The Big Picture: Resource Extraction

This is the fourth installment of The Big Picture, a public symposium on what’s at stake in Trump’s America, co-organized by Public Books and NYU’s Institute for Public Knowledge. Read IPK Director Eric Klinenberg’s introduction here.
Trump has a range of cons going, but one of the most outrageous is this: he is about to fleece his working-class supporters in the Rust Belt, coal country, and the rural Pacific Northwest ...

Trump has a range of cons going, but one of the most outrageous is this: he is about to fleece his working-class supporters in the Rust Belt, coal country, and the rural Pacific Northwest. When he does, we will all suffer the losses. These are the most land-rich, cash-poor regions of our country. They are places where many people feel that their birthright is in the soil itself: the coal seams, old-growth forests, shale gas, and even gold ore. Such resources may be scarce in the world, but they look plentiful if you live in their midst. It is easy to understand the enraged sense of stolen prosperity that follows—a suspicion that distant cities teeming with people in suits have locked local families away from their patrimony. What if you were very poor, but looked around and thought your surroundings could have made you very rich?

Trump has told these communities that he will turn regional land into cash. What he will not tell them is that the cash would not be for them. Today’s dramatic inequality and the ownership structure of our extractive industries means that a small number of multinational corporations are poised to confiscate America’s patrimony of forests and fuels, paying for the right to do so with just a few crumbs for a few years. Families in these areas will lose, and because burning fossil fuels and clear-cutting mature forests accelerate climate change, everyone else will lose with them.

Along with his EPA Administrator Scott Pruitt, Trump is pursuing structural reforms that reflect the principle that getting regulation out of the way of resource extraction will build our wealth as a nation. Their claim reminds me of an early American legal doctrine called the “rule of capture,” which governed mobile natural resources like oil, gas, foxes, and fish. When it came to wild things, you were free to take whatever you could, as fast as you could. That’s what made it yours. If you could afford the biggest ocean nets or oil wells, more power (property) to you. Leaving resources fallow was prosperity squandered. This was before most environmental science or the labor movement, so it didn’t matter if you left water in a nearby stream undrinkable, paid your workers too little to live on, or risked their safety on the job. It didn’t matter if you depleted the supply in ways that hurt future generations.

The left must unite Environmental Justice and Economic Justice together in a single movement.

Many of us who teach this rule in law school play a scene from the film There Will Be Blood to explain how it worked, and the scene is a useful metaphor here as well. The character Daniel Plainview, an early 1900s oil baron, is thundering at a whimpering man named Eli Sunday. Sunday has come to offer Plainview a lease to draw oil from under Sunday’s property, but he’s too late. Plainview’s leases to surrounding wells had already allowed him to empty Sunday’s oil deposit. “That land has been had,” Plainview says, “Nothing you can do about it.” Staggering drunk in his private bowling alley, Plainview spits violently as he explains:

Drainage! Drainage. Eli … you boy. Drained dry. I’m so sorry. Here, if you have a milkshake, and I have a milkshake, and I have a straw … Now, my straw reaches acrooooooooooss the room and starts to drink your milkshake. I drink your milkshake! I drink it up!

Trump wants a government that only works for the likes of Daniel Plainview—not for Plainview’s employees, neighbors, or smaller competitors, and certainly not for the public. The key to selling this agenda is the illusion that anyone can be Plainview. This is the president who brought us books like Trump: How to Get Rich (yes, his name is in the title) and Why We Want You To Be Rich. A Twitter message from an account in “the Mountains, West Virginia” schooled me on how much people want to believe this. “Don’t fall for the Marxist propaganda,” it said. “The movement should be to make poor people wealthy.”

