Private monitoring and public enforcement: Evidence from complaints and regulation of oil and gas wells

The traditional theory of firm regulatory compliance examines the interplay of firms and regulator, with the general public as passive consumers of goods or providers of votes. However, members of the public can play an important role in monitoring for compliance, which we analyze with a novel dataset of Colorado regulatory activities. We find regulators frequently conduct follow-up inspections of people's complaints, and these complaint-driven inspections are at least as likely to be followed by regulatory action as “normal” scheduled inspections. However, regulators do not increase inspection activity of other assets owned by a firm that was complained about, consistent with regulators treating these complaints as “one-offs”. An inspector conducting a complaint inspection crowds out two regular inspections at the daily level, but we find no evidence of crowd-out at time scales of one month or greater. Finally, heterogeneity across complaint types suggests people are more adept at identifying nuisance-related violations (e.g. noise, smell), but are less adept at identifying more technical violations.

Duke Scholars

Author Peter Maniloff Environmental Sciences and Policy