Download This PaperFracking and Tracking: The Effects of Oil and Natural Gas Well Locations on the Housing Market.
37 Pages Posted: 15 May 2020
Date Written: April 14, 2020
Abstract
The technique of hydraulic fracturing or "fracking", has made it possible to produce vast new quantities of oil and natural gas. States like Colorado, Texas, and Oklahoma have seen a dramatic increase in the number of wells for both oil and natural gas. In this study, the main source of exogenous variation to be explored is the location of injection well sites. With that I estimate the effect hydraulically fractured natural gas and oil injection sites have on both urban and rural residential home prices between years 2000 to 2018 in 11 different states. The data is coming from two rich data sets, one form the U.S. Department of Homeland Security that listed all oil and natural gas wells. The second comes from Zillow's ZTRAX data base and that contains home transaction and administrative data. ArcGis is used to combine the data and created varying buffer zones sizes around injection well sites to see how average home prices and the average number of transactions changed before and after a well is put in, and as distance from the well site increases. First, a zip code level fixed effects model, as well as a household level fixed effects model to see how only repeat sales are affected by new wells. Lastly, a spatial differences in differences (SDID) is used to see how homes prices change as homes that are already by wells see a new well come in that decreases the distance to the nearest well. My results show that homes that are within .5 mile of a well have a 2.9% increase in selling price and homes that are .5-1 mile from a well site see a 1.2% increase compared to homes that are more than 2 miles away. Lastly, the spatial model shows that home that initially start 1-2 miles from a well and a new well is drilled reducing the distance to .5-1 miles away see a 2.1% increase and homes that are now .5 miles or closer see a 5.1% increase.
Keywords: Hydraulic fracturing, Housing, Spatial dependence, Spatial analysis
JEL Classification: Q35, Q33, R21
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