Creating Anticommons: Historical Land Privatization and Modern Natural Resource Use1 Bryan Leonard Arizona State University
[email protected] Dominic Parker University of Wisconsin, Madison
[email protected] May 31, 2017 Abstract: We explain how privatizing the commons to promote use of one land-based resource (agriculture) discourages use of another (shale oil). We test for this ‘anticommons’ problem using a natural experiment on the Bakken, one of the world's largest shale reserves. Before oil discovery, U.S. land policies inadvertently created a mosaic of private and tribal subsurface ownership on the Fort Berthold Indian Reservation. We compare horizontal drilling across parcels during the 2005-2015 fracking boom and find that fragmented ownership significantly reduced royalty income, relative to contiguous tribal ownership. This evidence highlights a cost of subdividing land containing spatially expansive natural resources. Key words: anticommons, oil, indigenous policy, transaction costs, resource booms, privatization JEL Codes: O13, Q32, Q33, D23, H82, K11 1 For helpful comments, we thank Alex Rothenberg, Jane Friesen, Dean Lueck, Donna Feir, Gary Libecap, Terry Anderson, Shawn Regan, Tim Fitzgerald, Dan Benjamin, Ronald Trosper, and seminar participants at Simon Fraser U., Stanford U. (Hoover Economic Policy Talk), U. of Illinois, U. of Hawaii, UC-Riverside, and the Property and Environment Research Center. We also thank attendees of conference sessions hosted by SOIE, UC Santa Barbara, WEAI, AERE, and the Midwest International Development Conference. We are grateful to Matt Kelly, an attorney of Tarlow and Stonecipher PLLC for helpful discussions about oil and gas leasing on the Bakken. I. Introduction Much of the world’s indigenous populations live on communally owned land and this ownership structure has likely hindered development.