IDEAS home Printed from https://ideas.repec.org/a/aen/journl/2001v22-01-a01.html
   My bibliography  Save this article

Regulatory Remedies to the Common Pool: The Limits to Oil Field Unitization

Author

Listed:
  • Gary D. Libecap
  • James L. Smith

Abstract

We examine the potential inability of voluntary unitization to remedy common property losses associated with oil field development. Unlike the traditional literature, we show that if the field contains two (or more) substances that differ in kind (like oil and gas), then it is possible that non-unitized forms of ownership and operation (with conflicted production incentives) may dominate unitized development of the resource. More specifically, it may be impossible to identify any plan of unitized development that is not pareto-dominated by initial endowments or other non-unitized production arrangements which the parties might devise. These results cast the role of the regulatory agency in a new light. Whereas compulsory unitization has tended to be viewed as a uniformly helpful form of outside influence that succeeds by reducing or overcoming the deadweight cost of bargaining, from our perspective it could also be seen as forcing on the parties a "solution" that unavoidably harms one or more of them.

Suggested Citation

  • Gary D. Libecap & James L. Smith, 2001. "Regulatory Remedies to the Common Pool: The Limits to Oil Field Unitization," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-26.
    • Handle: RePEc:aen:journl:2001v22-01-a01
    as

