Wednesday, October 28, 2009

New York State Confronts The Energy Suppy/Natural Capital Protection Tradeoff

People in New York City want clean water to drink and access to cheap natural gas. This article highlights the tradeoff. To protect the water supply from pollution at the drill site, the energy company has been pushed not to drill in upper New York State. Given that the company believes that a huge amount of natural gas is located there, they are frustrated. Would a Torts lawyer have come up with a contract to encourage the energy company to devote careful effort to minimize the liability concerns? Is zero drilling "optimal"?

The "big issue" here is how much risk (to the water supply in this case) are we willing to take on in return for some benefits? If the water supply can really be poisoned by the energy company's pollution, then I certainly support this decision but is that true? There is really no way to craft a moderate position here?

Of course, I want my mom (in New York City) to have clean water and there are 20 million people like her in the region. But, what is the cost of banning this drilling?


Josh said...

Don't forget to ask: What is the opportunity benefit to renewable energy as "traditional" energy's externalitites and risks get priced in, either through tighter regulation, or through market mechanisms?

Perhaps zero isn't the optimal, perhaps it's one penny over the margin for renewable. Sure, I know that is effectively zero drilling, but it looks nicer on paper.

nathanbishop said...

Government is more concern to earn through ground resource rather then providing clean drinking water.
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