Cutting costs or cutting corners: asset reallocation in oil and gas production | Catie Hausman

Catie Hausman, a professor at the Gerald R. Ford School of Public Policy at the University of Michigan and a Research Associate at the National Bureau of Economics Research. Her work focuses on environmental and energy economics. 

Catie will be discussing the paper ‘Cutting Costs or Cutting Corners: Asset Reallocation in Oil and Gas Production‘  (with Sarah Armitage and Judson Boomhower)

Abstract: Asset transfers can lead to efficiency gains but can also reflect distortions from rent-seeking. We examine the link between asset transfers and rent-seeking enabled by differences in environmental liability costs. Focusing on US oil and gas, we develop a conceptual framework in which firms can avoid environmental liabilities through asset transfers. Using a novel dataset, we show that oil and gas wells are transferred frequently, particularly low-revenue wells. Low-revenue wells are also especially likely to be transferred to lower-revenue firms. Transferred wells produce similar amounts in later years but are less likely to be plugged — posing environmental risk.  

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