Fragmented Ownership and Natural Resource Use: Evidence from the Bakken

Abstract

Does land fragmentation impair spatially expansive natural resource use? We conduct empirical tests using ownership variation on the Bakken, one of the world's most valuable shale oil reserves. Long before shale was discovered, U.S. policies created a mosaic of private, jointly owned, and tribal government parcels on the Fort Berthold Indian Reservation. We find that all three forms of fragmentation reduced production during the 2010–2015 oil boom, especially joint ownership and the interspersion of small parcels of government and private land. We estimate implied gains from consolidation and discuss implications for the use (or conservation) of other spatially expansive resources.

Virtual Parceling

“…Bradshaw and Lueck observed one form of virtual parceling using contract; we outline several other mechanisms below. Our exploration synthesizes a growing but diffuse body of recent empirical work on specific examples of parties re-bundling fragmented resources that can only be managed at the landscape level (Leonard and Parker 2019, Raghetti 2018, Facemire forthcoming 2020. It also draws upon the well-established literature on land assembly (Epstein 1985(Epstein , 2014aHeller 1998;Brooks & Lutz 2016;Isaac et al 2016) to suggest that a parallel process of re-bundling occurs with commercially viable resources that begin as severable interests in land.…”

“…First, economists have noted that privatization effectively mitigates the tragedy of the commons (Gordon 1954;Hardin 1968). 2 Yet, fragmented property interests lead to mis-use of resources (Libecap and Wiggins 1984;Hansen and Libecap 2004;Heller 1998;Buchanan and Yoon 2000;Leonard and Parker, 2019). For decades, these findings did not seem to contrast-or even relate.…”

“…An interdisciplinary group of scientists, economists, political scientists, and legal scholars have since begun re-defining property as an overlapping set of resources and associated rights. (Lueck 2018, Leonard and Parker 2019, Facemire and Bradshaw 2020, Cowen and Delmotte 2020. Yandle (2007) coined the term "mismatched property rights" in her exploration of overlapping rights regimes in New Zealand's Fisheries.…”

“…In this setting, many users across the domain of the resource can exclude others from access to the resource on their parcel, perhaps charging a fee for access. Because management of the resource requires access to all parcels, there is an input assembly problem that tends to result in under-use of the large-scale resource due to transaction costs and hold up problems, often referred to as an anticommons (Heller 1998;Heller and Hills 2008;Buchanan and Yoon 2000;Leonard and Parker 2019).…”

Small Farms, Large Transaction Costs: Haiti’s Missing Sugar

“…For example, in Cuba, transaction costs from negotiating with entrenched landowners forced investors to develop sugar mills on the eastern side of the island, far from Havana and the established sugar industry (Dye 1994). More recently, fragmented land ownership impeded shale oil production in North Dakota (Leonard and Parker 2021). To overcome such problems, economic development sometimes requires (involuntarily) reallocating property rights in response to changing economic conditions (Lamoreaux 2011).…”