Wastewater reuse in the shale gas industry reduces firms' private costs and mitigates many of the local environmental harms associated with fracking. Most reuse occurs within the firm boundary, but rival operators often exchange (or “share”) wastewater prior to reuse. This paper considers how shale gas producers in Pennsylvania choose between internal reuse and sharing, and whether additional sharing would be environmentally beneficial. To quantify the costs of sharing, I build a novel empirical model of firms' wastewater management decisions. Estimating the model, I find that transaction costs associated with sharing are large — increasing total water-related costs by roughly 10% — but heterogeneous. Variation in the estimates reveals several channels for potential policy interventions to facilitate further sharing. However, counterfactual exercises suggest that such interventions may have limited environmental benefits.

This paper explores market participants' incentives to exercise unilateral market power in financial transmission rights (FTR) auctions. I present a model of strategic bidding in FTR auctions that illustrates how the standard market clearing mechanism for FTR auctions facilitates cross-path competition, limiting the profitability of demand reduction. Simulation evidence suggests that this force can dramatically reduce rents from unilateral market power relative to other sources of auction revenue shortfalls, highlighting potential adverse effects from proposed market reforms such as decentralized FTR sales and bidding-path restrictions that may weaken cross-path competition.