Three Chapters Evaluating Energy’s Bridges and Barriers: Fracking and Renewables

Abstract

This thesis has three chapters on energy economics. The first compares two policies that govern oil and gas leasing in the American Southwest. The second provides an overview of fracking and economic research on fracking to date. The third evaluates a policy meant to encourage renewables and decrease greenhouse gas (GHG) emissions.

In the first chapter, I compare two policies that drillers can use to coerce landowners into leasing their land: forced pooling in New Mexico and Rule 37 exemptions in Texas. Forced pooling is widely used in other states and has received widespread criticism, while Rule 37 exemptions are only used in Texas and have received much less criticism. Using a dataset containing details for nearly 100,000 leases at the New Mexico-Texas border, I examine leasing outcomes. I find that, despite the criticism, landowners contracting under forced pooling fare better in two dimensions of lease outcomes, royalty rates and concessions from firms, and no worse in the third, bonus payments.

In the second chapter, I explain the fracking boom and give an overview of studies done by economists thus far. Economists' research on fracking has explored the local and national economic consequences of fracking, fracking's effects on the housing market and infant health, how the fracking boom affected oil and gas leasing negotiations, and how fracking can be used as a natural experiment to answer questions about road safety and voter turnout.

In the third chapter, joint with Arik Levinson, we evaluate renewable portfolio standards (RPSs). RPSs aim to encourage renewables and discourage GHG emissions. Some prominent government agencies assert that US renewables growth has been largely due to RPSs. That seems unlikely, given that in most regions, renewables exceed RPS requirements. We combine the best features of four recent academic studies, using reduced-form and instrumental variables approaches. In some specifications, RPSs do appear to reduce the use of natural gas and decrease GHG emissions, while boosting the use of wind power. But the effects are small—consistent with the academic findings and in contrast to the public claims and policy goals.