corner is protected, huh? Anybody living outside her little protected kingdom will be thrown to the wolves. They are already raping and pillaging Curtis island and the harbor in Gladstone itself. I have never hated a government as I hate this one. Since being in power they have not built one major energy facility or dam in 20 years. A pox on Bligh and her well padded husband who runs DERM. Her tears for her son when he appeared in one of Labors Carbon Tax Ads didn't cut any ice with us.....her tears were shed because their son was caught out.

[Louis McLennan]

11.

It would be interesting to see how the tune of quarry and gas companies would change regarding the worth of the land if farmers could buy out the deep freehold. I sent in something I wrote regarding this yesterday. Hope to see it up soon.

[Miners View]

12.

Much Australian rangeland is Patoral lease not freehold. Leasehold over crown land is not a right to anything more than grazing and improvements. Pastoralists seem for the most part to convenitently ignore this point and act as if the land they lease is their own freehold. In cases I have seen Pastoralists have been more than adequately compensated for any damage to their business. Some (not all) seem to think that if they make enough noise they can get more. I fully support complete and adequate compensation but do not support a squeaky wheel situation where greedy pastoralists get more than their leasehold rights entitle them to.

[[email protected]]

13.

Comments to Clinton Mead & Louis McLennan - land is sold into private hands in Australia under a Grant in Fee Simple title - the purchaser buys the land to the centre of the earth and as high as your eye can see. Every land purchase is a contract with 2 parties - the original owner and the Queen - who retains the mineral rights. Which are then leased to mining companies to dig out. However, the land around the minerals belongs to the land owner - which is why compensation was traditional until mid last century. At that point the mining companies complained about the royalty costs and govt legislated that they only had to pay for the top 6 inches. The High Court have ruled many times on trespass, which essentially establishes who owns the land - every land owner must and should use trespass signs, lock their gates and be prepared to sue if necessary. That would clearly establish the rules. And avoid the Miner's Courts which the HC have also ruled are not constitutional and therefore have no right to rule over private land.
Comment to Miners View - the HC have also stated that if someone (ie.govt) has leased land to someone else, they can not change the rules and give use of that land to a third person. A lease stands as strongly as ownership. And if you were in the exact situation many pastoralists and now town folk find themselves in - I bet you would be squeaking too.

[Louis McLennan]

14.

Not really the case in QLD.

[bluebell]

15.

Only when the last tree has died
and the last river has been poisoned
and the last fish has been caught
will you realize that you can’t eat money

Think about that as Australia becomes a NET IMPORTER of food by the year 2015. China is buying up our agricultural lands at an ever increasing & alarming rate. The Chinese can't lose. They can either farm it for their own people or mine it with State government approval. States who are cash strapped or broke. Either way they win, we lose. Australia has had an appalling track record of NOT supporting our own....that is why so many of our researchers and scientists move to other countries where their knowledge & skills are appreciated. Some of our most incredible inventions have fallen into the hands of others who saw the value of investing in them. This country is a joke....we are lead by short sighted greedy politicians who are more interested in self promotion and fattening their bank accounts than guiding this country to full self reliance.

My fathers cousin died at the hands of the Japanese in Changi Prison. He lied about his age and was one of the youngest. What did he die for? Indeed what did they all die for? Our current bunch of sloths in Canberra wouldn't have a clue. The history of how this land was forged and defended by previous generations isn't been taught in our schools. Many of our immigrants wouldn't have a clue, nor care in many cases. Revisionist history is now being taught in our schools. The Convict settler has now become the murdering raping invader who stole the land. Yes, Aborigines were displaced and marginalized. But that is not what happened in the early years of Settlement. In the beginning their was good co-operation on both sides. Only when Aborigines started killing the settlements sheep did things take a turn for the worst. The First Fleeters arrivals were on the verge of starvation. Only saved by the arrival of the Second Fleet.

The Australia many of us grew up in is disappearing rapidly before our eyes. We grew up in the best years.....the post war years where children had stay at home mothers who looked after and cared for the children they bore. Where men prided themselves at being able to provide for their wife and family. Where children played carefree into the setting sun, where boy's built their own billy carts, played marbles & knuckles, where local aborigines taught us white kids how to dig for yams, the girls played with their dolls, made daisy chains, played hopscotch, learnt how to knit, and cook. The time when children looked apon birthdays, Easter and Christmas as special occasions and were happy with modest gifts. No designer trainers or jeans in those days.

Of course not everything in the fifties was perfect - but is was a damn sight better than the sick perverted society we have created in it's place. Our children are placed in kiddy prisons as Mummy works to help Daddy keep the family solvent. No longer content to live in modest homes, own one car, and holiday at home ect, the new consumerism engulfs the new modern day family to keep up with the Jones. The McMansion is the new ideal, along with two or three cars, a pool, spa, upmarket barbecues, and holidays to Bali. It's the new benchmark. If you fail to acquire these things you are seen as a failure, a loser.

As a society we need to take a good look at the monster we are creating. The recent English riots are a failure of society to guide the young. A failure to provide decent environments that nurture children. A failure to provide meaningful work that builds a sense of worth. A failure to provide a sense of respect for parents, teachers and community. Why then are we not surprised that they turn out feral and 'run through the streets like rats.' A description given by one English woman.

My heart cries out for Australia....and it cries out in countries like England and America. The West is imploding before our eyes.....and our politicians are fiddling as Rome burns.