Message in a Bottle
Capturing Economic Rent from Excess
Revenue
Business as un-usual
• Lower interest rates in the hope we… will
consume more
• Offer rebates in the hope we will…
consume more
OR
• Lower the cost of doing business
• Utilize pre-existing infrastructure and restructure its allocation process
Ground Water in Vermont:
Current Revenue:
• Vermont has no structure in place to glean economic rent for this asset, so
it goes without saying that Vermont’s rent payment on groundwater equals
zero at the present time.
Current Management Structure:
• Unlike the majority of states in the country, Vermont does not have an
overall water use program that addresses withdrawals of surface water,
groundwater, and water from springs. [1] We have adopted the Correlative
Rights “Doctrine” [Statute]
http://www.vjel.org/journal/VJEL10046.html
•
[1] VNRC Memorandum, Groundwater Study Committee: Overview of GW Issue in VT, 12/07/07, Jon Groveman pg 2
Something for nothing?
Four strategies for gleaning
Economic Rent:
• Legal/legislative
• Economic
• Energy
• Public Health
Legal:
Can we Torque the Tort?
• Tort is the law of civil wrongs. Tort law is broken down
•
•
into various distinct types of "torts", so that a person
may sue in negligence, when somebody has
unreasonably breached a “duty of care” for others'
interests
Tort law usually provides people with the rights to
compensation when another person*** harms their
legally protected interests.
Negligence is a tort which depends on the existence of a
breach of duty of care owed by one person* to another.
One well-known case is Donoghue v. Stevenson
• Donoghue v. Stevenson:
The majority of the members of the House of Lords agreed (3-2) that
Mrs. Donoghue had a valid claim, but disagreed as to why such a
claim should exist. Lord MacMillan, thought this should be treated as
a new product liability case. Lord Atkin argued that the law should
recognize a unifying principle that we owe a duty of reasonable
care to our neighbors
• *** Historical note - In the same year they extended the 14th
Amendment to corporations, the Supreme Court overturned a major
civil rights act. Throughout the U.S., the civil rights of AfricanAmericans were being scaled back in other courts, paving the way
for segregation. In 1938, Justice Hugo Black remarked that of the
cases in which the Supreme Court applied the 14th Amendment
during the first 50 years after Santa Clara vs. Southern Pacific, “less
that one-half of 1% invoked it in protection of the Negro race, and
more than 50% asked that its benefits be extended to corporations.”
http://www.ecologycenter.org/tfs/lesson.php?id=13480
WaterGate:
Pulling the plug on this dam privatization
•
Support (Senate Bill 304) – and/or future bills like it - which would give citizens of
Vermont a “public trust” designation. Such a designation is a crucial step [2] in the
eventual direction of creating an infrastructure for economic rent
•
Under such law: Not only could bottle water companies afford the aforementioned
rent payment of a penny on any gallon beyond the Vermont residential use, since
they are still producing (at least in the example from Maine in the last slide)
approximately 89% net profit. A withdrawal cap placed in addition to a standard
percentage of 2% (known as a Preservation Fee) could be collected from surplus
profits (“rent”) and it would have little to no effect on the cost of their operation
[2] “The state’s water quantity laws are much weaker than its regulations regarding
water quality.” Jon Groveman (the chief architect of S. 304) as quoted by Mike Ives in
Seven Days Journal article “Groundwater Rising”, Feb. 27-March 05, 2008 edition
Ecology and Economy?:
The economic argument
•
•
By their own admission some water bottlers concede
[concerning groundwater], “there’s more than anyone
in Vermont would ever need or be able to use
anyway.[3]
Such a concession of surplus by for-profit companies is
the crucial component necessary to create opportunity
for an open dialogue on the subject of economic rent…
[3] Quoting Ron Colton, president of Pristine Mountain Springs in Stockbridge (who currently has contracts to sell a
minimum of 333,000 gallons of groundwater a day to area bottlers) in Seven Days, “Groundwater Rising”, Mike Ives,
Feb. 27-March 05, 2008 edition
.
It’s like Oil and Water…but these two can mix
…Especially when extremely low overhead costs exist in comparison to
similar successful institutionalized distribution models
http://waterdividendtrust.com/documents/education.pdf
(page 9)
A Clear Source
of revenue
Aggregate totals for 2007:
Only one company, Clear Source, had data for the entire year
(CSS-B): 28,233,905
2,352,825 gallons on average per month[4]
•
[4] 1.5 million (50,000 gallons a day X 30) is the maximum one can
withdrawal without a permit - No.144 of the Acts of the 2005 Adj. Sess.
(2006). Hence such companies need a permit yet could conceivably divide
their subsidiaries (Vermont Pure* and a spring in Stockbridge, VT,
conveniently the home of Pristine Mountain Springs*) so that each could
collect near capacity amounts yet remain - by ANR standards - as “not
active”.
