Evaluating Split Estates in Oil and Gas Leasing
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.
References listed on IDEAS
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- Ryan Kellogg, 2011.
"Learning by Drilling: Interfirm Learning and Relationship Persistence in the Texas Oilpatch,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 126(4), pages 1961-2004.
- Ryan Kellogg, 2009. "Learning by Drilling: Inter-Firm Learning and Relationship Persistence in the Texas Oilpatch," NBER Working Papers 15060, National Bureau of Economic Research, Inc.
- Chouinard Hayley H & Steinhoff Christina, 2008. "Split-Estate Negotiations: The Case of Coal-Bed Methane," Review of Law & Economics, De Gruyter, vol. 4(1), pages 233-258, July.
- Mitch Kunce & Shelby Gerking & William Morgan, 2002. "Effects of Environmental and Land Use Regulation in the Oil and Gas Industry Using the Wyoming Checkerboard as an Experimental Design," American Economic Review, American Economic Association, vol. 92(5), pages 1588-1593, December.
- Gary D. Libecap, 2009. "Chinatown Revisited: Owens Valley and Los Angeles--Bargaining Costs and Fairness Perceptions of the First Major Water Rights Exchange," Journal of Law, Economics and Organization, Oxford University Press, vol. 25(2), pages 311-338, October. Full references (including those not matched with items on IDEAS)
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