Relinquishing Riches: Auctions vs Informal Negotiations in Texas Oil and Gas Leasing / Thomas R. Covert, Richard L. Sweeney.

Format:

Book

Author/Creator:

Covert, Thomas R.

Contributor:

National Bureau of Economic Research.

Sweeney, Richard L.

Series:

Working Paper Series (National Bureau of Economic Research) no. w25712.

NBER working paper series no. w25712

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Relinquishing Riches

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

This paper compares outcomes from informally negotiated oil and gas leases to those awarded via centralized auction. We focus on Texas, where legislative decisions in the early twentieth century assigned thousands of proximate parcels to different mineral allocation mechanisms. We show that during the fracking boom, which began unexpectedly decades later, auctioned leases generated at least 40 percent larger upfront payments and 60 percent more output than negotiated leases did. These results suggest large potential gains from employing centralized, formal mechanisms in markets that traditionally allocate in an unstructured fashion, including the broader $3 trillion market for privately owned minerals.

Notes:

Print version record

March 2019.