Who Benefits from the Fracking Bargain? Social Inequalities in Oil and Gas Lease Contracts

• In Event: 2350 - Economic Sociology and New Mechanisms for the Production of Inequality

Abstract

How do social inequalities become reinforced in legal instruments? In this paper, I draw from economic sociology, stratification, and socio-legal studies literatures to explore the effects of social inequalities and local-network ties on contract outcomes. For my empirical case, I study economic disparities in a ubiquitous but understudied aspect of the United States fracking boom: mineral-rights lease contracts. I analyze a unique dataset of nearly 90,000 leases in Texas’s Barnett shale. I find that 1) local-community embeddedness yields expected higher payments to mineral-rights owners when compared to those who reside outside of the local community, and 2) people of color, in particular those of Hispanic/Latino ethnicity, receive significantly lower royalty terms when compared to whites, all else equal. The results hold when extended to a dataset of approximately 484,000 lease contracts across the country. My findings suggest that local ties can open pathways to locally sourced information and confer social capital, which can be beneficial during contract negotiations. The findings also support sociological theories of how social biases and categories affect economic transactions, resulting in patterned inequalities and discriminatory effects for socially disadvantaged groups. In this way, contracts are social artifacts, simultaneously reflective and constitutive of social relations, categories, and biases. This paper opens a new empirical domain—subsurface property rights—for socio-legal studies of contracts, and it offers new theoretical directions into how social inequalities become reinforced in legal instruments.

Author

• Daniel N. Kluttz, University of California-Berkeley