Costs of Inefficient Regulation: Evidence from the Bakken

48 Pages Posted: 15 Dec 2017  

Gabriel Lade

Iowa State University - Department of Economics

Ivan Rudik

Cornell University - Dyson School of Applied Economics and Management

Multiple version iconThere are 2 versions of this paper

Date Written: December 12, 2017

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.

Keywords: North Dakota, Bakken, hydraulic fracturing, flaring, efficient regulation, oil and gas

JEL Classification: L71, Q3, Q4

Suggested Citation

Lade, Gabriel and Rudik, Ivan, Costs of Inefficient Regulation: Evidence from the Bakken (December 12, 2017). Available at SSRN: https://ssrn.com/abstract=3086728 or http://dx.doi.org/10.2139/ssrn.3086728

Gabriel Lade

Iowa State University - Department of Economics ( email )

260 Heady Hall
Ames, IA 50011
United States

Ivan Rudik (Contact Author)

Cornell University - Dyson School of Applied Economics and Management ( email )

Ithaca, NY
United States

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