Eminent domain and the libertarian problem with Keystone

Everyone on the right is enamored with the Keystone XL pipeline, or so it seems. After all it appears to be all about the market. There is a resource that Canada has and through free trade we can be making use of it for the benefit of the American people–cheaper gas, more economic growth and employment, all through the process of trade and exchange. But for many of use who believe strongly in these principles there’s a problem; through the use of eminent domain, land will be taken from private citizens by force and transferred to private companies who will be building and profiting from the pipeline.

Recently in the Washington Examiner, Tim Carney focused on this philosophical problem for those who, on the one hand, believe strongly that we should move forward with the pipeline while at the same time have been ardent defenders of private property and critics of the Kelo v. City of New London  Supreme court decision.

Carney highlights a current case in Nebraska where a court has shut down construction of the pipeline over this issue. “The plaintiffs were landowners in Keystone’s path who didn’t want to sell, and so became victims of eminent domain to benefit Keystone,” writes Carney. The taking was approved by the state of Nebraska under a law that was passed in 2012 granting pipeline companies eminent domain authority. The judge,  Stephanie Stacy, shot down the law as unconstitutional, taking the side of the private landowners against the state and the pipeline companies.

Who to side with in this case should be a no brainer for conservatives and libertarians who who argue that private property rights are the foundation of their free enterprise philosophy.

As Carney notes:

NIMBYism [Not in my back yard] is problematic from a free-enterprise view only if it’s used metaphorically. If somebody else is trying to build something literally through your back yard, shouldn’t you have the right to say no?

And from north to south, that’s exactly what Keystone XL’s owners are doing: working with state governments to use eminent domain and force reluctant landowners to allow the pipeline through their property.

So if eminent domain is not allowed does it mean that the pipeline does not get built? The answer is no. What it means is that pipeline companies actually have to pay landowners their reservation price, not what some court says is the “fair market price.” The vast majority of us at any given moment are not willing to sell our house, farm, or other business voluntarily at the current market price. What makes any price a “market price” is that it brings together willing buyers and sellers. If force or strong arming is behind a given sale then the price that is paid or received has nothing to do with markets properly conceived.

But just because the market price at any given point in time is not one that would induce us to sell it doesn’t mean that there isn’t a higher price that we would voluntarily accept for our property.  This is what is called our reservation price and for the vast majority of us it is above the market price. What pipeline companies need to do is negotiate with the land owners, find out what their reservation price is, and, if they really want access to the land, pay it. As Carney points out:

If the pipeline is economically so valuable, shouldn’t its developers be willing to pay what it takes to build it — without the government putting a gun to the head of landowners?


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