Where to drill? The petroleum industry's response to an endangered species listing

- A discrete choice model measures the effect of the Endangered Species Act on oil and natural gas well locations.
- ESA regulations discouraged only a small percentage of drilling activity in habitat.
- Pre-listing ESA announcements affected drilling locations.

This paper examines the effect of U.S. Endangered Species Act (ESA) regulations on oil and natural gas well drilling in Kansas and Oklahoma. In 2014 and 2015, petroleum companies faced land use restrictions when the imperiled lesser prairie chicken received threatened species-status under the ESA. In Kansas and Oklahoma, as elsewhere, the petroleum industry has been criticized for damaging environmental quality and developing wildlife habitat. Using data on well locations, I estimate a discrete choice model to measure the effects of ESA regulations on companies' location preferences. While the results show that habitat avoidance increased with regulatory scrutiny, the effect is very modest, which suggests that companies may have discounted the risk of penalties from ESA violations. Results also suggest that pre-listing announcements related to ESA regulations influenced companies' location choice.