Message in a BottleMessage in a Bottle

Capturing Economic Rent from Capturing Economic Rent from Excess RevenueExcess Revenue

Business as un-usualBusiness as un-usual

• Lower interest rates in the hope we… Lower interest rates in the hope we… will will consume moreconsume more

• Offer rebates in the hope we will… Offer rebates in the hope we will… consume moreconsume more

OROR• Lower the cost of doing businessLower the cost of doing business• Utilize pre-existing infrastructure and Utilize pre-existing infrastructure and

re-structure its allocation processre-structure its allocation process

Ground Water in Vermont:Ground Water in Vermont:

Current Revenue:Current Revenue:

• Vermont has no structure in place to glean economic rent for this Vermont has no structure in place to glean economic rent for this asset, so it goes without saying that Vermont’s rent payment on asset, so it goes without saying that Vermont’s rent payment on groundwater equals zero at the present time. groundwater equals zero at the present time.

Current Management Structure:Current Management Structure:

• Unlike the majority of states in the country, Vermont does not Unlike the majority of states in the country, Vermont does not have an overall water use program that addresses withdrawals of have an overall water use program that addresses withdrawals of surface water, groundwater, and water from springs. surface water, groundwater, and water from springs. [1][1] We have We have adopted the Correlative Rights “Doctrine” [Statute]adopted the Correlative Rights “Doctrine” [Statute]

http://www.vjel.org/journal/VJEL10046.htmlhttp://www.vjel.org/journal/VJEL10046.html

• [1][1] VNRC Memorandum, Groundwater Study Committee: Overview of GW Issue in VT, 12/07/07, Jon Groveman pg 2 VNRC Memorandum, Groundwater Study Committee: Overview of GW Issue in VT, 12/07/07, Jon Groveman pg 2

Something for nothing?Something for nothing?Four strategies for gleaning Four strategies for gleaning

Economic Rent:Economic Rent:

•Legal/legislativeLegal/legislative

•Economic Economic

•EnergyEnergy

•Public HealthPublic Health

Legal: Legal: Can we Torque the Tort?Can we Torque the Tort?

• Tort is the law of civil wrongs. Tort law is broken Tort is the law of civil wrongs. Tort law is broken down into various distinct types of "torts", so that down into various distinct types of "torts", so that a person may sue in negligence, when somebody a person may sue in negligence, when somebody has unreasonably breached a “duty of care” for has unreasonably breached a “duty of care” for others' interestsothers' interests

• Tort law usually provides people with the rights to Tort law usually provides people with the rights to compensation when another compensation when another person*** person*** harms harms their legally protected interests.their legally protected interests.

• Negligence is a tort which depends on the Negligence is a tort which depends on the existence of a breach of existence of a breach of duty of careduty of care owed by one owed by one person* to another. One well-known case is person* to another. One well-known case is Donoghue v. StevensonDonoghue v. Stevenson

• Donoghue v. StevensonDonoghue v. Stevenson::

The majority of the members of the The majority of the members of the House of LordsHouse of Lords agreed (3-2) agreed (3-2) that that

Mrs. Donoghue had a valid claim, but disagreed as to Mrs. Donoghue had a valid claim, but disagreed as to why such a why such a claim should existclaim should exist. . Lord MacMillanLord MacMillan, thought this should be , thought this should be

treated as treated as a a new product liability casenew product liability case. . Lord AtkinLord Atkin argued that the law argued that the law

should should recognize a unifying principle recognize a unifying principle that we owe a duty of that we owe a duty of

reasonable reasonable care to our neighborscare to our neighbors

• ****** Historical noteHistorical note - - In the same year they extended the 14th In the same year they extended the 14th Amendment to corporationsAmendment to corporations, the Supreme Court overturned a , the Supreme Court overturned a major civil rights act. Throughout the U.S., the civil rights of major civil rights act. Throughout the U.S., the civil rights of African-Americans were being scaled back in other courts, African-Americans were being scaled back in other courts, paving the way for segregation. In 1938, Justice Hugo Black paving the way for segregation. In 1938, Justice Hugo Black remarked that of the cases in which the Supreme Court applied remarked that of the cases in which the Supreme Court applied the 14th Amendment during the first 50 years after Santa Clara the 14th Amendment during the first 50 years after Santa Clara vs. Southern Pacific, “less that one-half of 1% invoked it in vs. Southern Pacific, “less that one-half of 1% invoked it in protection of the Negro race, and more than 50% asked that its protection of the Negro race, and more than 50% asked that its benefits be extended to corporations.” benefits be extended to corporations.”

