The Economics of Natural Gas Venting, Flaring and Leaking in U.S. Shale: An Agenda for Research and Policy

43 Pages Posted: 21 Jul 2020 Last revised: 30 Sep 2021

See all articles by Mark Agerton

Mark Agerton

Department of Agricultural and Resource Economics, UC Davis

Ben Gilbert

Colorado School of Mines - Division of Economics and Business

Gregory Upton

Louisiana State University, Baton Rouge

Date Written: July 19, 2020

Abstract

Natural gas venting, flaring and leaking (VF&L) are closely intertwined environmental policy issues for U.S. shale oil and gas operations. In this paper, we lay out an agenda for researchers and policymakers. We describe why VF&L are closely related, both physically and in terms of policy. We perform an interdisciplinary literature review on measurement of VF&L. We marshal granular industry data to identify constraints in the natural gas system correlated with upstream VF&L. Motivated by this descriptive analysis, we discuss the economic reasons for VF&L and the market distortions that could exacerbate VF&L. We then discuss the external cost of VF&L. We calculate that reported 2015 and 2019 flaring and venting imposed climate damages of $0.9 to $1.8 billion and $1.7 to $3.4 billion. We calculate that climate damages of 2015 upstream U.S. methane emissions estimated by Alvarez et al. (2018) were $16.8 billion. Finally, we discuss both existing policy and economic insights relevant to future policy.

Keywords: methane, venting, flaring, leaking, natural gas, shale, energy policy, environmental policy

JEL Classification: Q35, Q48, Q53, Q54

Suggested Citation

Agerton, Mark and Gilbert, Ben and Upton, Gregory, The Economics of Natural Gas Venting, Flaring and Leaking in U.S. Shale: An Agenda for Research and Policy (July 19, 2020). USAEE Working Paper No. 20-460, Available at SSRN: https://ssrn.com/abstract=3655624 or http://dx.doi.org/10.2139/ssrn.3655624

Mark Agerton (Contact Author)

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

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Davis, CA 95616
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HOME PAGE: http://markagerton.com

Ben Gilbert

Colorado School of Mines - Division of Economics and Business ( email )

1500 Illinois Street
Golden, CO 80401
United States

Gregory Upton

Louisiana State University, Baton Rouge ( email )

Baton Rouge, LA 70803
United States

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