Costs of Inefficient Regulation: Evidence from the Bakken

52 Pages Posted: 15 Dec 2017 Last revised: 17 Oct 2018

See all articles by Gabriel Lade

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: October 11, 2018

Abstract

Efficient pollution regulation equalizes marginal abatement costs across sources. We study a new flaring regulation in North Dakota and document its efficiency. The regulation reduced flaring 4 to 17 percentage points, accounting for most of the ob- served flaring reductions at new wells in the state since 2015. We construct firm-specific marginal abatement cost curves and find that the flaring reductions could have been achieved at 46% lower cost by taxing flared gas instead of imposing firm-specific requirements. Taxing flared gas at the public lands royalty rate would achieve 90% of the year-on-year flaring reductions at 60% lower cost.

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 (October 11, 2018). 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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