http://www.ecologycenter.org/tfs/lesson.php?id=13480http://www.ecologycenter.org/tfs/lesson.php?id=13480

WaterGate:WaterGate:Pulling the plug on this dam Pulling the plug on this dam

privatizationprivatization

• Support (Senate Bill 304) – and/or future bills like it - which would give 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 citizens of Vermont a “public trust” designation. Such a designation is a crucial step [2] in the eventual direction of creating an infrastructure for crucial step [2] in the eventual direction of creating an infrastructure for economic rent economic rent

• Under such law: Not only could bottle water companies afford the Under such law: Not only could bottle water companies afford the aforementioned rent payment of a penny on any gallon beyond the Vermont 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 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 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 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 Fee) could be collected from surplus profits (“rent”) and it would have little to no effect on the cost of their operation to no effect on the cost of their operation

[2] “The state’s water [2] “The state’s water quantityquantity laws are much weaker than its regulations laws are much weaker than its regulations regarding water regarding water qualityquality.” Jon Groveman (the chief architect of S. 304) as .” Jon Groveman (the chief architect of S. 304) as quoted by Mike Ives in Seven Days Journal article “Groundwater Rising”, quoted by Mike Ives in Seven Days Journal article “Groundwater Rising”, Feb. 27-March 05, 2008 editionFeb. 27-March 05, 2008 edition

Ecology and Economy?:Ecology and Economy?:The economic argumentThe economic argument

• By their own admission some water bottlers concede By their own admission some water bottlers concede [concerning groundwater], “there’s more than anyone [concerning groundwater], “there’s more than anyone in Vermont would ever need or be able to use anyway.in Vermont would ever need or be able to use anyway.[3][3]

• Such a concession of surplus by for-profit companies is Such a concession of surplus by for-profit companies is the crucial component necessary to create opportunity the crucial component necessary to create opportunity for an open dialogue on the subject of economic rent…for an open dialogue on the subject of economic rent…

[3][3] Quoting Ron Colton, president of Pristine Mountain Springs in Stockbridge (who currently has contracts to sell a Quoting Ron Colton, president of Pristine Mountain Springs in Stockbridge (who currently has contracts to sell aminimum of 333,000 gallons of groundwater a day to area bottlers) in Seven Days, “Groundwater Rising”, Mike Ives,minimum of 333,000 gallons of groundwater a day to area bottlers) in Seven Days, “Groundwater Rising”, Mike Ives,Feb. 27-March 05, 2008 editionFeb. 27-March 05, 2008 edition

..

It’s like Oil and Water…but these two It’s like Oil and Water…but these two cancan mixmix

……Especially when extremely low overhead costs exist in Especially when extremely low overhead costs exist in comparison to similar successful institutionalized distribution comparison to similar successful institutionalized distribution

modelsmodels

http://waterdividendtrust.com/documents/education.pdf (page 9)

A Clear Source A Clear Source of revenueof revenue

Aggregate totals for 2007:Aggregate totals for 2007:

Only one company, Clear Source, had data for the entire yearOnly one company, Clear Source, had data for the entire year(CSS-B): 28,233,905 (CSS-B): 28,233,905

2,352,825 gallons on average per month2,352,825 gallons on average per month[4][4]•

[4][4] 1.5 million (50,000 gallons a day X 30) is the maximum one 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 can withdrawal without a permit - No.144 of the Acts of the 2005 Adj. Sess. (2006). Hence such companies need a permit yet could Adj. Sess. (2006). Hence such companies need a permit yet could conceivably divide their subsidiaries (Vermont Pure* and a spring conceivably divide their subsidiaries (Vermont Pure* and a spring in Stockbridge, VT, conveniently the home of Pristine Mountain in Stockbridge, VT, conveniently the home of Pristine Mountain Springs*) so that each could collect near capacity amounts yet Springs*) so that each could collect near capacity amounts yet

remain - by ANR standards - as “not active”. remain - by ANR standards - as “not active”. **http://64.233.169.104/search?q=cache:sObwLUbF__0J:www.mass.gov/Eeohhs2/docs/dph/http://64.233.169.104/search?q=cache:sObwLUbF__0J:www.mass.gov/Eeohhs2/docs/dph/

environmental/foodsafety/environmental/foodsafety/permlist_draft.rtf+Vermont+Bottle+water+permit+holders&hl=en&ct=clnk&cd=1&gl=us&client=fipermlist_draft.rtf+Vermont+Bottle+water+permit+holders&hl=en&ct=clnk&cd=1&gl=us&client=firefox-arefox-a

