Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Jan, 2024, Volume 92, Issue 1

Drilling Deadlines and Oil and Gas Development
p. 29-60

Evan Herrnstadt, Ryan Kellogg, Eric Lewis

Oil and gas leases between mineral owners and extraction firms typically specify a date by which the firm must either drill a well or lose the lease. These deadlines are known as primary terms. Using data from the Louisiana shale boom, we first show that well drilling is substantially bunched just before the primary term deadline. This bunching is not necessarily surplus‐reducing: using an estimated model of firms' drilling and input choices, we show that primary terms can increase total surplus by countering the effects of leases' royalties, as royalties are a tax on revenue and delay drilling. These benefits are reduced, however, when production outcomes are sensitive to drilling inputs and when drilling one well indefinitely extends the period of time during which additional wells may be drilled. We enrich the model to consider mineral owners' lease offers and find small effects of primary terms on owners' revenue.

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Supplemental Material

Supplement to "Drilling Deadlines and Oil and Gas Development"

Evan Herrnstadt, Ryan Kellogg, and Eric Lewis

In this data appendix, we discuss: (1) our data sources; (2) how we estimate well decline and the present value of well cumulative production; (3) how we clean lease data and match leases to units; and (4) how we match wells to Haynesville units.

Supplement to "Drilling Deadlines and Oil and Gas Development"

Evan Herrnstadt, Ryan Kellogg, and Eric Lewis

The replication package for this paper is available at The authors were granted an exemption to publish parts of their data because either access to these data is restricted or the authors do not have the right to republish them. Therefore, the replication package only includes the codes and the parts of the data that are not subject to the exemption. However, the authors provided the Journal with (or assisted the Journal to obtain) temporary access to the restricted data. The Journal checked the provided and restricted data and the codes for their ability to reproduce the results in the paper and approved online appendices.