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. R&R at JAERE.

    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 R&R at JPE.

    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.

  • “Seller Commitment to Reserve Prices: Revenue Implications for Federal Mineral Auctions.” With Diógenes Cruz, UC Davis; and Eric Lewis, Brigham Young University. Available on SSRN. R&R at RAND.

    We study the impact of seller commitment in US federal auctions for mineral rights. These featured binding reserve prices plus a secondary sale at a lower price if the auction failed. We find eliminating secondary sales would have increased initial sales revenue by an average of $311 per parcel but decreased the sales probability by 2.9% on average, in turn decreasing royalty revenues. Had the US eliminated noncompetitive leasing in our auction sample, foregone royalties would have exceeded $19 million. Our results are relevant as the Inflation Reduction Act eliminated these secondary sales and Congress is now considering reintroducing them.

  • “Pricing the Social Cost of Flaring: Composition, Location, and Policy Implications.” With Lauren Beatty, Wes Blundell, Ben Gilbert, and Sophia Salzer. Available on SSRN. Submitted.

  • “Global Optimality of MLE in Dynamic Discrete Choice Models: A Sufficient Condition via Convex Relaxation.” With Bulat Gafarov and Stuart Morrison. Draft available upon request.

    For dynamic discrete choice models with additively separable Type I extreme value payoff shocks and linear-in-parameters flow payoffs, we show that a convex relaxation of the MLE certifies global optimality: any local optimum that solves the relaxation is the unique global optimum, and with probability approaching one, every local optimum does. In finite samples, the sufficient condition is easily checked at any candidate solution, regardless of estimation method. The relaxation can be reformulated as a convex conic program solvable without starting values, embedded in an EM algorithm for discrete unobserved heterogeneity, and paired with k-step updating for full efficiency. Our sufficient condition applies to any continuous shock distribution, but the asymptotic exactness guarantee is specific to Type I extreme value (logit) errors.

In Progress

Permanent Working Papers

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