Costs of Inefficient Regulation: Evidence from the Bakken

Abstract

Efficient pollution regulation equalizes marginal abatement costs across sources. Here we study a new flaring regulation in North Dakota's oil and gas industry and document its efficiency. Exploiting detailed well-level data, we find that the regulation reduced flaring 4 to 7 percentage points and accounts for up to half of the observed flaring reductions since 2015. We construct firm-level marginal flaring abatement cost curves and find that the observed flaring reductions could have been achieved at 20%lower cost by imposing a tax on flared gas equal to current public lands royalty rates instead of using firm-specific flaring requirements. DisciplinesBehavioral Economics | Environmental Studies | Growth and Development | Oil, Gas, and Energy ABSTRACTEfficient pollution regulation equalizes marginal abatement costs across sources. Here we study a new flaring regulation in North Dakota's oil and gas industry and document its efficiency. Exploiting detailed well-level data, we find that the regulation reduced flaring 4 to 7 percentage points and accounts for up to half of the observed flaring reductions since 2015. We construct firm-level marginal flaring abatement cost curves and find that the observed flaring reductions could have been achieved at 20%lower cost by imposing a tax on flared gas equal to current public lands royalty rates instead of using firm-specific flaring requirements.

Systematically Incorporating Environmental Objectives into Shale Gas Pipeline Development: A Binary Integer, Multiobjective Spatial Optimization Model

“…We follow previous models and use distance as a proxy for private pipeline infrastructure cost to the developer (see, e.g., Abrahams, Griffin, and Matthews). Following Lade and Rudik, we assume that gathering lines are 4 in. in diameter.…”