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Costs of increasing oil and gas setbacks are initially modest but rise sharply

Author

Listed:
  • Sean J. Ericson

    (Department of Economics, University of Colorado - Boulder)

  • Daniel T. Kaffine

    (Department of Economics, University of Colorado - Boulder)

  • Peter Maniloff

    (Division of Economics and Business, Colorado School of Mines)

Abstract

Spatial setback rules are a common form of oil and gas regulation worldwide - they require minimum distances between oil and gas operations and homes and other sensitive locations. While setbacks can reduce exposure to potential harms associated with oil and gas production, they can also cause substantial quantities of oil and gas resources to be unavailable for extraction. Using both theoretical modeling and spatial analysis with GIS tools on publicly available data, we determine oil and gas resource loss under different setback distances, focusing on Colorado counties as a case study. We show that increasing setbacks results in small resource loss for setbacks up to 1500 feet, but resource loss quickly increases with longer setbacks. Approximately $5 billion in annual resource revenues would be lost in Colorado under 2500-foot setbacks, a distance recently proposed in Colorado Proposition 112 and California AB 345.

Suggested Citation

  • Sean J. Ericson & Daniel T. Kaffine & Peter Maniloff, 2019. "Costs of increasing oil and gas setbacks are initially modest but rise sharply," Working Papers 2019-06, Colorado School of Mines, Division of Economics and Business.
    • Handle: RePEc:mns:wpaper:wp201906
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    File URL: http://econbus-papers.mines.edu/working-papers/wp201906.pdf
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    References listed on IDEAS

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    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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