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Natural Resource Production under Divided Ownership: Evidence from Coalbed Methane

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  • Fitzgerald Timothy

    (Montana State University)

Abstract

Divided ownership has been shown to dilute economic incentives in a variety of contexts. Split estate, or severed mineral rights, is a widely-held form of divided ownership and has been a topic of recent policy interest. A natural experiment created by federal mineral ownership established due to forces unrelated to the natural resource being exploited is studied to avoid the endogeneity problems found on private minerals. Using well-level production data from coalbed methane (CBM) wells in Wyoming during the years 1987-2006, wells on federal minerals with private surface are compared to those on federal minerals with federal surface. Delays in development on split estate are found; maximum production is somewhat lower but cumulative production is higher. Some support is found for strategic incentives firms face regarding property rights. The role of the accommodation doctrine in preventing holdup is discussed.

Suggested Citation

  • Fitzgerald Timothy, 2012. "Natural Resource Production under Divided Ownership: Evidence from Coalbed Methane," Review of Law & Economics, De Gruyter, vol. 8(3), pages 719-757, December.
    • Handle: RePEc:bpj:rlecon:v:8:y:2012:i:3:p:719-757:n:6
    DOI: 10.1515/1555-5879.1575
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    References listed on IDEAS

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