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Evaluating Split Estates in Oil and Gas Leasing

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  • Timothy Fitzgerald

Abstract

Taking advantage of randomly assigned federal mineral rights, this paper establishes the discount that mineral developers place on oil and gas leases with divided ownership. Results of 53 bimonthly federal oil and gas lease auctions in Wyoming between February 1998 and October 2006 are examined. Bidders discount split estate by 11% to 14% on average, but by as much as 24% for more expensive leases. Impacts of multiple ownerships and additional leasing stipulations are also explored. This discount is interpreted as an expectation of transaction costs incurred in obtaining surface access, so total costs remain unaffected on average.

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File URL: http://le.uwpress.org/cgi/reprint/86/2/294
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Bibliographic Info

Article provided by University of Wisconsin Press in its journal Land Economics.

Volume (Year): 86 (2010)
Issue (Month): 2 ()
Pages: 294-312

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Handle: RePEc:uwp:landec:v:86:y:2010:i:2:p:294-312

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Web page: http://le.uwpress.org/

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Cited by:
  1. Collins, Alan R & Nkansah, Kofi, 2013. "Divided Rights, Expanded Conflict: The Impact of Split Estates in Natural Gas Production," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150128, Agricultural and Applied Economics Association.

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