    Download full text from publisher

    File URL: http://www.iaee.org/en/publications/ejarticle.aspx?id=1354
    Download Restriction: Access to full text is restricted to IAEE members and subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Smith, James L, 1982. "Risk Aversion and Bidding Behavior for Offshore Petroleum Leases," Journal of Industrial Economics, Wiley Blackwell, vol. 30(3), pages 251-269, March.
    2. Libecap, Gary D & Wiggins, Steven N, 1985. "The Influence of Private Contractual Failure on Regulation: The Case of Oil Field Unitization," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 690-714, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gary D. Libecap, 2014. "Addressing Global Environmental Externalities: Transaction Costs Considerations," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 424-479, June.
    2. Paul A. Brehm & Eric Lewis, 2021. "Information asymmetry, trade, and drilling: evidence from an oil lease lottery," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 496-514, September.
    3. Osmundsen, Petter, 2002. "Regulation of common property resources under private information about resource externalities," Resource and Energy Economics, Elsevier, vol. 24(4), pages 349-366, November.
    4. Lin, C.-Y. Cynthia, 2007. "The Multi-Stage Investment Timing Game in Offshore Petroleum Production: Preliminary results from an econometric model," Institute of Transportation Studies, Working Paper Series qt70t9n2r3, Institute of Transportation Studies, UC Davis.
    5. Jongwook Kim & Joseph T. Mahoney, 2002. "Resource-based and property rights perspectives on value creation: the case of oil field unitization," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(4-5), pages 225-245.
    6. Lin, C.-Y. Cynthia & Leighty, Wayne, 2007. "Government Leasing Policy and the Multi-Stage Investment Timing Game in Offshore Petroleum Production," Institute of Transportation Studies, Working Paper Series qt1rj6v4df, Institute of Transportation Studies, UC Davis.
    7. Foreman, R. Dean & Kleit, Andrew N., 2023. "Is prorationing efficiency-enhancing or rent-seeking?: Evidence from a natural experiment," Resources Policy, Elsevier, vol. 80(C).
    8. Gary D. Libecap, 2018. "Douglass C. North: Transaction Costs, Property Rights, and Economic Outcomes," NBER Working Papers 24585, National Bureau of Economic Research, Inc.
    9. Andrew B. Ayres & Eric C. Edwards & Gary D. Libecap, 2017. "How Transaction Costs Obstruct Collective Action: Evidence from California’s Groundwater," NBER Working Papers 23382, National Bureau of Economic Research, Inc.
    10. Gary D. Libecap, 2013. "Addressing Global Environmental Externalities: Transaction Costs Considerations," NBER Working Papers 19501, National Bureau of Economic Research, Inc.
    11. Sylvain Rossiaud, 2015. "L’ouverture de l’amont pétrolier à des compagnies privées. Un cadre d’analyse en termes d’économie des coûts de transaction," Post-Print hal-01162793, HAL.
    12. 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).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Foreman, R. Dean & Kleit, Andrew N., 2023. "Is prorationing efficiency-enhancing or rent-seeking?: Evidence from a natural experiment," Resources Policy, Elsevier, vol. 80(C).
    2. Boyce, John R. & Herbert Emery, J.C., 2011. "Is a negative correlation between resource abundance and growth sufficient evidence that there is a "resource curse"?," Resources Policy, Elsevier, vol. 36(1), pages 1-13, March.
    3. Stahn, Hubert & Tomini, Agnes, 2021. "Externality and common-pool resources: The case of artesian aquifers," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    4. Karen Maguire, 2013. "Drill Baby Drill? Political and Market Influences on Federal Onshore Oil and Gas Leasing in the Western United States," Economics Working Paper Series 1401, Oklahoma State University, Department of Economics and Legal Studies in Business, revised Apr 2013.
    5. Michael Dooley & Peter Isard & Mark Taylor, 1992. "Exchange Rates, Country Preferences, and Gold," NBER Working Papers 4183, National Bureau of Economic Research, Inc.
    6. Gary D. Libecap, 1990. "Comments on Elinor Ostrom," Rationality and Society, , vol. 2(1), pages 112-116, January.
    7. John R. Boyce & David M. Bruner, 2009. "Good Fences Make Good Neighbors: Endogenous Property Rights in a Game of Conflict," Working Papers 09-05, Department of Economics, Appalachian State University.
    8. Akhil Rao & Giacomo Rondina, 2025. "The Economics of Orbit Use: Open Access, External Costs, and Runaway Debris Growth," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 12(2), pages 353-388.
    9. Vissing, Ashley, 2015. "Private Contracts as Regulation: A Study of Private Lease Negotiations Using the Texas Natural Gas Industry," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 44(2), pages 1-18, August.
    10. Lin, C.-Y. Cynthia & Leighty, Wayne, 2007. "Government Leasing Policy and the Multi-Stage Investment Timing Game in Offshore Petroleum Production," Institute of Transportation Studies, Working Paper Series qt0x81x3jp, Institute of Transportation Studies, UC Davis.
    11. Yoder, Jonathan K., 2000. "Contracting Over Common Property: Cost-Share Contracts For Predator Control," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(2), pages 1-16, December.
    12. Xiaoying Liu & Mare Sarr & Timothy Swanson, 2014. "Resistance to the Regulation of Common Resources in Rural Tunisia," CIES Research Paper series 30-2014, Centre for International Environmental Studies, The Graduate Institute.
    13. Costello, Christopher & Quérou, Nicolas & Tomini, Agnes, 2015. "Partial enclosure of the commons," Journal of Public Economics, Elsevier, vol. 121(C), pages 69-78.
    14. Bessen James, 2009. "Evaluating the Economic Performance of Property Systems," Review of Law & Economics, De Gruyter, vol. 5(3), pages 1037-1061, December.
    15. Quérou, Nicolas & Tomini, Agnes & Costello, Christopher, 2022. "Limited‐tenure concessions for collective goods," Journal of Economic Dynamics and Control, Elsevier, vol. 143(C).
    16. Watson, William D. & Lin, King & Browne, Thomas, 1999. "US policy instruments to protect coal-bearing fragile lands," Resources Policy, Elsevier, vol. 25(2), pages 125-140, June.
    17. Brooks A. Kaiser & James A. Roumasset, 2014. "Transitional Forces in a Resource Based Economy: Phases of Economic and Institutional Development in Hawaii," Review of Economics and Institutions, Università di Perugia, vol. 5(2).
    18. Harris,Colin & Cai,Meina & Murtazashvili,Ilia & Murtazashvili,Jennifer Brick, 2020. "The Origins and Consequences of Property Rights," Cambridge Books, Cambridge University Press, number 9781108969055, Enero-Abr.
    19. 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.
    20. Christopher Costello & Daniel Kaffine, 2018. "Natural Resource Federalism: Preferences Versus Connectivity for Patchy Resources," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(1), pages 99-126, September.

    More about this item

    JEL classification:

    • F0 - International Economics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aen:journl:2001v22-01-a01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David Williams (email available below). General contact details of provider: https://edirc.repec.org/data/iaeeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.