Property Rights and Gravel Pits

Print Insight

Property Rights and Gravel Pits

By: John A. Baden, Ph.D.
Posted on November 19, 2008 FREE Insights Topics:

Controversy over the location and operation of gravel pits illustrates an exceedingly important, widely neglected, and oft misunderstood principle of economics: clear and enforceable property rights minimize conflict. Their absence or ambiguity fosters all manner of negative feelings and behavior, sometimes even violence.

The Indian Wars of the 1800s, Israeli-Palestinian conflicts over settlements, and the turf battles of drug dealers are horrific examples. Our controversies over billboards, methane drilling, stream access, and gravel pits are smaller in scope and lower in intensity, but the underlying principles are constant.

Here’s the rule: when property rights are ill defined and values threatened, conflict is the natural, predictable outcome. As we shall see, the process of defining these rights, especially in the context of economic and cultural change, is highly contentious.

Every stable, peaceful society has a system of property rights. Their fundamental purpose is to eliminate destructive competition over valued resources. When property rights are not well defined and legally enforced, or when they are being re-defined, conflict follows.

Here’s a local example. After much controversy, the Gallatin County Commission granted the TMC company the right to operate a 53-acre, 1.45 million cubic yard, pit west of Gallatin Gateway for 10 years.

Why is this occurring? Gravel is essential to modern life. It’s necessary for roads, concrete, and many other uses. Because there is demand for it, people supply it. If zoning precluded pits in one neighborhood, if the property rights of landowners protect them from these pits, gravel will be mined elsewhere. Some landowners would lose the opportunity to mine gravel and their revenue and the value of their land would reflect this loss.

We have a state permitted, registered gravel pit on our ranch. We never sold gravel, but rather used it on our lanes, and gave some to neighbors and the Kleinschmidt Canal for occasional repair. Our pit was small, rarely in operation, and hence imposed no significant costs or negative externalities on neighbors. We are reclaiming it under a conservation easement with GVLT, hauling stockpiled gravel and smoothing banks to restore the topography to its natural contours.

Two miles south of our place on Little Bear Road was a similar pit. The owners are a well-established and liked ranch family. They are, for good reason, respected and valued in the community. When they drive by, they wave. When there’s a problem, they respond.

Beaver sometimes tunnel through canal banks, a big problem when water breaks through. When this occurs, folks know what to do—call these neighbors and a dump truck of gravel and an excavator soon arrive. If someone in the neighborhood is snowed in by a blizzard and they call, they’ll bring a grader to clear the drifts.

Fifteen years ago these neighbors filed the required papers and made their pit a commercial operation. They have exhausted their initial claim and have filed to expand to their adjacent land. They are so well liked and respected, ideal neighbors, that the Gallatin Gateway Planning Committee passed a unanimous resolution to exempt their pit from new regulations.

Alas, problems still arose. Gravel pits by their very nature have negative spillovers, e.g., noise, increased traffic, and dust. Twenty-five years ago this was considered a minor problem. Now, however, the property rights of pit owners and homeowners are highly contentious.

While these pit operators have amassed much good will with old time neighbors, newer arrivals lack experience with good deeds banked over the years. They know only the negatives. Hence, they complained, conflict ensued, and pit development is stymied.

The conflict is a predictable consequence of spillovers landing in a changed culture and economy. Does the subdivision half a mile from the pit have rights to constrain development? Do the people who built nearby houses after the commercial pit was in operation have an ethical claim to stop its continued operation? Alternatively, does this neighbor have rights to develop his pit on his land?

These are open questions, and important values are at risk. One thing is sure, unclear rights over future use of a valuable resource lead to conflict. I hope this column promotes understanding and resolution.