Property Values and Risks: Evidence from Shale Development
38 Pages Posted: 25 Sep 2017 Last revised: 28 Sep 2017
Date Written: September 1, 2017
The profitability of extracting oil and gas trapped within the nation’s extensive shale formations has generated a boom in the oil-and-gas industry. Operators are pushing to drill close to populations and sensitive resources, and many states are facilitating such extensive drilling with laws that preempt local land-use control. On one hand, shale production has the potential to enrich local land owners who can collect lucrative royalty payments from operators. On the other hand, shale production is not without potential local risks. Some of these risks are speculative, and the magnitudes of the risks are uncertain.
Using property sales data from Washington County, Pennsylvania, this paper finds that an additional horizontal well within a mile of a property tends to increase the property’s value. This positive effect, however, is diminished for properties that rely on private water wells for drinking water. In addition, all properties with nearby horizontal wells lose value as the number of recent environmental, health, and safety well violations increases in the county.
Keywords: Shale development, hydraulic fracturing, hedonic analysis, property values, risk information, private risk assessment, negative externalities
JEL Classification: D80, O18, R20, R30, R52
Suggested Citation: Suggested Citation