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March 17, 2014

"Three Cheers for Fracking"

Noted economist Gary Libecap praises fracking and explains why fracking is so much more developed in the U.S.:

New fracking and horizontal drilling technologies are dominantly developed and implemented in the U.S. Why is that? The answer is secure private property rights to subsurface minerals. These are the major reason why the American oil and natural gas industry has been so dynamic and innovative. Except for western Canada, throughout the world, subsurface mineral rights are held by governments, and indeed, the U.S. government also holds the rights to hydrocarbon deposits on federal lands. The incentives for and transaction costs of investing in and using new fracking, pumping, and drilling technologies are dramatically different between private and public ownership.

To which Glenn Reynolds cracks, "The political class views this stuff askance, though, because secure property rights reduce the opportunities for graft."

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