“Strategic Reporting and the Effects of Water Use in Hydraulic Fracturing on Local Groundwater Levels in Texas.” [Download]
During the last two decades, oil and gas firms have learned to extract more hydrocarbons from unconventional geologic formations by increasing the amount of water, among other inputs, used in hydraulic well stimulations. Since many unconventional resources are located in relatively arid regions, the industry’s increasing water use has created concerns over the impacts on local availability. In this paper, I study two interrelated issues regarding the water use of the unconventional oil and gas industry in Texas. Using a unique dataset of well-level reports on input use, I show that firms’ propensity to disclose details on water use worsens when a well is located within a groundwater conservation district, and a causal link between reported water use in hydraulic fracturing treatments and declining local groundwater levels. The findings contribute to a growing literature studying responses to disclosure laws and are helpful to inform a variety of discussions on resource management. But welfare questions remain, given that significant mineral owner absenteeism suggests the beneficiaries of development are often not the same individuals facing its negative effects.
“Turning Public Information Into Private Benefits: A Natural Experiment in Oil and Gas Leasing Activity.”
Proficiency in oil and gas extraction is dependent on firms acquiring drilling rights in areas with abundant resource stocks and designing an optimal development program. In this paper, I study the first of these decisions using the U.S. Geological Survey’s first large-scale resource assessment of a prolific oil basin as a quasi-natural experiment on leasing activity. I use the assessment's set of geologically-defined boundaries and estimates of oil and gas abundance within to study how firms used its predictions as a meta-level guide to narrow their search radius and acquire drilling rights in areas with better geology. Relative to activity in the unassessed areas of the basin, in the assessed areas I find economically significant changes in the size of a new lease, the number of new leases acquired, and several pecuniary and non-pecuniary terms on leases signed after the assessment was published. Since the areas predicted to have the greatest resource abundance also experienced the largest changes in leasing activity, my findings indicate that firms knew relatively little about the spatial distribution of the basin’s geology during its early development, and that a government-funded project shifted their focus to areas with greater productive potential. Such a change has important implications for resource management from an allocative efficiency standpoint, but it also raises concerns over equity and fairness for less sophisticated private mineral owners in these areas, many of whom were negotiating leases with extraction firms for the first time.
“New Insight on the Determinants of Marine Recreational Fishing Site Choice: Valuing Onsite Characteristics and Diversity Avoidance in Random Utility Models.” – with Rich Woodward
[Revise and Resubmit at Marine Resource Economics]
Information on recreation site amenities is often sparse. Not only does this information scarcity have the potential to limit recreation activity, particularly if it causes users to forego recreation opportunities, but it also limits the ability of coastal communities to best allocate resources across site amenities to meet the needs of users and potential users and maximize the value of marine resources. In this paper, we estimate travel cost models that make use of a new dataset on fishing site characteristics to investigate the degree to which a large vector of amenities influences the site choice decisions of recreational anglers fishing in the Gulf of Mexico. We also uncover an important role of racial, ethnic, and income diversity considerations in recreation decision-making. We contextualize the valuation estimates and combined with the findings of angler tendencies to avoid diversity, discuss the implications for coastal resource management.
“Racial Distance Matters Too: Racial and Ethnic Reference Dependence in Recreation Decision Making” – with Rich Woodward
Using data on angler choices from the Marine Recreational Information Program of the National Oceanic Atmospheric Administration, we find that aversion to diversity affects where anglers choose to fish. We estimate that private-boat anglers in the Gulf of Mexico are willing to encumber higher transportation costs to reach sites that have smaller Black and Hispanic populations, a result that is robust to a variety of alternative specifications including when controlling for pollution and crime. The findings are consistent with the predictions of statistical discrimination theory, as more experienced anglers discriminate less than less experienced anglers. We also find results consistent with the contact hypothesis, as we observe differential discrimination among anglers from ZIP Codes that are above and below the national median White population percentage. Our results provide a novel perspective on the role of race in society and suggest a need for further studies of how race and ethnicity affect recreational choices and non-market valuation.
Rapid technological diffusion has led to a heavy reliance on digital communication media, fundamentally changing how people transact and coordinate. This paper studies how adopting digital communication impacts efficiency and welfare distributions in a Coasian bargaining experiment. After replicating seminal face-to-face bargaining experiments, we find that conducting the same experiments in a digital environment leads to a more than doubling in self-regarding behavior and a 22.5 percent decrease in efficient decision-making. As many firms and institutions continue to wrestle with the migration of face-to-face activities to an online setting, our results offer insight into some potential effects of this transition.
“The Texas Grand Slam: Robbed by Red Tides?” – with Yunyi Hu
A bloom of Karenia brevis (KB) cells, more commonly known as a red tide, is a notorious harmful algal bloom (HAB) observed in all coastal U.S. states. KB blooms present significant challenges as the cells emit brevetoxins, which cause numerous adverse health and environmental effects that degrade the function of markets dependent on the quality of local water and other marine resources. In this paper, we estimate lower bounds of the social costs of red tides. Using the marine recreational fishing industry as our setting, we study the effects on the behavior of anglers that took trips to over 300 fishing sites along Texas’ 367-mile coastline over 2004-2019. Our primary contributions are twofold. First, we exploit a rare panel dataset of monthly site-level fishing pressures, which we use to provide the first estimates of the effects of random KB events in the reduced form, finding that a 1,000% increase in KB cell concentration reduces trips by 19%. Second, we use a rich dataset containing the universe of coastal Texas fishing trip surveys, which include precise on-the-water fishing locations and harvest data from anglers over the same period, to estimate a discrete choice model that enables us to recover the social costs of red tides to the marine angling industry. We estimate the WTP to reduce KB cell concentrations at $22-$34 per angler per trip. Our findings provide an example of where a better satellite prediction, detection, and monitoring program would be useful to inform the public of HAB events.
“A Coupled Recreational Anglers' Decision and Multi-Species Fish Population Dynamics Model" – with Masami Fujiwara and Richard Woodward. (2018). PLoS One, 13(10), e0206537. DOI: doi.org/10.1371/journal.pone.0206537.