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Taming drillers through legislative action: Evidence from Pennsylvania’s shale gas industry

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  • Kim, Byung-Cheol
  • Oliver, Matthew E.

Abstract

In 2012 Pennsylvania amended its Oil and Gas Act to tighten regulations on development of shale gas resources. Three key pecuniary provisions were annual well fees, increased bonding requirements, and higher penalty limits for violations. We analyze the effects of these mandates on well operator behavior using data on well operations and inspections over the period 2000–2013. After deriving theoretical predictions, we empirically examine each provision’s effect on firm behavior in two aspects: (i) acquisition of new well permits, and (ii) regulatory violations. Overall, we find the amendments induced firms to acquire fewer permits and elevate environmental protection effort.

Suggested Citation

  • Kim, Byung-Cheol & Oliver, Matthew E., 2017. "Taming drillers through legislative action: Evidence from Pennsylvania’s shale gas industry," Resource and Energy Economics, Elsevier, vol. 50(C), pages 15-35.
    • Handle: RePEc:eee:resene:v:50:y:2017:i:c:p:15-35
    DOI: 10.1016/j.reseneeco.2017.06.002
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    Cited by:

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    3. Max Harleman & Pramod Manohar & Elaine L. Hill, 2022. "Negotiations of Oil and Gas Auxiliary Lease Clauses: Evidence from Pennsylvania’s Marcellus Shale," NBER Working Papers 30806, National Bureau of Economic Research, Inc.
    4. Walls, W.D. & Zheng, Xiaoli, 2021. "Environmental regulation and safety outcomes: Evidence from energy pipelines in Canada," Resource and Energy Economics, Elsevier, vol. 64(C).
    5. Eyer, Jonathan, 2018. "The effect of firm size on fracking safety," Resource and Energy Economics, Elsevier, vol. 53(C), pages 101-113.

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    More about this item

    Keywords

    Shale gas; Regulatory compliance; General deterrence; Environmental bonds; Impact fee;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G2 - Financial Economics - - Financial Institutions and Services
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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