Tag Archives: property rights

Allocating property rights to wind and solar resources

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Michael Giberson

Troy Rule, a law professor at the University of Missouri, has a pair of articles applying Calabresi and Melamed’s “Cathedral Model” to rights in wind resources and solar resources.  As Rule notes, the law remains unsettled on these resource issues, but the potential for conflict increases as these resources become more frequently exploited.  I like Rule’s article because it brings an explicitly “law and economics” focus to this question of property rights and resource development.  (Links follow below.)

The cathedral model was offered by Calabresi and Melamed in 1972 as a way of organizing legal thinking about property and liability issues in a unified manner.  As summarized by Rule in the wind rights article, using the common example of pollution, the model provides four possible rules for allocating rights between a potential upstream “polluter” and a downstream “victim”:

RULE ONE: The victims are entitled to be free from pollution and their entitlement is protected by a property rule (an injunction against the polluter);

RULE TWO: The victims are entitled to be free from pollution and their entitlement is protected by a liability rule (the victims can force the polluter to pay them compensatory damages);

RULE THREE: The polluter is entitled to pollute and its entitlement is protected by a property rule (the victims have no legal or equitable right to stop the pollution); and

RULE FOUR: The polluter is entitled to pollute and its entitlement is protected by a liability rule (the victims can purchase an injunction to stop the pollution by paying the polluter’s costs of stopping the pollution).

A particular contribution of the Cababresi and Melamed article was the explication of the “Rule Four” possibility, an option which had not been much noticed in legal practice or scholarship up to that point. In the case of Rule’s wind rights article and solar rights article, he argues that Rule Four is the way to go.  For example, a downwind landowner should have the right to, in effect, buy a “non interference” easement from the upwind landowner.

As a practical matter, existing markets are solving the problem without much specific law.  For the most part lenders won’t lend money for a wind turbine that isn’t protected by an adequate buffer to protect the “supply” of wind.  This buffer can be from property owned by the same landowner leasing land to the wind project or it can be an easement negotiated with a neighboring landowner.  Of course this sort of lending market discipline doesn’t impinge on self-funded projects, and may lead to two neighboring landowners devoting too much land to a buffer area when coordinated development could have allowed them to devote less to the buffer.  Rule’s rule is intended to clarify just where the boundaries of neighbors rights and responsibilities are.

Curiously, Rule’s analysis proceeds as if the designation of “upwind developer” and “downwind developer” were stable when actually such designations will literally shift with the changing of the wind (unlike, say, upstream and downstream along a river, since rivers rarely change direction). So far as I recall, Rule didn’t worry about this point. Yet, I think the dynamic element here only complicates the analysis for wind without fundamentally upsetting the principles being advocated.

LINKS:

Troy Rule, “A Downwind View of the Cathedral: Using Rule Four to Allocate Wind Rights,” San Diego Law Review, (2009).

ABSTRACT: The rapid pace of U.S. wind energy development is generating a growing number of conflicts over competing wind rights. The “wake” of a commercial wind turbine creates turbulence and unsteady wind flow that can reduce the productivity of other wind turbines situated downwind. Existing law is unclear as to whether a landowner who installs a wind turbine on its property is liable for the lost productivity of a downwind neighbor’s turbine resulting from such wake effects. Legal uncertainty as to how competing wind rights are shared among neighbors can induce wind energy developers to abandon otherwise lucrative turbine sites situated near property lines, thus forfeiting valuable wind resources. This paper applies Calabresi and Melamed’s familiar “Cathedral” model to determine which rule regime would best promote the efficient allocation of competing wind rights while maintaining consistency with existing law. Surprisingly, the Cathedral model’s infamous and rarely-applied “Rule Four” seems best-suited for addressing these conflicts.

Troy Rule, “Shadows on the Cathedral: Solar Access Laws in a Different Light,” University of Illinois Law Review, (2010).

ABSTRACT: Unprecedented growth in rooftop solar energy development is drawing increased attention to the issue of solar access. To operate effectively, solar panels require un-shaded access to the sun’s rays during peak sunlight hours. Some landowners are reluctant to invest in rooftop solar panels because they fear that a neighbor will erect a structure or grow a tree on nearby property that shades their panels. Existing statutory approaches to protecting solar access for such landowners vary widely across jurisdictions, and some approaches ignore the airspace rights of neighbors. Which rule regime for solar access protection best promotes the efficient allocation of scarce airspace, within the constraints of existing law? This Article applies Calabresi and Melamed’s “Cathedral” framework of property rules and liability rules to compare and analyze existing solar access laws and to evaluate a model solar access statute recently drafted under funding from the US Department of Energy. Surprisingly, the Article concludes that a statute implementing the Cathedral model’s seldom-used “Rule Four” is best suited for addressing solar access conflicts.

Guido Calabresi & A. Douglas Melamed, “Property Rules, Liability Rules, and Inalienability. One View of the Cathedral,” Harvard Law Review, (1972).

