Cutting Costs or Cutting Corners: Asset Reallocation in Oil and Gas Production
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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Copy CitationSarah C. Armitage, Judson Boomhower, and Catherine Hausman, "Cutting Costs or Cutting Corners: Asset Reallocation in Oil and Gas Production," NBER Working Paper 34961 (2026), https://doi.org/10.3386/w34961.Download Citation
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Non-Technical Summaries
- The US has an estimated 2.1 million abandoned and unplugged oil and gas wells, as well as nearly 1 million still-producing wells. At the...
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