How Property Rights Can Spur Artificial Reefs; M. De Alessi

But in one state, Alabama, artificial reefs can be privately owned-sort of. Private cit izens are allowed to create artificial reefs. The state provides no defense of this ownership, however. If others learn about the reef, they can use it, too, so the property right is marginal at best. Even so, the most tenuous private property right related to reefs-simply having proprietary information on the exact location of a reef-results in a tremendous private initiative to create such reefs. Mr. De Alessi is coordinator of the Center for Private Conservation, a project ofthe Competitive Enterprise Institute in Washington, D. C. 77 Artificial reefs are popular with local rec reationists and environmentalists because they enhance the marine environment. Within days of a hard substrate appearing on the seafloor, small encrusting animals begin to attach themselves, in the process creating more surface area for other organisms to either attach to or hide behind. Thus artificial reefs create habitat for many species of both fish and invertebrates, which in turn attract many larger fish, some of which might not survive otherwise. There is some debate over the extent to which reefs attract sea life that is already present and the extent to which they encourage propagation of more fish and other animals. Clearly, they do both.

The Gulf of Mexico is particularly well suited to artificial reef creation because its seafloor lacks the rocky bottom and outcrop pings that can support a rich variety of life (although even California, which has such features, has a strong contingent clamoring for artificial reef production). "Dropping one of these [artificial reefs] in the middle of this vast expanse of mud bottom is like putting an oasis in the desert,"2 says an officialwith the Texas Parks and Wildlife Department. Sunk Assets Many of the privately created reefs off the coast of Alabama were formed by sinking old autos. While this may not initially seem pru dent, the cars are well cleaned of any noxious chemicals before they are carried out to sea.

78 THE FREEMAN • FEBRUARY 1997 Even without stringent regulations, many of the people who fish around these reefs eat what they catch, so it is also in their best interests to keep fish free from toxic chemi cals. The main problem with cars is that they do not last very long, but without secure private property rights, there is little interest in finding more durable materials. Legal, private reef creation began in Ala bama in 1987 when the Department of Con servation and Natural Resources created the first of two large areas where people are allowed to sink acceptable objects (those passing a state inspection to ensure that no toxic materials remain). The measure came in response to the artificial reef creation that was already going on illegally. Recreational fish ers had figured out the benefits of small artificial reefs and had been sinking objects on their own for many years. Eventually the commercial fishingindustry grew tired of stray shopping carts damaging their nets, so they convinced the state to take action.

Because the jurisdiction over artificial reef creation rested with the U.S. Army Corps of Engineers, Alabama arranged for a large permit from the Corps, then issued its own permits to the public. As part of this arrange ment, the state assumed all of the liability resulting from these reefs, which encouraged their creation but discouraged any private interest in the long-term effects of the reefs. Strengthening ownership rights to artificial reefs and returning liability to their owners would encourage long-term care and stew ardship. Once reef creation was sanctioned by the state, the numbers of reefs took off, and so did entrepreneurial activity. One company has specialized in preparing old cars to meet state standards, then delivering them to a specified and confidential location. Since 1987 it is estimated to have placed over 5,000 cars and 300 school buses underwater. 3 As a result of this kind of activity, in 1992, with only a fraction of the Gulf Coast shoreline, the recreational catch of red snapper in Alabama was two to five times higher than those of the other Gulf states.4 The value of proprietary information en couraged reef creation, but the fleeting nature of the property right and lack of liability encouraged people to consider only the short term benefits of their actions. Thus most of the reefs were formed from old washing machines, toilets, and all sorts of other junk that corroded quicklyor was otherwise rapidly destroyed. Auto bodies lasted longer, usually five years or more, but when Hurricane Opal passed by Alabama in 1995, many reefs were washed out of the area or destroyed, and auto hoods started winding up in fishing nets. This led the state to institute a moratorium on most junk and scrap by early 1997. With this move, Alabama may see some of its sport fishing moving to Florida.

