In an editorial, the Economist this week argues that "if Britain wants an American-style energy boom, it should import American-style local taxation." In short, they argue that differences in public opinion toward fracking are driven by differences in how the benefits of development are distributed. In the UK (and most other European countries), subsurface mineral rights are held by the state, and taxes on production are generally collected at the national level. Local communities therefore don't get or at least don't easily see the economic benefits of development, only its environmental and other costs. The editorial argues that distributing revenues back to communities would increase local support, enabling greater development that would (it is implied) benefit the UK in general.
This argument is not new - private ownership of subsurface rights are a frequently cited structural advantage for oil and gas development in the US. The argument is also appealing, especially for me - as one of my professors loved to say, lawyers are "institutional engineers". If policy outcomes can be explained by relatively small differences in legal institutions like the distribution of subsurface rights, then the application of some institutional engineering can probably improve things. Even if not, just being able to argue that law drives public opinion and policy is attractive, partly because it makes me look good in front of colleagues from other disciplines, like the economists I work with here at RFF.
Nevertheless, these institutional differences can't be the only driver of differing attitudes toward fracking in the US and UK. As the editorial points out, attitudes toward development vary greatly within the US, despite universal state-level control over regulation and taxation. Even ownership of subsurface rights isn't a good explanation for these differences, at least by itself. New York's moratorium on fracking continues, driven by a highly skeptical public, while development generally has greater support in the West - this despite the fact that the federal government is by far the largest landowner in that part of the country. Severance taxes (taxes on gas production) also vary greatly across the country, making it difficult to draw any connections between public opinion and public (or at least government) benefit.
Private rights and local benefit therefore might be part of the story, but they can't alone explain differences in public opinion or the pace of development. Other factors must be in play. "Culture" is probably part of it, though without more explanation that's a cop-out. I suspect that experience with the oil & gas industry and, relatedly, the pace of recent development are important - if there hasn't been much drilling in recent decades, but industry suddenly starts drilling hundreds or thousands of wells, there's going to be a public response. People naturally fear change. But if industry has been drilling for a long time, and if many jobs in an area depend on that development, the benefits of new drilling are easier to see (though some might argue that people in such areas can become desensitized to new risks).
Other factors like population density (low in Texas and the West, higher in the East and in Europe), reliance on groundwater vs. surface water, or general vulnerability (perceived or actual) of the local environment might also drive differences in public opinion. The only thing these factors have in common is that there's not much data to differentiate between them. The Economist is probably right that legal and fiscal policy are important drivers of public opinion toward oil & gas development, but they are almost certainly wrong to suggest these are the only factors, and they may not even be the most important ones, however much they (and I) might wish the story were so simple.
RFF's soon-to-be-released survey of public opinion in Pennsylvania and Texas should shed some light on the issue, though not specifically on the relevance of land rights and tax policy. We plan to continue research along these lines in the near future, in hopes that we can understand the public context in which policy must exist.
