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Where to drill? The petroleum industry's response to an endangered species listing

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  • Melstrom, Richard T.

Abstract

This paper examines the effect of U.S. Endangered Species Act (ESA) regulations on oil and natural gas well drilling in Kansas and Oklahoma. In 2014 and 2015, petroleum companies faced land use restrictions when the imperiled lesser prairie chicken received threatened species-status under the ESA. In Kansas and Oklahoma, as elsewhere, the petroleum industry has been criticized for damaging environmental quality and developing wildlife habitat. Using data on well locations, I estimate a discrete choice model to measure the effects of ESA regulations on companies' location preferences. While the results show that habitat avoidance increased with regulatory scrutiny, the effect is very modest, which suggests that companies may have discounted the risk of penalties from ESA violations. Results also suggest that pre-listing announcements related to ESA regulations influenced companies' location choice.

Suggested Citation

  • Melstrom, Richard T., 2017. "Where to drill? The petroleum industry's response to an endangered species listing," Energy Economics, Elsevier, vol. 66(C), pages 320-327.
  • Handle: RePEc:eee:eneeco:v:66:y:2017:i:c:p:320-327
    DOI: 10.1016/j.eneco.2017.06.028
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    More about this item

    Keywords

    Well locations; Conservation; Energy; Habitat; Endangered Species Act;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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