Working Paper: NBER ID: w30806
Authors: Max Harleman; Pramod Manohar; Elaine L. Hill
Abstract: Oil and gas lease negotiations provide mineral owners the opportunity to negotiate for both compensation and auxiliary clauses that may protect their health and properties. We use optical character recognition to assemble a novel dataset of compensation and specific clauses in nearly 60,000 leases signed in the Marcellus Shale Play of Pennsylvania. We leverage the dataset to produce three main findings. First, contrary to the standard utility maximization model, we find a positive relationship between compensation and clauses. Second, we find that as development of the shale play progressed over time, compensation rose and leases became more likely to contain environmentally protective clauses. Third, we find that compensation and the presence of clauses have a weak relationship with the geologic productivity of nearby wells. Together, our findings indicate that oil and gas firms simultaneously make concessions by raising compensation and approving clauses, but these concessions do not depend on geologic productivity. This suggests that some mineral owners, such as those that are high-income or from more socially organized communities, have the skills or resources to negotiate for more favorable leases all-around and point to similar environmental justice concerns identified in other shale plays.
Keywords: No keywords provided
JEL Codes: D23; Q32; Q33; R11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| compensation (M52) | auxiliary clauses (Y20) |
| development of Marcellus Shale (L71) | likelihood of protective clauses (G33) |
| development of Marcellus Shale (L71) | compensation (M52) |
| compensation (M52) | geologic productivity (L72) |