Evolution, Adaptation, And Invention - Property Rights In Natural Resources In A Changing World

Part Three

Changing Conceptions of Property and the Challenge of Accommodating Principles of Sustainability in the Ownership and Use of Natural Resources

Of course, there are many challenges today. The world recently experienced a major financial crisis that has diverted massive financial resources on a global scale towards propping up faltering economies with no long-term guarantees of success. Regional and global conflicts consume massive resources and cause widespread human suffering and economic insecurity. Global population is increasing rapidly, with unprecedented demand for land, natural resources, food, and water. Ever-increasing energy demand drives exploration and development of ever-diminishing supplies of fossil fuels, often in remote, inaccessible, and ecologically sensitive areas. Working at the limits of technology, such developments sometimes go badly wrong with ecologically disastrous results. The 2010 Deepwater Horizon oil rig blowout in the Gulf of Mexico provides a recent and graphic illustration.1 The populations of most nations exceed by several times the carrying capacity of their part of the Earth.2 Clean air and water are diminishing resources. Climate change caused by human activities is now accepted as a reality and, as noted in a recent authoritative report, considered “largely irreversible for 1,000 years.”3 These problems are no longer confined to geographically discrete areas that can be managed in isolation. They are global and require a coordinated and rational global response including changes in resource use and energy consumption patterns, adoption of appropriate international and national legal and policy measures, and modifications to individual rights and responsibilities.

1Between the date of the initial explosion on April 20, 2010, and August 4, 2010, when the well appeared to have been brought under control almost 5 million barrels of crude oil was discharged into the Gulf of Mexico. The well was permanently plugged on September 19, 2010, 5 months after the blow-out. See generally “Deepwater Horizon Oil Spill,” Wikipedia, http://en.wikipedia

.org/wiki/Deepwater_Horizon_oil_spill (accessed August 21, 2010). See also Campbell Robertson and Clifford Krause, “Gulf Spill Is the Largest of Its Kind, Scientists Say,” The New York Times, August 2, 2010, http://www.nytimes.com/2010/08/03/us/03spill.html?_ r=1&fta=y (accessed August 21, 2010).

2For example, “clean green” New Zealand has the sixth largest per capita ecological footprint in the OECD at 5.9 global hectares per person to support our lifestyle and absorb waste products. New Zealand Government, Ministry for the Environment, Environment New Zealand 2007 (December 2007), ch. 3, “Household Consumption,” 74–6 and references therein, http://www.mfe.govt.nz/publications/ser/enz07-dec07/index.html (accessed August 21, 2010).

3See, e.g., Susan Solomon et al., “Irreversible climate change due to carbon dioxide emissions,”

Proceedings of the National Academy of Sciences of the United States of America, published online January 28, 2009 before print: http://www.pnas.org/content/early/2009/01/28/0812721106

.full.pdf+html (accessed August 21, 2010). See also Millennium Ecosystem Assessment Board, Living Beyond Our Means (Washington, DC: Millennium Ecosystem Assessment Board, 2005), 5. “Human activity is putting such strain on the natural functions of Earth that the ability of the planet’s ecosystems to sustain future generations can no longer be taken for granted.”

1. The role of property rights in natural resources4

In most societies the right to own and use land is considered a basic right and a fundamental requisite for economic productivity and the accumulation of wealth by individuals, communities, and States. As Justice Grant Hammond said in White v Chandler, “[n]ext to constitutional rights, property rights are the strongest interests recognized by our law.”5

Such rights are not, and never have been, considered “absolute” under the common law. In describing the basic rights of individuals in civilized society – life, liberty and property – Blackstone, in the 18th century, said of private property:6

The third absolute right, inherent in every Englishman, is that of property: which consists in the free use, enjoyment, and disposal of all his acquisitions, without any control or diminution, save only by the laws of the land . . .7

The italicized part of the quote, often overlooked, is important because it shows that the early common lawyers did not regard private property rights as absolute, but rather as an element of “that residuum of natural liberty, which is not required by the laws of society to be sacrificed to public convenience. . . .”8 The concept of public convenience traditionally embraced town planning, health and environmental regulation, and infrastructure services. Today it also encompasses protection of the public interest in a clean and safe environment, preservation of public land and wilderness areas, and implementing binding international obligations concerning climate change, marine resources, and intergenerational equity.