Strengthening Property Rights Setting restrictions to solve this problem ignores the very reason why care was not taken to avoid storm damages in the first place. Cars made popular reefs because they lasted longer than one could hope to keep a good fishing spot secret. For only slightly more than a car,5 a firm called Reef Ball Ltd. offers prefabricated artificial reefs, specifi cally designed to enhance the marine envi ronment and to be durable. By strengthening private property rights to artificial reefs, own ers would naturally take an interest in their protection, and would probably be more in terested in Reef Balls than old Chryslers. Increased liability would also encourage own ers to account for the long-term effects of reef placement and construction. In Japan, where the rights to subtidal lands are clearly defined, the level of investment in artificial reefs is huge. Custom reefs are designed for specific habitats and species production. Many fishing cooperatives even place guards to watch over productive areas day and night.6 Japan is hardly a perfect example,7 yet the vigilance with which private reefs are protected, and the research efforts that goes into fishing reefs demonstrate the vast potential for the positive benefits of private ownership. ' The success of Alabama's artificial reef program'is having an effect outside the state Florida recently started creating large permit areas, and other Gulf states may follow suit.

HOW PROPERTY RIGHTS CAN SPUR ARTIFICIAL REEFS 79 Limited ownership schemes already exist in offshore waters for aquaculture and oil and gas exploration. Extending those leases to artificial reefs would be a simple step toward encouraging the kind of private stewardship of artificial reefs that has been so successful in Japan. 0 1. Oyster beds (a form of artificial reef) have been one exception. For a description of the positive effects of oyster bed ownership in Washington state, see Michael De Alessi, "Oysters and Willapa Bay," Center for Private Conservation Case Study (Washington, D.C.: Center for Private Conservation), March 1996. 2. Hal Osburn, director, Texas Parks and Wildlife Department, quoted on "Oil Rigs to Reefs," eNN's Future Watch, September 11, 1993. 3. William Lindberg, University of Florida Department of Fisheries and Aquatic Sciences, personal communication, Sep tember 25, 1996.

4. Eric s. Cisar, "Artificial Reefs: Making Something from Nothing," Tide, November/December 1993, p. 44. 5. A car body placed out in the Gulf ran about $275, while a delivered Reef Ball costs about $300. Todd Barber, president, Reef Ball Ltd., personal communication, September 1996. 6. Shingo Ota, First Secretary (Fisheries), Embassy of Japan, Washington, D.C., personal communication, July 1996. 7. Fishing cooperatives in Japan are heavily subsidized by the government, which also dictates that artificial reefs must be prefabricated. Thus one of the most important organizations involved in reef creation in Japan is the industry group of cement manufacturers, construction firms, steelmakers, and manufactur ers of plastic materials. See Robert S. Grove and Choule J. Sonu, "Fishing Reef Planning in Japan," in Artificial Reefs: Marine and Freshwater Applications, Frank M. D'ltri, ed. (Chelsea, Mich.: Lewis Publishers, Inc., 1985), p. 192.

"You can either save titne by subscribing to Comntenta!y or you can waste titne keeping up with it." -George F. Will Subscribe Today! $39.00 for 12 issues $72.00 for 24 issues Commentary CallI (800) 829-6270 or write to us at 165 East 56th Street, New YOrk, NY 10022 THEFREEMAN IDEAS ON LIBERTY An EnvironmentWithout PropertyRights by Richard L. Stroup and Jane S. Shaw '~Jhen Eastern Europe began to open up Y' in the late 1980s,one of the great shocks was the severity of its environmental prob lems. Journalists reported on skies full of smoke from lignite and soft coal, children kept inside for much of the winter because of unsafe air, and horses that had to be moved away from the worst areas after a few years or they would die. Many of the environmental ills reflected an abysmally low level of technology. Old, polluting factories of the kinds that are dim memories in the United States were the mainstay of socialist industry. Smelly,sluggish automobiles polluted the roads.