Natural Resource Production under Divided Ownership: Evidence from Coalbed Methane

Review of Law & Economics. Volume 8, Issue 3, Pages 719–757, ISSN (Online) 1555-5879, DOI: 10.1515/1555-5879.1575, December 2012

Posted: 7 Jan 2013

Abstract

Divided ownership has been shown to dilute economic incentives in a variety of contexts. Split estate, or severed mineral rights, is a widely-held form of divided ownership and has been a topic of recent policy interest. A natural experiment created by federal mineral ownership established due to forces unrelated to the natural resource being exploited is studied to avoid the endogeneity problems found on private minerals. Using well-level production data from coalbed methane (CBM) wells in Wyoming during the years 1987-2006, wells on federal minerals with private surface are compared to those on federal minerals with federal surface. Delays in development on split estate are found; maximum production is somewhat lower but cumulative production is higher. Some support is found for strategic incentives firms face regarding property rights. The role of the accommodation doctrine in preventing holdup is discussed.

Keywords: coalbed methane, split estate, energy development, property rights, transaction costs

JEL Classification: D23, L71, Q41

Suggested Citation

Fitzgerald, Tim, Natural Resource Production under Divided Ownership: Evidence from Coalbed Methane. Review of Law & Economics. Volume 8, Issue 3, Pages 719–757, ISSN (Online) 1555-5879, DOI: 10.1515/1555-5879.1575, December 2012, Available at SSRN: https://ssrn.com/abstract=2197407

Tim Fitzgerald (Contact Author)

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Independent ( email )

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