Natural Resource Ownership, Financial Gains, and Governance: The Case of Unconventional Gas Development in the UK and the US

Abstract

Who owns an area’s natural resources affects the local financial gains from extraction and participation in resource governance. We develop a typology of ownership regimes using two dimensions of ownership, private versus public and local versus absentee, and apply it to unconventional natural gas development in the UK and the US state of Pennsylvania. Using proprietary data on leases in Pennsylvania, we find that local residents own 53 percent of the acreage leased for natural gas development, making it a private-local ownership regime. Estimates suggest that a well in Pennsylvania will generate two times the local financial benefits of a well in the UK’s public-absentee regime despite revenue-sharing policies. Participation in leasing is also surprisingly large in Pennsylvania‒for the top six producing counties, an estimated 4 to 30 percent of local households benefit from lease payments. Private-local subsurface ownership in Pennsylvania also decentralizes resource governance, allowing individual resource owners to opt in or out of development and to negotiate parcel-specific terms through lease contracts with energy firms. Surface owners in the UK, in contrast, have less ability to preclude development or influence its terms, and therefore face a situation similar to surface owners in the US without subsurface rights.