Property rights are something of a two-edged sword in the context of environmental and natural resources management. If exercised and applied appropriately, and in accordance with natural limitations, the assignment of ownership

4 A growing body of writing explores the interrelationships between property rights, environmental law, and natural resources. See, e.g., Edella Schlager and Elinor Ostrom, “Property-rights Regimes and Natural Resources: A Conceptual Analysis,” Land Economics 68(3) (1992):249; Joseph L. Sax, “Property Rights and the Economy of Nature: Understanding Lucas v. South Carolina Coastal Council,” Stanford Law Review 45 (1993):1433; David Grinlinton, “Property Rights and the Environment,” Australian Property Law Journal 4

(1996):41; Sean Coyle and Karen Morrow, The Philosophical Foundations of Environmental Law: Property, Rights and Nature (London: Hart, 2004); Richard Barnes, Property Rights and Natural Resources (Portland: Hart Publishing, 2009); Aileen McHarg et al., eds., Property and the Law in Energy and Natural Resources (London: Oxford University Press, 2010).

5White v Chandler [2001] 1 NZLR 28, para [67].

6William Blackstone, Commentaries on the Laws of England, 4 Volumes, 19th ed. (London: Sweet, Pheney, Maxwell & Stevens & Sons, 1829), 137.

7Blackstone relied on the Magna Carta and the statute Confirmatio Cartarum 1297 (25 Edw. I); the Bill of Rights 1689 (1 W & M, St. 2. c.2); and the Act of Settlement 1701 (12 & 13 W. III, c.2) as confirmation of these fundamental rights.

8Blackstone, Commentaries on the Laws of England, supra note 6, at 128.

(or some measure of economic exclusivity) to a natural resource can be an effective tool to achieve sustainable use of that resource. This proposition relies on the presumption that the “owner” of the resource operates within a regulatory and economic system that rewards the resource’s continued existence and productivity.9 Examples in New Zealand might include farming and agricultural activities, forestry (with some reservations), the fisheries quota management system (QMS), and potentially, the recently introduced emissions trading scheme (ETS).

On the other side, current economic systems tend to reward the maximization of short-term exploitation of the utility value of resources for profit or speculation, with little long-term consideration for ensuring sustainable productive capacity.10 Adherence to an unrestricted “absolute rights” concept of property can result in complete disregard for neighboring owners’ rights, the general environment, and the public interest. Where there is no private owner, Garrett Hardin’s “tragedy of the commons”11 describes the eventual collapse of an open public resource that has no effective limits on its use.

When dealing with issues of sustainability, our legal and economic systems make it difficult to assign quantifiable economic values to elements of the natural environment such as amenity, scenic beauty, wilderness, and cultural or spiritual significance. Such elements are often ignored or given little weight in conventional resource-use decision-making.

Traditional property mechanisms such as easements, restrictive covenants, and even leases can be, and have been, used to protect access, views, and amenity; but such protection depends on the willingness of property owners to restrict the use of their property, and upon the willingness of the person or entity that seeks the restriction to pay the price and/or take on some correlational obligation. With less tangible or definable values such as amenity and wilderness, there is often no one prepared or able to “pay the price”, leaving such elements unprotected.

9See, e.g., Ronald H. Coase, “The Problem of Social Cost,” Journal of Law and Economics 3 (1960):1–44; Richard A. Posner, Economic Analysis of Law, 5th ed. (New York: Aspen Law & Business, 1998); Harold Demsetz, “Towards a Theory of Property Rights,” American Economic Review 57 (1967):347.

