How Private Mineral Rights Fuel Energy Innovation
In a recent episode of 'What's Ahead', Steve Forbes, the Chairman of Forbes Media, sheds light on a distinctive American advantage in the energy sector — the system of private mineral rights.
Steve highlights that in the US, unlike in most parts of the world, individuals and companies have the liberty to own the rights to minerals like oil, gas, coal and copper found under their property. This arrangement stands in stark contrast to countries where the government exercises strict control over such resources.
"Here, individuals and companies are allowed to own mineral rights," Steve says. "In other countries, you can have land, but governments own and strictly control any minerals beneath the surface of your property."
This private ownership model, Steve says, paves the way for widespread exploration and production activities as property owners stand to gain financially from the discovery and extraction of resources on their land.
They're also at liberty to sell or lease their rights, often receiving royalties from any resultant discoveries.
According to Steve, this system has led to the development of a "vibrant wildcat industry" of independent explorers in the oil and gas sector, who, along with major corporations, energise the American exploration landscape.
Innovation at the heart of the US energy sector
The US' unique approach to mineral rights has not only stimulated exploration but also innovation, specifically in extraction techniques. Forbes points to hydraulic fracturing, or fracking, as a prime example of American ingenuity.
This innovative drilling technique, which involves fracturing rock with a high-pressure mixture to extract oil and gas, has substantially increased production within the country.
"This freedom to experiment is how drillers made the breathtaking breakthroughs with lateral oil drilling and hydraulic fracturing," Steve says. "That rocketed US output natural gas once regarded as running out in the US in which even the green oriented Europeans now recognise as a clean fuel became abundant."
A comparative look at US and Mexico's mineral rights
Steve draws an intriguing comparison between the mineral rights systems of the US and Mexico, particularly in the context of the oil and gas sectors.
Despite sharing similar geological features, exploration and production in these areas are markedly more intensive on the US side of the border.
The reason? Mexico's state-controlled approach to oil and gas, Steve explains.
"The geology of the US Southwest is no different than what it is across the border in Mexico," he says. "Yet oil and gas exploration in the US is far greater in that region than in Mexico. Why? Because the oil industry there is owned by the Mexican government."
Forbes further argues that such state control prevalent worldwide might be impeding energy development, including potential natural gas discoveries in regions like Britain and Europe.
He concludes: "Despite the US experience, Mexico's government control top-down approach predominates in the rest of the world. There's a huge amount of natural gas waiting to be found and developed in Britain, Europe, and elsewhere. But the lack of American style of individual mineral rights is a costly hindrance."
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