*http://64.233.169.104/search?q=cache:sObwLUbF__0J:www.mass.gov/Eeohhs2/docs/dph/environmental/foodsafety
/permlist_draft.rtf+Vermont+Bottle+water+permit+holders&hl=en&ct=clnk&cd=1&gl=us&client=firefox-a
Future Economic Rent
Revenue:
Currently an average household consumes about 200 gallons of
water per day. [5]
For example, Clear Source is (on average) withdrawing 78,427
gallons per day. This withdrawal amount is approximately
28,427.50 over the limit of the Vermont resident usage
At a penny a gallon over the 50,000 G residential limit, the
difference would be 284 dollars and 27 cents a day paid to the
state or distributed to residents of Vermont for the use of their
water.
240 (approximate week days per yr.) X 284.27 =
$ 68,224.80 a year from Clear Source alone
[5] http://www.uvm.edu/~gflomenh/GRN-TAX-VT-PA395/ (Power Point
Presentations: Air, Water, Chemicals)
Ecology…good for business
Not only could bottle water
companies afford the above
mentioned rent payment (pennies
on a gallon ecological cap) they
still would be receiving (at least in
this example from Maine) 89%
net profit. Such an outrageously
high margin of economic rent
certainly would allow such a
company to allocate, in addition
to its cap, a preservation
Fee between 2 to 3 % on the
economic rent gained
• 24-Ounce Bottle Water
Calculator
Cost of one acre foot of water (An
acre foot of water is 43,560 cubic
feet or roughly 326,000 gallons)
= $1,630.00
Cost of Bottling $0.10
Selling Price of 1 Bottle $0.85
GROSS PROFIT: ONE ACRE
FOOT SOLD $1,300,875.50
• http://waterdividendtrust.com/info
rmation/waterprofit.php
• http://waterdividendtrust.com/doc
uments/education.pdf
Net Rent Fee Increases, Ecological
Caps & PreservationΩ Allocation:
•
•
•
Any amount over 70,000 a day (with a cap placed at
100,000 G or whatever amount is determined
ecologically safe for that particular site) will cost two
cents per gallon to be extracted
8,427 G X .02 = $ 168.00 a day X 240 working
days = An additional
$ 40,449.60 yearly
from Clear Source Alone
Enough to pay one hydro-geologist to study the health
of that ecosystem each year and present findings
Energy:
Water, The New Oil? A scarcity
index
Ω
• By 2030 global energy consumption is expected to grow by 50 %. New
•
•
•
England’s projected growth in this period is 15% [6].
Water resources play a crucial part in energy (especially nuclear, hydroelectric and biofuels)
“Even though 70% of Earth is covered with water, only 3% is fit for human
consumption, of which two-thirds is frozen and largely uninhabited ice caps
and glaciers, leaving 1% available for consumption (7)
The remaining 97% is salt water, which cannot be used for drinking or
agriculture.
• If all the earth's water fit in a gallon jug, available fresh
water would equal just over a tablespoon (7)
[6] Nature: March 2008, Vol.452/20, “The Energy Challenge”
(7) http://seekingalpha.com/article/17769-water-is-the-new-oil
Note: The omega symbol chosen above due to its use by the resistance movement against the
Vietnam-era draft
Public Health
• Unless a valid argument for public health can be
shaped a unifying rallying cry to mobilize the many
disparate Vermonter factions seems daunting
• Groundwater is a mobile resource that is necessarily
shared among all users [8]”
• Groundwater as a “Mobile Resource” means it cannot be
viewed in the same way as property or other mineral
rights**
[8] Quoted from Legislative Study Committee of Groundwater regulation and Funding Final Report
01/08 quoting Handbook for Groundwater Engineering (1999), Jacques N. Delleur
**Citing the U.S. Geological Survey, a Vermont
Journal of Environmental Law article notes that
most of Vermont’s groundwater lives in
“crystalline rock aquifers” – impermeable
formations of gneiss and schist. Eighty percent
of privately drilled well water flows from these
crystalline formations. The other twenty percent
flows from sand and gravel-based “stratified
drift” aquifers. While the latter “are under more
direct influence by surface water” than
crystalline ones, “practically all surface waters
interact with the groundwater in some way.”[9]
[9] Seven Days Journal article “Groundwater Rising”, Mike Ives, Feb. 27-March 05,
2008 edition, pg 26A
** “University of Vermont professor Donna
Rizzo, a civil and environmental engineer
who did her PhD dissertation on
groundwater conflicts has stated ‘From a
scientific point of view, there is no
difference between groundwater and
surface water.[10]’ “
Seven Days Journal article “Groundwater Rising”, Mike Ives, Feb. 27-March
05, 2008 edition, pg 26A
10]
“Associated Press investigation shows, a vast array
of pharmaceuticals — including antibiotics, anticonvulsants, mood stabilizers and sex hormones
have been found in the drinking water supplies
of at least 41 million Americans.[11]”
[11] “AP probe finds drugs in drinking water” by Jeff Donn, Martha Mendoza
and Justin Pritchard, Associated Press Writers Mon Mar 10, 12:08 PM ET
http://news.yahoo.com/s/ap/20080310/ap_on_re_us/pharmawater_i
Full Circle…
In an economy of scale,
reasonable use may not be
distinguished from reasonable
collection since what you are
collecting is to be used
[presumably and by law]
“reasonably”
Groundwater is a Tort Issue…