The Leasing of Federal Lands for Fossil Fuels Production

By Stephen L. McDonald | Go to book overview

4
The Relevant Economics-- Efficient Extraction of Minerals and Environmental Protection

THE EFFICIENT EXTRACTION OF MINERALS

Thus far we have simply assumed that in connection with the determination of rent the extraction of minerals is economically efficient. Now we must examine the matter more closely.1 Minerals extraction has a unique characteristic, the implications of which are most important for our purposes. We shall spell these out and show that, particularly in the case of oil and gas, competition in extraction does not necessarily assure economic efficiency. We shall show that in the interest of maximizing pure economic rent some degree of regulation may be required.


THE TIME-DISTRIBUTION OF EXTRACTION

Minerals extraction differs from most other productive processes in that the minerals physically available, in specific deposits and in total within a geographic area, are limited in amount and are nonrenewable; that is, extraction implies depletion of the mineral resource. Depletion, in turn, implies at least the possibility of ultimate exhaustion in some

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1
This chapter relies heavily on Stephen L. McDonald, Petroleum Conservation in the United States ( Baltimore, Md., Johns Hopkins University Press for Resources for the Future, 1971) chap. 5.

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