Effects of Stricter Environmental Regulations on Resource Development

Ian Lange and Michael Redlinger
Additional contact information
Michael Redlinger: Department of Natural Resources, State of Alaska

No 2016-11, Working Papers from Colorado School of Mines, Division of Economics and Business

Abstract: As technology and our ability to alter the natural world expand, it may lead to change in the level or type of externalities that economic activity places on society. This may prompt changes in the laws and regulations governing activity to limit the new externalities. While new regulations will change the distribution of rents around, welfare is impacted if the regulations alter the pace of economic activity. This analysis seeks to understand whether changes in oil and gas regulation brought about by the shale revolution have restricted the pace of drilling and production. This hypothesis is tested using data on North Dakota and Montana both before and after North Dakota increased the level of bonding required to operate in the state as well as stricter rules on waste disposal. Using regression discontinuity and difference-in-differences methods, results generally find that the new regulations had no statistical impact on the pace of drilling and production. While the average impact of the regulations on production was statistically indistinguishable from zero, it is found that smaller operators reduced their production and larger operators increased theirs. These results are instructive for policymakers who weigh the loss of economic welfare against improved environmental quality when deciding on new regulations.

Keywords: Oil and Gas Regulation; Shale Oil; Drilling; Firm Exit (search for similar items in EconPapers)
JEL-codes: L51 L71 Q35 Q53 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2016-10
New Economics Papers: this item is included in nep-ene, nep-env and nep-ind
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http://econbus-papers.mines.edu/working-papers/wp201611.pdf First version, 2016 (application/pdf)

Related works:
Journal Article: Effects of stricter environmental regulations on resource development (2019)
Working Paper: Effects of Stricter Environmental Regulations on Resource Development (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:mns:wpaper:wp201611

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