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Effects of Stricter Environmental Regulations on Resource Development

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  • Ian A. Lange
  • Michael Redlinger

Abstract

This analysis seeks to understand whether changes in oil regulation brought about by the shale revolution have restricted the pace of drilling and production. This hypothesis is tested using data on North Dakota and Montana both before and after North Dakota increased the level of bonding required. Results generally find that the new regulations had no statistical impact on the pace of drilling and production, however it is found that smaller operators reduced their production and exited. These results are instructive for policymakers who weigh the loss of economic welfare against improved environmental quality when deciding on new regulations.

Suggested Citation

  • Ian A. Lange & Michael Redlinger, 2018. "Effects of Stricter Environmental Regulations on Resource Development," CESifo Working Paper Series 7053, CESifo.
    • Handle: RePEc:ces:ceswps:_7053
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp7053.pdf
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    References listed on IDEAS

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    Cited by:

    1. Yi Li & Lili Ding & Yongliang Yang, 2020. "Can the Introduction of an Environmental Target Assessment Policy Improve the TFP of Textile Enterprises? A Quasi-Natural Experiment Based on the Huai River Basin in China," Sustainability, MDPI, vol. 12(4), pages 1-19, February.
    2. Yang, Peifang & Davis, Graham A., 2021. "Why don't environmental bonds fully cover reclamation costs?," Energy Policy, Elsevier, vol. 152(C).
    3. Lade, Gabriel E. & Rudik, Ivan, 2020. "Costs of inefficient regulation: Evidence from the Bakken," Journal of Environmental Economics and Management, Elsevier, vol. 102(C).
    4. Wenqi Zhu & Kangkang Zhang & Deyi Xu & Ziyuan Liu & Jingke Gao, 2021. "Statistical Analysis on the Effect of the Utilization of Mineral Resources on the Environmental Impact in China," Sustainability, MDPI, vol. 13(15), pages 1-19, July.
    5. Haider Mahmood & Maham Furqan, 2021. "Oil rents and greenhouse gas emissions: spatial analysis of Gulf Cooperation Council countries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(4), pages 6215-6233, April.
    6. Backstrom, Jesse, 2019. "Strategic Reporting and the Effects of Water Use in Hydraulic Fracturing on Local Groundwater Levels in Texas," Center for Growth and Opportunity at Utah State University 307177, Center for Growth and Opportunity.
    7. Castillo, Emilio, 2021. "The impacts of profit-based royalties on early-stage mineral exploration," Resources Policy, Elsevier, vol. 73(C).
    8. Weber, Jeremy, 2021. "Bonding Requirements for Oil and Gas Wells in Pennsylvania: Cost-Based Recommendations," MPRA Paper 110035, University Library of Munich, Germany.
    9. 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).
    10. Dong, Zhaoyingzi & Wang, Shaojian & Zhang, Weiwen & Shen, Huijun, 2022. "The dynamic effect of environmental regulation on firms’ energy consumption behavior-Evidence from China's industrial firms," Renewable and Sustainable Energy Reviews, Elsevier, vol. 156(C).

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    More about this item

    Keywords

    oil and gas regulation; shale oil; drilling; firm exit;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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