Developmental Differences: The Role of Institutions in Oil and Gas Operations within the State of Colorado

Abstract

I argue differences in institutional design choices governing western lands have demonstrable effects in the extraction of shale resources. Using GIS data on geographic characteristics and shale development data, I create a dataset which allows a spatial link between institutions, natural resource development, and other parcel metrics. This allows for a test of how institutions governing property affect shale development. Employing a border discontinuity, I indicate that Native American land experiences extensively more shale development, compared to the neighboring private, state, and federal lands containing similar potential for shale development. In sum, this study contributes to the property rights scholarship by providing empirical evidence on how institutional design choices governing property rights affect the development of a natural resource. My analysis further suggests how institutional choices over the governance of natural resources can increase the cost of extracting the resource within one institutional choice, while also transferring development to the less costly institutional choice.