REALIGNING INCENTIVES IN PENNSYLVANIA’S NATURAL GAS INDUSTRY THROUGH ENVIRONMENTAL BONDING
Open Access
Author:
Edwards, Theodore D
Area of Honors:
Energy, Business, and Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
Andrew Nathan Kleit, Thesis Supervisor Andrew Nathan Kleit, Thesis Honors Advisor Dr. Anastasia Shcherbakova, Faculty Reader
Keywords:
Reclamation Marcellus Shale Bonding Environmental Law Environmental Economics
Abstract:
Current policy regarding bonding of natural gas wells in Pennsylvania likely leads to socially inefficient outcomes. This is due to the fact that incentives provided to producers may lead them to leave certain costs associated with natural gas production to society. Particularly, bonding requirements may incentivize operators to leave plugging and reclamation costs to society, creating an externality. At the heart of the issue is that current bond amounts do not reflect the expected costs of reclamation and plugging. In short: incentives are misaligned.
This paper will proceed by examining the problem in detail, establishing the importance of addressing the problem, offering possible solutions to the issue of misaligned incentives, and eventually advocating for a policy based on full-cost, site specific bonds.