The heist, though, is that we are all still Eli Sunday, and the big mouth about to drain our milkshake is no longer a regional, individual powerhouse like Plainview. Returning to a winner-take-all system for natural resources in 2017 benefits a small group of global industrial giants and their few owners. Take Peabody Energy, for instance, the world’s largest coal company, whose 2016 bankruptcy filing allowed it to restructure its obligations to bondholders, pensioners, and government agencies. That bankruptcy reaped a $15 million stock bonus for its chief executive, and hundreds of millions of dollars for six hedge funds that are all based in New York City or Connecticut. Or consider some of the big timber stands and mills in Northern California, which were drawn together in 1891 by lumber titan C. R. Johnson and his family company Union Lumber. In 1969, Union Lumber was sold to the Boise Cascade Corporation, which was sold to Georgia-Pacific in 1973, one of the largest paper products companies in the world. In 2005, the Koch Industries—one of the biggest companies of any kind in the country—rolled the Georgia-Pacific conglomerate into their even bigger empire.

With their power and $3.1 million to lobby lawmakers early this year, the Koch Brothers helped write a wave of deregulation measures and confirm Scott Pruitt, who is poised to deliver our land wealth to them for a song. Pruitt is using every tool he can find to transform the EPA into a concierge service for the largest oil and gas, chemical manufacturing, and coal companies. He is likely courting them as donors for his own political future.

Applying the rule of capture to today’s world means crossing the wires of big capital with rural poverty, amidst powerful extractive technologies that minimize job creation. There is money to be made for sure, but it will flow to the biggest corporations and their C-Suites. Beyond them is just a bit of trickle down here and there. As in other industries, wages for jobs in the coal industry are not keeping pace with the economy, even as executive pay soars. Unionized miners still make a good living, but only 2.5 percent of coal miners were covered by a union as of 2016. This leaves most coal miners competing for short-term jobs that lack health benefits and pull in less than $20 per hour while they last.

Meanwhile, Trump’s proposed 2018 budget eliminates funding for the Appalachian Regional Commission (ARC) and the US Economic Development Administration, which have long supported downsized coal miners and new businesses in Appalachia. While Congress acted in May to find taxpayer funding to cover health benefits for 22,000 retired coal miners whose employers had gone bankrupt, there is as yet no fix to address those miners’ unfunded pensions. So far, Trump’s ideas for rebuilding infrastructure would only work for projects that can pay down debt with high usage fees over time (like bridge tolls, airport taxes, and rising water rates). This will mean little to no infrastructure work on the urgent projects needed in older areas where residents cannot afford to pay more for what they need.

Pruitt holds up his home state of Oklahoma as a promise: Look how a state rich in fossil fuels becomes rich in money. But it really should be a warning. For more than 25 years, incomes for poor and middle-class families in Oklahoma have fallen or stagnated, despite dramatic growth among the state’s wealthiest households. Posing in a hardhat, as Pruitt so often does these days, does not a working man make.


Tax the Rich?

By Julia Ott

This would all be hard enough to fix if a Rule of Capture for America only mattered in terms of monopolistic power and rising income inequality. Even that would require a better model for sharing the prosperity of our land: whether through tax and labor reforms or regional royalty systems like the one in Alaska, where oil and gas extraction yields checks for every single resident.

Unfortunately, it is even more than wealth and poverty at stake. When it comes to natural resources, our wealth is subject to contamination, waste, and depletion. It matters how things are done—whether a shale gas well or a coal mine is operated so as to protect area water supplies, whether the land left behind is safe and usable for other purposes. It matters if we choose methods of harvesting fish and timber that permit regeneration, especially because sustainable practices maintain more jobs.

The finitude of finite resources means that at some point fossil fuels are gone for good, even as the greenhouse gases they leave are here to stay. Even trees are stubbornly slow to regrow, such that clearing the remaining stands of federal old-growth forests in the Pacific Northwest would only offer a short burst of logging before starting a 75-year waiting game on lower value farm trees.

And, of course, in the age of climate change, our stewardship of fossil fuels and forests has global implications. Hurricanes Harvey, Irma, and Maria provide a reminder that the raging storms and rising seas of climate change will be cruel to rich and poor alike, but those who are most economically vulnerable may be least able to rebuild. The recent years of catastrophic wildfires and droughts in the West make clear that it is in our vital personal interest not to let the fossil fuel industry grow at the expense of us all.