Future Economic Rent Future Economic Rent Revenue:Revenue:

Currently an average household consumes about 200 Currently an average household consumes about 200 gallons of water per day. gallons of water per day. [5][5]

For example, Clear Source is (on average) withdrawing For example, Clear Source is (on average) withdrawing 78,427 gallons per day. This withdrawal amount is 78,427 gallons per day. This withdrawal amount is

approximately 28,427.50 over the limit of the Vermont approximately 28,427.50 over the limit of the Vermont resident usageresident usage

At a penny a gallon over the 50,000 G residential limit, the At a penny a gallon over the 50,000 G residential limit, the difference would be 284 dollars and 27 cents a day paid difference would be 284 dollars and 27 cents a day paid

to the state or distributed to residents of Vermont for to the state or distributed to residents of Vermont for the use of their water. the use of their water.

240 (approximate week days per yr.) X 284.27 = 240 (approximate week days per yr.) X 284.27 =

$ 68,224.80 a year from Clear Source alone$ 68,224.80 a year from Clear Source alone

[5][5] http://www.uvm.edu/~gflomenh/GRN-TAX-VT-PA395/http://www.uvm.edu/~gflomenh/GRN-TAX-VT-PA395/ (Power (Power Point Presentations: Air, Water, Chemicals)Point Presentations: Air, Water, Chemicals)

Not only could bottle waterNot only could bottle watercompanies afford the abovecompanies afford the abovementioned rent payment mentioned rent payment

((penniespennieson a gallon ecological capon a gallon ecological cap) they) theystill would be receiving (at least still would be receiving (at least

ininthis example from Maine) 89%this example from Maine) 89%net profit. Such an outrageouslynet profit. Such an outrageouslyhigh margin of economic renthigh margin of economic rentcertainly would allow such acertainly would allow such acompany to allocate, in additioncompany to allocate, in additionto its cap, a to its cap, a preservationpreservationFee Fee between 2 to 3 % on thebetween 2 to 3 % on theeconomic rent gained economic rent gained

• 24-Ounce Bottle Water 24-Ounce Bottle Water CalculatorCalculator

Cost of one acre foot of water Cost of one acre foot of water (An acre foot of water is (An acre foot of water is 43,560 cubic feet or roughly 43,560 cubic feet or roughly 326,000 gallons) = $1,630.00326,000 gallons) = $1,630.00

Cost of Bottling $0.10Cost of Bottling $0.10Selling Price of 1 Bottle $0.85 Selling Price of 1 Bottle $0.85

GROSS PROFIT: GROSS PROFIT: ONE ACRE ONE ACRE FOOT SOLD $1,300,875.50FOOT SOLD $1,300,875.50

• http://waterdividendtrust.com/http://waterdividendtrust.com/

information/waterprofit.phpinformation/waterprofit.php• http://http://

waterdividendtrust.com/waterdividendtrust.com/documents/education.pdfdocuments/education.pdf

Ecology…good for business

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 $ 40,449.60 yearly from Clear Source Alonefrom Clear Source Alone

• Enough to pay one hydro-geologist to study the health of that ecosystem each year and present findings

Ω Energy: Energy: Water, The New Oil? A scarcity Water, The New Oil? A scarcity

indexindex• By 2030 global energy consumption is expected to grow by 50 %. By 2030 global energy consumption is expected to grow by 50 %.

New England’s projected growth in this period is 15% [6]. New England’s projected growth in this period is 15% [6]. • Water resources play a crucial part in energy (especially nuclear, Water resources play a crucial part in energy (especially nuclear,

hydro-electric and biofuels)hydro-electric and biofuels)• ““Even though 70% of Earth is covered with water, only 3% is fit for Even though 70% of Earth is covered with water, only 3% is fit for

human consumption, of which two-thirds is frozen and largely human consumption, of which two-thirds is frozen and largely uninhabited ice caps and glaciers, leaving 1% available for uninhabited ice caps and glaciers, leaving 1% available for consumption (7) consumption (7)

• The remaining 97% is salt water, which cannot be used for The remaining 97% is salt water, which cannot be used for drinking or agriculture. drinking or agriculture.

