These days, throughout northern Wayne County, PA, farmers are talking less about livestock and dairy prices and more about Norwegian oil policy, Devonian geology, market capitalization, and seismic thumper trucks.
Wayne County sits atop part of the enormous Marcellus Shale gas field, and each farmer is looking at a small fortune in future leasing royalties and bonuses. They are also in the process of solving a problem that has stumped the World Bank, the United Nations, and governments around the world.
The problem is the so-called resource curse. Usually, when countries discover oil, gas, or minerals, most nationalistic governments in the developing world seek to keep all the wealth that comes from such extraction by claiming exclusive rights to everything below the topsoil. Instead of economic development, what they get is corruption, environmental destruction, violent conflict, a worsening economy, and hoards of angry local people.
The resource curse’s current poster child is Nigeria, where corrupt government officials—on all levels—stole hundreds of millions of dollars, thousands died from ethnic conflict and environmental devastation in the oil-producing zones, and the majority of people throughout the country live on less than $1 a day.
In Wayne County (as elsewhere in the United States), it’s the locals who will decide the terms of how the gas is extracted from the ground. Here, the farmers who have farmed the land for generations formed a collective bargaining group, hired lawyers and environmental consultants, and are negotiating with several gas companies on the financial details and the local environmental risks.
Drilling for oil or gas has a long, ugly record of contaminating land and water—a potential catastrophe since this area is an aquifer for New York City and Philadelphia. So, many newly arrived former city dwellers in Wayne County are, at best, doubtful and are demanding that regulatory commissions provide even broader environmental protections.
They point to people in central Pennsylvania and in the West who signed bad leases and found themselves with environmental nightmares like noise pollution, ruined land, contaminated water supplies, and leaky holding pools full of toxic chemicals.
It’s the tension between these two sides that has pushed the issue of how to balance money and the environment further and faster than ever before. Both sides have become immersed in every detail of the drilling process and its risks and costs. The lesson of Marcellus is that the petroleum industries and the landowners can still profit with environmental regulations, despite what industry representatives say. Governments have no excuses to avoid enacting tough environmental laws to protect landowners.
When the process is done, it should offer a new model for future oil, gas, and mining projects: that involving local individuals (and addressing their interests and concerns) in the initial contracting phase with resource companies is the best way to end up with a situation that almost everyone supports.
Since the economic slowdown, the frantic rush to finalize the leasing in Marcellus has slowed—but not stopped. Bonuses that were hovering around $2,500+ per acre have shrunk for the time being to $1,000. Royalties are now offered on a sliding scale. And the gas companies, which see in Marcellus a hugely profitable field irresistibly close to the Eastern seaboard, are becoming much more careful about determining which parcels are most promising. This has given all sides breathing room to get the details right before prices start to rise again.
All this is very different from previous attempts to head off the resource curse. Most non-governmental organizations and the World Bank have promoted financial transparency as a cure-all, but that has had limited success at best over the past decade. The idea behind financial transparency is simple: if people can track the money petroleum companies give to national governments, it should prevent corruption. But, in practice, financial transparency is voluntary, easy to circumvent, and, in itself, has no power to stop those who steal.
Those in international development like to point to the impoverished country of Chad, where the World Bank and oil companies tried another approach that gave meager one-time payouts to the local farmers, which were often wasted. (Sadly, the bulk of the money was also, in turn, wasted by the government.)
Although Chad was a failure, it demonstrated that the World Bank, other development organizations, and the petroleum companies have begun to acknowledge that more needs to be done on the ground locally to compensate landowners. The problem is that their idea of creating local stakeholders has been to tell the people what is happening and offer them a trifle to shut up. That clearly doesn’t work.
The highly promoted alternative of privatization, which sells off a resource into the hands of a distant, corrupt, and uncaring few, has only exploited the countries where it has been used.
When the world and commodity markets regain their footing, those in the developing world should be able to look to Marcellus, adapt its lessons, and negotiate their own specific demands of their governments and the extraction industries when resources are discovered on their land.
The people and the government together can best determine how to make resource extraction a livable proposition by intrinsically involving an informed local citizenry in negotiating environmental protections and sharing the profit with them. Only thus can resource-rich countries in the developing world finally achieve the promise of wealth hidden under the ground.
Jodi Liss is a former consultant at the United Nations. She has lived in Wayne County, PA, since childhood.