Shale Gas Development and the Costs of Groundwater Contamination Risk

Resources for the Future Discussion Paper No. 12-40-REV

39 Pages Posted: 26 Jul 2012 Last revised: 27 Mar 2013

See all articles by Lucija Muehlenbachs

Lucija Muehlenbachs

Resources for the Future; University of Calgary

Elisheba Spiller

Environmental Defense Fund

Christopher Timmins

Duke University - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: March 19, 2013

Abstract

While shale gas development can result in rapid local economic development, negative externalities associated with the process may adversely affect the prices of nearby homes. We utilize a difference-in-differences estimator with additional controls for house fixed effects and the boundary of the public water service area in Washington County, Pennsylvania to identify the capitalization of groundwater contamination risk in property values, differentiating it from other externalities, lease payments to homeowners, and local economic development. We find that proximity to wells increases property values. However, groundwater contamination concerns fully offset those gains by reducing property values up to 26 percent.

Keywords: shale gas, property values, hedonic, groundwater

JEL Classification: Q53

Suggested Citation

Muehlenbachs, Lucija and Spiller, Elisheba and Timmins, Christopher D., Shale Gas Development and the Costs of Groundwater Contamination Risk (March 19, 2013). Resources for the Future Discussion Paper No. 12-40-REV. Available at SSRN: https://ssrn.com/abstract=2117427 or http://dx.doi.org/10.2139/ssrn.2117427

Lucija Muehlenbachs (Contact Author)

Resources for the Future ( email )

Washington, DC 20036
United States

University of Calgary ( email )

University Drive
Calgary, Alberta T2N 1N4
Canada

Elisheba Spiller

Environmental Defense Fund ( email )

257 Park Avenue South
New York, NY 10010
United States

Christopher D. Timmins

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States
919-660-1809 (Phone)
919-684-8974 (Fax)

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