I think the road out of here is to return the way we came. Here is what I mean: For decades, people in our land-rich, cash-poor regions have looked for answers to the puzzle of natural wealth and pervasive poverty in their communities. Too few of our environmental regulations or other policies included large-scale government efforts (in education, economic development, and land reclamation) to ensure a just transition beyond an economy based on logging and mining. America has yet to see a major national investment in rural education to answer the hardships of the machine age in mills and mines, which has cost these regions so many jobs. Other than some protesters in Seattle, few tried to make a social movement fighting for fairness in the global markets for building materials like steel and lumber that were driving down the value of our domestic supplies.

In the absence of alternative ways to make a living, in the absence of honesty about the ways that automation and globalization were replacing and offshoring jobs, people looked for answers. Major industries provided them: environmental regulation alone was to blame. This has always been the winning move for extractive industries and consolidated agriculture.

What if you were very poor, but looked around and thought your surroundings could have made you very rich?

We’ve seen this in California for ages. Most recently, during our devastating drought amplified by climate change, the agribusiness giants of the Westlands Water District funded a $1.1 million “astroturf” campaign to convey that what was good for Westlands was good for California’s impoverished, drought-stricken farmworkers. (Now that Trump has installed a Westlands lobbyist as the deputy secretary of the Department of the Interior, they may not need such campaigns.) But the truth is that the Westlands businesses keep down those same farmworkers’ wage and labor protections, and their thirsty cash crops undermine the water supply for farmworker homes. The political reality is that when a paycheck from agribusiness is all you’ve got (even if it’s less than subsistence wages), and no one else in the state seems to acknowledge you exist, you begin to believe the boss’s needs are your needs.

Just as environmental groups can’t show up at the 11th hour of a terrible drought causing job losses and say they care about farmworkers, so too the American left can’t keep ignoring our land-rich, cash-poor regions. No one can afford for Trump and Pruitt to be the only people who show up holding a plan. “Drill, baby, drill” starts looking pretty good if there is no other prospect of making rent—even if Exxon wrote the plan and everyone knows that drilling, baby, requires more machines than men.

To show up with a plan, I think, means this: Blue voters and politicians in the cities, state governments, and federal delegations of purple, resource-rich states like West Virginia, Pennsylvania, Michigan, and Colorado have to seize the political moment to issue a vocal, organized demand for three things: (1) ambitious, transformative investments (including for tuition relief) in community colleges and universities in declining urban and rural areas, (2) capital investments in small businesses as a foundation for economic development, and (3) a jobs program (expanded from the American Recovery & Reinvestment Act model) that meets urgent needs in these regions: such as rebuilding decaying water and wastewater infrastructure, thinning the overstocked western forests that threaten rural counties with wildfires, decontaminating waterways and land sullied by fossil fuel extraction, and treating the opioid addiction crisis.

This demand is for Trump as well as all the Democrats in Congress—that is, the two groups whose immediate political future most depends on a serious campaign for the stabilization and reinvention of declining regions. If big business is the only hope in town, it will always divide households’ urgent, short-term economic interests from collective environmental safety interests.

Sooner or later, the left is going to have to adopt a platform that ties Environmental Justice and Economic Justice together in a single movement. That platform must be rooted in reinvestment, not just regulation.

I am very sympathetic to the argument that our land rich, cash-poor areas have had their patrimony locked down. But they are no better off if instead, after a few years of a few low-wage jobs, it has been consumed by the industrial behemoths of the Second Gilded Age. A future climate that is safe for all of us is my patrimony too, and I will stand with the Rust Belt, coal country, and our timberlands to make sure that their poverty doesn’t drive them to sell the riches of their land for just the hourly wages they need. That means guarding our shared interests and providing ambitious alternatives so that the Daniel Plainviews of our times can never say to us, as Plainview said to Eli Sunday:

“You’re just the afterbirth.” icon

Featured image: Coal mining in Borneo, Indonesia, 2012. Photograph by Parolan Harahap / Flickr