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A regression discontinuity approach to measuring the effectiveness of oil and natural gas regulation to address the common-pool externality

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  • Balthrop, Andrew T.
  • Schnier, Kurt E.

Abstract

Oil and natural gas reservoirs typically span multiple productive leases so that no owner has rights to the entire stock of resource, resulting in production externalities. Previous literature has examined the effectiveness of government regulation in Texas and Oklahoma in abating these externalities, finding Oklahoma to be more successful in unifying common pools and securing property rights. Using regression discontinuity design, we quantify the impact of regulatory difference between the two states. We find that Oklahoma produces an average of 3361 more barrels of oil over the life of a well, relative to Texas. Given the maturity of the fields in question, the result underscores the continuing importance of addressing common pool externalities even after the primary phase of recovery has largely been completed.

Suggested Citation

  • Balthrop, Andrew T. & Schnier, Kurt E., 2016. "A regression discontinuity approach to measuring the effectiveness of oil and natural gas regulation to address the common-pool externality," Resource and Energy Economics, Elsevier, vol. 44(C), pages 118-138.
    • Handle: RePEc:eee:resene:v:44:y:2016:i:c:p:118-138
    DOI: 10.1016/j.reseneeco.2016.02.006
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    Citations

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    Cited by:

    1. H. Spencer Banzhaf & Yaqin Liu & Martin Smith & Frank Asche, 2019. "Non-Parametric Tests of the Tragedy of the Commons," NBER Working Papers 26398, National Bureau of Economic Research, Inc.
    2. Brown, Jason P. & Maniloff, Peter & Manning, Dale T., 2020. "Spatially variable taxation and resource extraction: The impact of state oil taxes on drilling in the US," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    3. Mauricio Villamizar‐Villegas & Freddy A. Pinzon‐Puerto & Maria Alejandra Ruiz‐Sanchez, 2022. "A comprehensive history of regression discontinuity designs: An empirical survey of the last 60 years," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 1130-1178, September.
    4. Thomas, Pinky & Collins, Alan & Etienne, Xiaoli & Mugabe, Douglas, 2024. "Impacts of state tax and resource ownership policies on extraction: Evidence from U.S. natural gas production," Energy Economics, Elsevier, vol. 138(C).
    5. Banzhaf, H. Spencer & Liu, Yaqin & Smith, Martin D. & Asche, Frank, 2024. "Non-parametric tests of behavior in the commons," Journal of Economic Behavior & Organization, Elsevier, vol. 224(C), pages 521-536.

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    More about this item

    Keywords

    Common pool resource; Oil; Natural gas; Regression discontinuity design;
    All these keywords.

    JEL classification:

    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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