Let me suggest a solution to the fracking problem. The self-styled energy companies want to draw natural gas out of the shale deposits deep below the earth’s surface. Environmentalists like myself believe that fracking will foul the drinking water, damaging a much more crucial resource than the gas they’ll extract. We also think that if gas is so valuable, they wouldn’t be burning it off where it already comes up alongside oil wells. But that’s another story. Let’s stick to safety.
The president refused to give clearance for the Canadian pipeline down through middle America because it would have endangered water resources in that area. The New York Department of Environmental Conservation is trying to draft regulations to assure that there will be no damage to water resources in New York State. Environmentalists doubt the regulations will be strong enough. The gas and oil companies claim there is no need for any regulations and that regulation will cut their profits.
Now I don’t have any particular problem figuring out whom to believe. But many people are left puzzled by the debate and don’t know who or what to believe. So I have a simple suggestion.
All we need to do is change the liability rules. There are, essentially, two rules that matter. One is who’s liable and the other is what they are liable for.
Most of the time we operate under a negligence rule. There’s no liability unless one could have foreseen the damage and did something that was careless in the face of that risk. But in some circumstances we have rules of absolute liability – if your activity caused the damage, you’re liable. The point of that is to shift the burden of failure. I’m sitting quietly in my house and somebody uses dynamite nearby. Not necessary to establish whether they were at fault. They have to figure on the likelihood of injuring someone, arrange to insure against it, and as part of their business plan, they have to do everything they can to avoid even the most innocent damage. Some people may respond that they were careful, but the homeowner didn’t do anything careless either. So the rule of absolute liability can be used to shift the burden to those who are changing the situation. They can go ahead. But if they cause damage, they cannot respond like little kids “But I didn’t mean it.” You break it it’s yours.
The other issue is who is liable. Incorporation limits the liability of the investors, officers and employees of the company. For most purposes, liability stops at the corporate office. And if the corporation decides to go bankrupt or dissolve the corporation, there may be nobody left to sue. But that is a feature of law and it can be withdrawn. Just withdraw the rules limiting liability to the corporation for actions which inflict environmental damage. Remember, you break it it’s yours.
Two simple changes. But then it would be interesting to listen to the private conversations of all those folks, like the ones who brought us the Exxon Valdez oil spill in Alaska, and BP in the Gulf, and see if they tell each other that there is no risk.
They’re out there saying there is no risk because there is no risk to them – the law largely insulates the companies and the risk is on the bystanders, the people who live and work in the area. But if they have to face the risk, maybe they’ll think differently.
— This commentary was broadcast on WAMC Northeast Report, April 10, 2012.