10Walter Lippman, The Public Philosophy (London: Hamish Hamilton, 1955), 109; Timothy O. O’Riordan, Environmentalism, 2nd ed. (London: Pion, 1981), 265 (both referred to in chapter 1 of this volume). See also Carol M. Rose, “Economic Claims and the Challenges of New Property,” in Property in Question: Value Transformation in the Global Economy, ed. Katherine Verdery (Oxford: Berg Publishers, 2004), 275, esp. 279–81 and 288–92.

11Garrett Hardin, “The Tragedy of the Commons,” Science 162 (1968):1243.

2. What is “property”?

Throughout the history of Western common law, as well as in other legal systems, “property” is one of the most difficult concepts to define.12 While a detailed discussion is beyond the scope of this chapter, a few ideas and observations are useful. ‘Property,’ as with most legal concepts, is the creation of a society or social grouping to manage social and economic relations in the interests of harmonious coexistence and economic advancement. The concept is inherently dynamic, and will change and adapt as the demands and circumstances of the society change and develop.13 Therefore, precise definition is difficult, and probably even counterproductive. Many theorists would agree that there is no unitary theory of property that covers all existing and potential manifestations of the so-called bundles of rights14 that people refer to as ‘property,’ but many practitioners would insist “. . . but I know it when I see it.”15

Traditional doctrine is that ‘property’ is either ‘real’ or ‘personal’; the former referring to land, and the latter to movables or ‘personalty.’ Real property

12For a sample of more traditional approaches to the theoretical bases of property rights and obligations, see: Theodore F. T. Plucknett, A Concise History of the Common Law, 4th ed. (London: Butterworths, 1956), Part III, esp. 506–44; Wesley N. Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning, collected and published posthumously under the editorship of Walter W. Cook (New Haven: Yale University Press, 1923); Arthur L. Corbin, “Legal Analysis and Legal Terminology,” Yale Law Journal 29 (1919):163; A. Honoré, “Ownership,” in Oxford Essays in Jurisprudence, ed. A. G. Guest (London: Oxford University Press, 1961), 107–48; Jeremy Waldron, “Property Law,” in A Companion to Philosophy of Law and Legal Theory, ed. D. Paterson (London: Blackwell Publishers, 1996), 560–73. More critical discussions of property rights include: J. E. Penner, “The ‘Bundle of Rights’ Picture of Property,” UCLA Law Review (1996):711; Edella Schlager and Elinor Ostrom, “Property-Rights Regimes and Natural Resources: A Conceptual Analysis,”

Land Economics 68(3)3 (1992):249; Coyle and Morrow, Philosophical Foundations of Environmental Law, supra note 4, at 1–7; Carol M. Rose, “Economic Claims and the Challenges of New Property,” supra note 10, at 275; Terry Frazier, “The Green Alternative to Classical Liberal Property Theory,” Vermont Law Review 20 (1995):299; Carol M. Rose, “Given-ness and Gift: Property and the Quest for Environmental Ethics,” Environmental Law 24 (1994):1; Kevin Gray, “Pedestrian Democracy and the Geography of Hope,” Journal of Human Rights and the Environment 1 (2010):45–65. See also chapter 1 of this volume, and the references therein.

13See, e.g., Lippman, Public Philosophy, supra note 10, at 108; Earl Finbar Murphy,

Nature, Bureaucracy, and the Rules of Property – Regulating the Renewing Environment

(New York: North-Holland, 1977), 186. See also, J. E. Cribbet, “Concepts in Transition: The Search for a New Definition of Property,” University of Illinois Law Review 1 (1986):1, 40; Joseph H. Guth, “Law for the Ecological Age,” Vermont Journal of Environmental Law 9 (2008):432, 511–512.

14See, e.g., James E. Penner, “The ‘Bundle of Rights’ Picture of Property,” UCLA Law Review (1996):711.

