Learning Where to Drill: Drilling Decisions and Geological Quality in the Haynesville Shale

68 Pages Posted: 23 Apr 2020

See all articles by Mark Agerton

Mark Agerton

Department of Agricultural and Resource Economics, UC Davis

Date Written: April 22, 2020

Abstract

We often link increasing productivity in resource extraction to innovation in how firms extract. Yet resource quality - where firms extract - is a key driver of productivity. Using a structural model and data from Louisiana's Haynesville shale, I disentangle the impacts of how and where firms extract natural gas. Mineral lease contracts, learning about geology, and prices actually explain more than half of growth in output per well not just technological change. Neglecting this may lead to over-optimistic long-run supply forecasts. I also show that growth in output per well masked large distortions caused by mineral lease contracts, which reduced resource rents.

Suggested Citation

Agerton, Mark, Learning Where to Drill: Drilling Decisions and Geological Quality in the Haynesville Shale (April 22, 2020). USAEE Working Paper No. 20-439. Available at SSRN: https://ssrn.com/abstract=3583149 or http://dx.doi.org/10.2139/ssrn.3583149

Mark Agerton (Contact Author)

Department of Agricultural and Resource Economics, UC Davis ( email )

One Shields Avenue
SS&H Building
Davis, CA 95616
United States

HOME PAGE: http://markagerton.com

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