Endangered species for sale, for their own good and ours

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Lynne Kiesling

At Aguanomics, David Zetland takes on a topic that I find greatly interesting and important — using private property rights to conserve endangered species, reduce poaching, and enable indigenous communities who live around such animals to thrive without species extinction as a consequence. In fact, one of my first-ever posts back in 2002 was about the Irbis Enterprises work with Mongolian herders and snow leopards. I also discussed property rights in tigers in a 2005 post and a 2006 post. Note that Irbis Enterprises is now part of the Snow Leopard Trust.

David observes

That’s why the Brazilian rainforest is disappearing — because government policy makes it easier to slash and burn and move on than to conserve the greenery.

The way to protect the rainforest, the whales, etc. is with stronger property rights, and individuals and companies (e.g., the Nature Conservancy) are set up to provide that protection. (To learn more about this kind of free market environmentalism, visit the Property and Environment Research Center.)

Note also that property rights are not just a binary yes-no either-or. Ownership implies a variety of rights (the frequent metaphor is that a property right is a bundle of sticks), and if you have defined, defensible, divisible, and alienable property rights, then you are more likely to get the beneficial outcomes David discusses.

For example, if you own a piece of property between my property and a lovely mountain range, if I value my view by enough, I can buy your development rights on your property. If that happens, then you and subsequent owners can build on the property, but not in a way that impedes my view. In that case the divisibility of your property rights means that you can profit from selling me a right that I value more than you do. [With thanks to Randy Simmons, from whom I've plagiarized this example.]

Think about what a boon this would be in the rainforest. Organizations like pharmaceutical companies and environmental nonprofits could own the land and the plants, water, and animals on it, and could exchange specific development rights that were contingent upon not destroying the assets. Think about the implications for another current tradeoff in land use in Brazil — rainforest vs. clear-cutting to plant soybeans for soy biodiesel. If the big ag companies had to pay to buy the rainforest, that would change the economics of soy biodiesel, not to mention the implications of rainforest owners being able to retain development rights and divide up the bundle of rights.

This divisibility is also how conservation easements work — a property owner sells (or gives, in the case of it being a charitable contribution) a piece of his/her bundle of rights.

The idea is pretty intuitive for land, watersheds, viewsheds, etc., but how about animals? To my mind, animals are more like water and less like land; animals move, and that means I think the characteristic of the property right in animals is the ability of the community to define and enforce use rights. That means treating the animal population as a common-pool resource and defining use rights (number allowed to kill per year, for example).

Is “First in Time, First in Right” the best way to allocate rights to wind energy?

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Michael Giberson

At EnergyPulse, Ron Rebenitsch discusses the unsettled foundation of the wind power industry: uncertain rights to use the energy present in the wind. Currently the industry seems to work on a “capture what you can” model, but the approach has its problems and the problems are likely to become more pronounced as the industry grows.

Because a wind turbine extracts energy from the wind, the wind downwind of a turbine will be less powerful and more turbulent than the wind entering the turbine. As a rule of thumb, expect that these downwind effects continue for a distance up to 10 times the size of the turbine’s rotor diameter. As Rebenitsch mentions, a 1.5 MW turbine might have a 77 meter rotor diameter, so the downwind effects of the turbine could extend 770 meters (or just over 2500 feet). If a wind power project’s turbine is closer than 2500 feet to the landowner’s property boundary, it may be subject to interference from development of wind power (or other construction) on the neighboring property.

As a practical matter, I understand that financiers typically seek to enforce a buffer zone around a project before participating in funding. Project developers, too, are obviously interested in the long term value of an installation. Still, the industry would benefit from additional clarity.

The article is only one of two parts that Rebenitsch intends to publish. This first part explains the problem and cites two possible legal models: the “First in Time, First in Right” approach sometimes used for water rights, and the unitization model frequently used for oil and gas. In the second part he intends to address the pros and cons associated with differing legal models.

I’m looking forward to it.

UPDATE: A link to part two of Rebenitsch’s essay on rights to capture wind energy.

More definitive evidence that property rights improve fishing yields and sustainability

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Lynne Kiesling

I’ve been enjoying this new research from environmental economist Chris Costello and his two co-authors, Steven Gaines and John Lynham: “Can Catch Shares Prevent Fisheries Collapse?”:

Recent reports suggest that most of the world’s commercial fisheries could collapse within decades. Although poor fisheries governance is often implicated, evaluation of solutions remains rare. Bioeconomic theory and case studies suggest that rights-based catch shares can provide individual incentives for sustainable harvest that is less prone to collapse. To test whether catch-share fishery reforms achieve these hypothetical benefits, we have compiled a global database of fisheries institutions and catch statistics in 11,135 fisheries from 1950 to 2003. Implementation of catch shares halts, and even reverses, the global trend toward widespread collapse. Institutional change has the potential for greatly altering the future of global fisheries.

This is a wonderful result for a whole host of reasons — good for fish, good for fishers, good for fish consumers, good for the interactions in the fish ecosystem, good for fishery policy, good for economists who argue that institutions matter and that effective institutions for common-pool resource governance can lead to superior outcomes.

At Aguanomics, David Zetland provided more thoughtful and insightful analysis and commentary than I’ve been able to pull together this week, as well as links to the Economist article and the New York Times article on the research.

See also Ben Muse’s post with useful links and a valuable reminder that the primary sustainability driver that comes from better-defined property rights is that it makes the fishers more interested in long-term outcomes.