15To borrow from the classic comment of U.S. Supreme Court Justice Potter Stewart in Jacobellis v Ohio, 378 U.S. 184 (1964), at 197, regarding his difficulty in defining “hard-core pornography.”

carries with it rights in rem; personal property carries rights in personam.16 Even in the formative years of the common law this construct caused difficulty. For example, because of rigid adherence to certain forms of action, it was not until the end of the 15th century that an exclusive right to possess and use land for a fixed period of time (a lease) was enforceable against all comers by the action in ejectment.17 As such interests had long been regarded as ‘personalty,’ the courts interpreted such a right as a hybrid form of property incorporating elements of realty and personalty, naming the interest a chattel real. This is an early example of the capacity of the common law to evolve, adapt, and invent.18

The law normally considers natural resources found on land – such as minerals, trees, structures, and other fixed objects – to be part of the land. However, migratory resources – such as natural water percolating under or flowing through land, geothermal steams, fish, wild animals, and oil and gas – are generally not considered part of the land, and this has created problems. Because the common law was found wanting in assigning clear rules of ownership to migratory resources, and the “rule of capture”19 was considered uncertain and inappropriate, intervention by the state through nationalizing ownership of, or control over, such resources has been the preferred solution.20

Today many new types of rights are being created that go far beyond traditional property concepts. In New Zealand, these rights include fisheries “quota” under the 1996 Fisheries Act; “resource consents” under the 1991 Resource Management Act (RMA); mining permits and access arrangements under the 1991 Crown Minerals Act (CMA); Crown forest licenses under the 1989 Crown Forest Assets Act; and sustainable forest management permits under the Forests

16Simply put, rights in rem are rights exercisable against the land; rights in personam, are rights exercisable against the person.

17See Megarry and Wade, The Law of Real Property, 6th ed. (London: Sweet & Maxwell, 2000), para 3–009.

18Other early land law examples relevant to natural resources include the creation of the concept of restrictive covenants by the courts in Tulk v Moxhay [1848] 41 ER 1143; and the expansion of easements to cover land enjoyed for recreation by neighboring landowners in

Re Ellenborough Park [1956] Ch 131.

19The common law rule is that the first person to “capture” a migratory resource such as groundwater, oil, gas, or wild animals, acquires ownership. See, e.g., Acton v Blundell [1843] 152 ER 1223; Ballard v Tomlinson (1885) 29 Ch D 115, 121; Ohio Oil Co v Indiana 177 U.S. 190, 203 (1900).

20For example, the nationalization of oil by many common law jurisdictions leading up World War II as the strategic importance of petroleum was realized: Petroleum (Production) Act 1934 (UK), Mines (Petroleum) Act 1935 (Vic), Petroleum Act 1936 (WA). In New Zealand in 1937 the Crown resumed ownership in all liquid and gaseous hydrocarbons under land retrospectively: Petroleum Act 1937 (NZ), s 3 (now s 10, Crown Minerals Act 1991 (NZ) (hereinafter “CMA”)). The right to control access to water in its natural state was assumed by the Crown in 1967: Water and Soil Conservation Act 1967, s 21(1) (now see Resource Management Act 1991 (NZ) (hereinafter “RMA”), s 354(1)(b)). A similar regime for geothermal energy was introduced in 1953: Geothermal Energy Act 1953 (NZ), s 3 (now see RMA, s 354(1)(a)).

Act 1949. More recently a form of property right in carbon dioxide and other greenhouse gases has been developed under the emissions trading scheme (ETS) pursuant to the 2008 Climate Change Response (Emissions Trading) Amendment Act, and formalized “customary rights orders” were created under the 2004 Foreshore and Seabed Act. These regulatory measures are examples of “invention” of what may be called “quasi-property” rights in resources and are discussed further below.

