Mark J. Agerton

Mark J. Agerton

Assistant Professor
Ag & Resource Economics
UC Davis

Research

Peer-Reviewed Publications

  • “Employment Impacts of Upstream Oil and Gas Investment in the United States.” With Peter R. Hartley, Kenneth B Medlock III, and Ted Temzelides. 2017. Energy Economics. https://doi.org/10.1016/j.eneco.2016.12.012

Working papers

  • “Midstream Infrastructure and Environmental Externalities in Oil and Gas: Permian Basin Flaring and Methane Emissions.” With Wes Blundell, Ben Gilbert, and Gregory B. Upton Jr. Available on SSRN.

    We estimate the short-run causal effect of congestion in natural gas midstream processing and transmission infrastructure on upstream environmental externalities from oil and gas production in the Permian basin between 2015 and 2021. We estimate that transmission congestion caused 34 percent of flaring and 10 percent of methane emissions valued at $527M and $674M in annual climate costs. We also find significant increases in flaring around processing plants when they experience congestion. At the well level, we find that gas-directed wells reduce output in response to midstream congestion, while oil-directed wells, which produce the majority of Permian gas, do not. Instead, oil wells flare excess gas. We find that wellhead netback gas prices respond differently at oil versus gas-directed wells when there is congestion, and that wells which are vertically integrated with a processing plant also respond differently compared with ones that are not. Results of this research have implications for understanding the environmental externalities of the oil and gas supply chain and the role transportation infrastructure plays.

  • “Learning Where to Drill: Drilling Decisions and Geological Quality in the Haynesville Shale.” Revisions requested at Journal of Political Economy. SSRN Working paper Appendix Estimation code

    We often link increasing productivity in resource extraction to innovation in how firms extract. Yet resource quality—where firms extract—is a key driver of productivity. Using a structural model and data from Louisiana’s Haynesville shale, I disentangle the impacts of how and where firms extract natural gas. Mineral lease contracts, learning about geology, and prices actually explain more than half of growth in output per well—not just technological change. Neglecting this may lead to over-optimistic long-run supply forecasts. I also show that growth in output per well masked large distortions caused by mineral lease contracts, which reduced resource rents.

  • “Orphan well methane: Targeting unlocks abatement yet climate gains limited.” With Siddhartha Narra, Brian Snyder, and Gregory B. Upton Jr, LSU. Available on SSRN

    We conduct a novel climate benefit-cost analysis of a $25 million orphan well plugging effort funded by the 2021 U.S. Infrastructure Investment and Jobs Act. Our dataset represents the largest new dataset of measured methane emissions from orphaned wells to date: 842 wells in northern Louisiana. We find that 23 percent of wells leak detectable amounts of methane, with average emission rates nearly three times higher than EPA emission factors. Most emissions come from a handful of wells. In simulations of hypothetical plugging programs, we demonstrate a general principle: when emissions are highly variable and budgets are limited, prioritizing mitigation based on quantified emissions improves the cost-effectiveness of abatement efforts. Nevertheless, even under assumptions that increase benefit-cost ratios—no measurement costs, operational efficiencies from plugging clusters of wells, perfect targeting, and half-century leak durations—climate benefits alone justify plugging relatively few wells compared to Louisiana’s remaining 4,900 orphans.

In Progress

  • “Quantifying Commitment Failure in Auctions.” With Diógenes Cruz, UC Davis; and Eric Lewis, Texas A&M.

    Governments control a large fraction of resources and must decide how to allocate these resources. While auctions are often viewed as the most effective method to maximize government revenue from resources, auctions also entail the risk that no bids are received. As a result, U.S. policy for oil and gas leasing on federal land has until recently included a non-competitive leasing policy: If a parcel for lease received no bid meeting the auction reserve price, the government then made the parcel available for leasing first-come, first-serve at a lower price. A major policiy concern was that this non-competitive leasing disincentivized firms from bidding in the auction and implicitly subsidized leasing. We use data from government lease auctions to quantify the impact of non-competitive leasing policy by estimating a structural model of firm bidding decision. We find that eliminating non-competitive leasing increase in government revenue, although the effects are small.

  • “Ambient Pollution Mechanisms with Remote Sensing Technology: An Application to the Oil and Gas Industry.” With Ben Gilbert and Eric Lewis.

    Economists have developed a rich toolkit of theoretical tax mechanisms for reducing nonpoint source (NPS) pollution, but such taxes are rarely implemented. For many of these schemes, the magnitude of the tax or the information required in order to efficiently achieve environmental goals makes them infeasible in practice. Remote sensing may represent a key technological advance to enable NPS mechanisms. However, even with the best remote sensing technology, the complete picture of point source emissions remains uncertain. In this paper we write a generalized model that nests most existing NPS input/output and ambient taxes with endogenous monitoring, and show how this tax framework can incorporate localized but uncertain remote sensing signals. This mechanism gives the regulator a menu of taxes she can use to tradeoff different objectives by placing weight on various types of information. We apply this mechanism to flaring and methane emissions from the oil and gas industry in the Permian Basin of Texas and show the tradeoff between tax revenue and emissions reductions within this framework. However, the mechanism is applicable to any setting in which the regulator has access to more information about emissions than just the regional ambient level or a subset of firm-level inputs or outputs.

Permanent Working Papers

  • “The Economics of Natural Gas Flaring: An Agenda for Research and Policy.” With Ben Gilbert and Gregory B. Upton Jr. Published as “The Economics of Natural Gas Flaring and Methane Emissions in U.S. Shale: An Agenda for Research and Policy.” in Review of Environmental Economics and Policy, Thi previous version version contains more descriptive analysis of flaring.

  • “Anatomy of a Shale Boom: Optimal Leasing and Drilling with Costly Search.” Download