Effects of Local Regulation on Neighboring Jurisdictions: Evidence from Mining Ordinances

Abstract: The environmental federalism literature describes local regulatory control as a double-edged sword. It empowers jurisdictions to solve their local problems, but to discount spillover impacts on neighboring jurisdictions. We study this tradeoff in the context of a regional ‘frac sand’ mining boom in Wisconsin, which began around 2010 and was induced by the hydraulic fracturing surge across the U.S. We exploit a 2012 state Supreme Court ruling, permitting township-level mining ordinances, to study the effects of local regulation on mining activity, resident exposure to disamenities, and property values. Consistent with complaints of heightened traffic congestion and roadway risks, we find large effects of mine openings on accidents involving industrial trucks ranging from 9 to 13% per mine but also positive effects of mine openings on township property values, ranging from 6 to 17% per mine. Township ordinances significantly reduce the own-township accident effects of mine openings, and enhance individual property values within the regulated townships. Mine openings under ordinances increase truck accidents and decrease property values in neighboring jurisdictions, however. The results, although preliminary, suggest the net value of local regulatory authority may be negative once spillover impacts are considered.