These novel types of rights illustrate the fact that property is both a dynamic and an abstract concept incapable of precise definition. In the context of this chapter, but at the risk of being too simplistic, ‘property rights’ will be described as a collection of enforceable rights and correlative obligations, relating to the exclusive (or nonexclusive) possession of, access to, ability to deal with, and/or ability to use land (private or public) or some other defined natural resource.21

3. Evolution, adaptation, and invention

Examples of situations in which the common law and the legislature have responded to new situations and problems of environmental protection and natural resource management have been mentioned. The common law is, by definition, a process of evolution and adaptation of legal rules to meet novel or changing circumstances. Techniques used in the courts include the concept of ratio decidendi (the rationale for the decision or the principle that the case establishes) and reasoning by analogy. The law “evolves” through the development by the courts of broad principles of general application from earlier authoritative specific decisions, and “adapts” through the application of general rules to novel and specific cases.22

Other methods of evolution and adaptation available to the Courts include the process of “distinguishing” earlier (often unhelpful) superior court decisions from the case under consideration,23 or the process of overruling inferior court decisions, or departing from decisions of courts of lesser or equal jurisdiction.

Although some judges are occasionally accused of “invention” (or “judicial activism”), this is theoretically the province of the legislature. Recent examples

21In this context, “land” includes any part of the surface, subsurface, or airspace that is normally considered part of the land. “Other natural resource” includes air, water, minerals, geothermal energy, other forms of energy, flora, fauna, marine resources and fisheries (commercial, recreational and noneconomic), amenity, and wilderness areas.

22A classic example is the development of the modern duty of care in negligence in Donoghue v Stevenson [1932] AC 562 (HL), and the subsequent expansive, and sometimes ingenious, growth of that concept to the present day.

23In the land law context, see the Privy Council’s distinguishing in Frazer v Walker [1967] 1 AC 569 at 584, of its earlier decision in Gibbs v Messer [1891] AC 248 through an exceedingly narrow interpretation of the ratio from that earlier case.

of such legislative invention in terms of property rights in relation to natural resources include the fisheries quota management system (QMS), resource consents under the RMA, mining permits under the CMA, and emissions units under the ETS.

This chapter will consider in more detail some of the traditional property concepts and techniques relevant to sustainable natural resource management; the modification and restrictions of those concepts by legislation in New Zealand; and new forms of property rights and further opportunities for evolution, adaptation, and invention in the future.

4. Traditional property rights in natural resources

4.1Land

Land ownership has traditionally carried certain common law rights, including extensive rights to use the land and natural resources associated with it. Traditional rights encompass rights to flora and most fauna, rights to minerals, riparian rights,24 and protection of land against the inroads of the sea.25 These rights are not absolute, and carry obligations such as support for neighboring land, and the obligation not to commit a nuisance,26 or waste. They are often overridden by Crown claims to certain resources, and have been progressively restricted by legislation in respect to minerals, town planning, environmental protection, and land takings for public works and infrastructure.

4.2Water

Under common law, water is regarded as incapable of ownership in its natural state,27 but once contained, it becomes the property of the landowner. Historically, it was considered a “free resource” that one could dam, divert, use, or

24An owner (or occupier) of land abutting a water body has a common law natural right to access to and regress from the water. For more detail on “riparian rights” see F. M. (Jock) Brookfield, “Water: Riparian Rights,” in Laws of New Zealand, edited by Honourable Justice McGrath, (Wellington: LexisNexis NZ, 2010), paras 46–55 in Water Part.

25This issue came to the fore in the context of coastal erosion and the coastal management regime under the RMA in Falkner v Gisborne District Council [1995] 3 NZLR 622 (“Falkner”).

26As represented in the ancient maxim, sic utere tuo ut alienum non laedas, “[u]se your property so as not to damage another’s.” Bryan A Garner, ed., Black’s Law Dictionary, 9 ed. (St. Paul MN: Thomson Reuters, 2009), Appendix B, 1872.

27Brookfield, “Water: Riparian Rights,” supra note 24, at para 39 in Water Part; Embrey

vOwen (1851) 6 Exch 353 at 369, 155 ER 579, at 585. This is reflected in s 21 of the Water and Soil Conservation Act 1967 (NZ) where the Crown asserts the right of control over access to water, but not the right of ownership.