Whose Oil Is It? Property Rights at Issue in China

July 18, 2005 – Copyright The New York Times
By HOWARD W. FRENCH
JINGBIAN, China – As a truck driver hauling crude from private wells sprouting up all over this arid countryside, Gao had a bird’s-eye view of the oil boom that was sweeping this county in the 1990’s. After years of hesitation, he did what tens of thousands of other folks were doing: collected his savings and contributions from every friend and relative he could, and drilled a well.
The total investment was $84,000, a princely sum in northern Shaanxi Province, a hardscrabble moonscape of dusty, yellow-earth hills at the edge of the Gobi Desert. But it seemed worth it when the black crude began to flow – until the day in 2003 when the government seized Mr. Gao’s well and thousands of other private wells, paying a fraction of their value.
What followed has been called one of the most important legal battles ever fought in modern China, as investors like Mr. Gao – he would not identify himself further – banded together in a class action to challenge the seizures, and to push the country’s Communist government as never before to respect its own rules, broadly redefined in 2003, giving private property legal status equal to that of the state.
China first allowed its citizens to sue the government in 1990. But this case is special. It is by common estimate the largest suit ever brought against the government, has drawn major domestic media attention, and involves oil, which China now avidly seeks around the globe.
Many of the investors have been detained; the authorities have invoked laws against illegal assembly and disturbing the public order. Lawyers have been banned from talking to the press and the plaintiffs’ lead counsel, Zhu Jiuhu, is under arrest.
For those in China who urge a strong, transparent justice system, the prospectors’ demand for better compensation or restitution of their wells goes to the heart of the question of what sort of society China is to become: one of full property rights and equal protection before the law, or one of arbitrary decisions imposed by fiat and without appeal.
“If common people have to accept whatever unpredictable changes the government makes, then our litigation code may as well be abolished, because that would mean the public is not allowed to sue the government,” said one person close to the case, who withheld his name to avoid arrest. “Why don’t we just abolish the profession of law altogether?”
Li Heping, who represents the plaintiffs’ lawyer, said the judicial system itself was at stake. “Lawyers believe that Mr. Zhu has always acted within the law,” Mr. Li said. “He never imagined that what he did could be regarded as breaking the law. If he is prosecuted, China’s legal system will mourn.”
Mr. Zhu’s wife said he was formally arrested on June 22, after weeks of detention in Jingbian, during which the authorities denied holding him.
Northern Shaanxi’s oil boom was made possible by sweeping changes in 1994 by the Oil Ministry and the China National Petroleum Corporation that allowed private citizens to prospect and produce oil in a 417-square-mile region in the province.
But a few months after Mr. Gao struck oil, Beijing rescinded private prospecting rights. The plaintiffs say they were never told.
“Local governments actually encouraged investors to drill more oil wells between January and November 2000, and signed lots of long-term investment contracts,” wrote one, Feng Bingxian, who is in hiding and answered a reporter’s questions through a computer messaging service. He argued his case before a legal seminar at Beijing’s Great Hall of the People last year. “In the year 2000 alone, over 2,000 wells were drilled,” he wrote, “which is about a third of the total number of wells in the area.”
In 2003, when the provincial government seized the private wells, it offered a total of $242 million. Many investors said that would cover only about a third of their outlays, and accused local officials of profiteering and conflicts of interest.
Beijing has so far said nothing publicly about the dispute. But in May, the mayor of one oil-rich town in northern Shaanxi told reporters that allowing the private investments had been “a beautiful mistake.” Asked what this meant, Liu Xuming, another city official, said: “At first our government was too poor to produce oil, and that’s why private investment was sought. But that decision is not in the same spirit as central and provincial government policy now.”
Until the government seizure, Mr. Gao’s story of striking it rich resounded with notes familiar from earlier oil booms, in places like west Texas and California.
After his well was dug – 750 yards deep – he camped there, following the hypnotic nod of his derrick and worrying about losing everything.
But two days after he turned his pump on, oil began to gush in a rich flow that amounted to 21 tons a day. Mr. Gao’s face, scarred from a life of hard work, still lights up when he recalls the moment. “I screamed, I washed my hands in the oil, and I drank all night, but I couldn’t get drunk,” he said. “I was too happy.”
Nowadays, he is tracked by the police and debt collectors. He and two other small-oil-well investors met a reporter at a dingy flophouse in a one-unpaved-street town miles from his home. Before he would speak, Mr. Gao handed over a statement professing “love for the party, love for the country and support for Hu Jintao’s reforms.”
“If you could come to my home, you’d see what a mess I am in,” he said. “There are debt collectors everywhere. All our appliances have been sold, and the family can’t even gather for the spring festival.”

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