RT Journal Article
SR Electronic
T1 Evaluating Split Estates in Oil and Gas Leasing
JF Land Economics
JO Land Econ
FD University of Wisconsin Press
SP 294
OP 312
DO 10.3368/le.86.2.294
VO 86
IS 2
A1 Fitzgerald, Timothy
YR 2010
UL http://le.uwpress.org/content/86/2/294.abstract
AB Taking advantage of randomly assigned federal mineral rights, this paper establishes the discount that mineral developers place on oil and gas leases with divided ownership. Results of 53 bimonthly federal oil and gas lease auctions in Wyoming between February 1998 and October 2006 are examined. Bidders discount split estate by 11% to 14% on average, but by as much as 24% for more expensive leases. Impacts of multiple ownerships and additional leasing stipulations are also explored. This discount is interpreted as an expectation of transaction costs incurred in obtaining surface access, so total costs remain unaffected on average. (JEL D23, Q32)