The Lax Kw’alaams and Why Property Rights Matter

The New York Times recently reported that the Lax Kw’alaams Band, an indigenous tribe in a remote part of British Columbia, has rejected a $1 billion offer for their consent to the construction of a natural gas processing facility that would service a nearby liquefied natural gas terminal. The group, which has about 3,600 members, would have received the equivalent of about $277,000 per person to allow the plant. The leader of the group explained their decision by saying, “Hopefully, the public will recognize that unanimous consensus in communities (and where unanimity is the exception) against a project where those communities are offered in excess of a billion dollars, sends an unequivocal message this is not a money issue: this is environmental and cultural.”

In normal market transactions, resources flow to those who value them the most regardless of who owns them initially. In this case, that would imply the decision to build the facility (whether now or in the future) does not depend on whether the Lax Kw’alaams Band or the gas company owns the land. Ownership simply determines who has to pay whom in order to develop the land or leave it undeveloped. If the gas company owned the land, they would not have to pay the tribe in order to develop the plant, but the tribe could purchase the land (or, at least, an anti-development easement) from the gas company in order to keep it undeveloped. If the tribe owns the land, the gas company would have to pay or the land would stay undeveloped. In both cases, development would occur if the gas company values the land more than the tribe.

That’s the general theory, but in this particular case the facts suggest that initial property rights do matter. In the case of the Lax Kw’alaams, the group places great value on keeping the land from being despoiled by a natural gas plant. A decade or so ago, the Canadian Supreme Court determined that tribes like the Lax Kw’alaams must be consulted and accommodated if projects cross their land. The tribe clearly has strong preferences for a pristine environment, and has made the choice to forgo a windfall to maintain it.

But what would have happened if the property rights belonged to someone else? If the party given the right had weaker environmental preferences, the terminal would likely be built; it’s doubtful the Lax Kw’alaams would win (or perhaps even enter) a bidding war with the gas company over control of the land. Because participants in environmental policy disputes “know” that property rights matter in this way, they fight politically over who has the current property rights rather than allow rights to exist and be traded.