• If all the earth's water fit in a gallon jug, available If all the earth's water fit in a gallon jug, available

fresh water would equal just over a tablespoonfresh water would equal just over a tablespoon (7) (7) [6] [6] NatureNature: March 2008, Vol.452/20, “The Energy Challenge”: March 2008, Vol.452/20, “The Energy Challenge” (7) (7) http://seekingalpha.com/article/17769-water-is-the-new-oilhttp://seekingalpha.com/article/17769-water-is-the-new-oilNote: The omega symbol chosen above due to its use by the resistance movement Note: The omega symbol chosen above due to its use by the resistance movement

against the Vietnam-era draft against the Vietnam-era draft

Public HealthPublic Health

• Unless Unless a valid argument for public health can a valid argument for public health can be shapedbe shaped a unifying rallying cry to mobilize the a unifying rallying cry to mobilize the

many disparate Vermonter factions seems dauntingmany disparate Vermonter factions seems daunting • Groundwater is a Groundwater is a mobile resourcemobile resource that is necessarily that is necessarily

shared among all users [8]”shared among all users [8]” • Groundwater as a “Mobile Resource” means it Groundwater as a “Mobile Resource” means it

cannot be viewed in the same way as property or cannot be viewed in the same way as property or

other mineral rights**other mineral rights** [8] Quoted from Legislative Study Committee of Groundwater regulation and Funding Final [8] Quoted from Legislative Study Committee of Groundwater regulation and Funding Final

Report 01/08 quoting Handbook for Groundwater Engineering (1999), Jacques N. Delleur Report 01/08 quoting Handbook for Groundwater Engineering (1999), Jacques N. Delleur

**Citing the U.S. Geological Survey, a **Citing the U.S. Geological Survey, a Vermont Journal of Environmental LawVermont Journal of Environmental Law article notes that most of Vermont’s article notes that most of Vermont’s groundwater lives in “crystalline rock groundwater lives in “crystalline rock aquifers” – impermeable formations of aquifers” – impermeable formations of gneiss and schist. Eighty percent of gneiss and schist. Eighty percent of privately drilled well water flows from these privately drilled well water flows from these crystalline formations. The other twenty crystalline formations. The other twenty percent flows from sand and gravel-based percent flows from sand and gravel-based “stratified drift” aquifers. While the latter “stratified drift” aquifers. While the latter “are under more direct influence by surface “are under more direct influence by surface water” than crystalline ones, “water” than crystalline ones, “practically all practically all surface waters interact with the surface waters interact with the groundwater in some waygroundwater in some way.”[9].”[9]

[9] Seven Days Journal article “[9] Seven Days Journal article “GroundwaterGroundwater RisingRising”, Mike Ives, Feb. 27-”, Mike Ives, Feb. 27-March 05, 2008 edition, pg 26AMarch 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]’ “

10] Seven Days Journal article “Groundwater Rising”, Mike Ives, Feb. 27-March 05, 2008 edition, pg 26A

““Associated Press investigation shows, a vast Associated Press investigation shows, a vast array of pharmaceuticals — including array of pharmaceuticals — including antibiotics, anti-convulsants, mood antibiotics, anti-convulsants, mood

stabilizers and sex hormones have been stabilizers and sex hormones have been found in the drinking water supplies of at found in the drinking water supplies of at

least 41 million Americans.[11]” least 41 million Americans.[11]”

[11] “AP probe finds drugs in drinking water” by Jeff Donn, Martha [11] “AP probe finds drugs in drinking water” by Jeff Donn, Martha Mendoza and Justin Pritchard, Associated Press Writers Mon Mar 10, Mendoza and Justin Pritchard, Associated Press Writers Mon Mar 10, 12:08 PM ET 12:08 PM ET

http://news.yahoo.com/s/ap/20080310/ap_on_re_us/pharmawater_ihttp://news.yahoo.com/s/ap/20080310/ap_on_re_us/pharmawater_i

Groundwater is a Tort Issue…Groundwater is a Tort Issue…

In an economy of scale, In an economy of scale, reasonable use may not be reasonable use may not be

distinguished from distinguished from reasonable collection reasonable collection

since what you are since what you are collecting is to be used collecting is to be used

[presumably and by law] [presumably and by law] “reasonably”“reasonably”

Full Circle…