Is the Shale Energy Boom a Bust for Nearby Residents? Evidence from Housing Values in Pennsylvania

Abstract

Profitable extraction of previously inaccessible shale energy reserves has led to the rapid expansion of shale exploration across the United States. We present one of the first empirical studies to measure the impact of early shale exploration on surrounding homeowners using data from Washington County, Pennsylvania, from 2008 to mid 2010. We find that property values are negatively impacted by shale gas exploration activity, but this impact depends on the proximity and intensity of shale activity and is largely transitory. The negative effects are larger for households located close to major highways and sourced with private well water.

What Can We Learn about Shale Gas Development from Land Values? Opportunities, Challenges, and Evidence from Texas and Pennsylvania

“…Drilling in shale formations has varied consequences, creating jobs while also affecting residential property values and human health (Weber 2012;Hill 2013;Olmstead et al 2013;Weber 2013;Brown 2014;Gopalakrishnan and Klaiber 2014).…”

“…Several recent studies look at the effect of shale gas development on residential housing values to estimate the cost of environmental and human health risks, real or perceived Gopalakrishnan and Klaiber 2014). The value of residential properties primarily reflects the value of buildings.…”

“…Residential values, which prior research has considered (e.g. Gopalakrishnan and Klaiber 2014;Muehlenbachs et al 2013), reveal how drilling affects a property's attractiveness for use as a residence. Properties with more land reveal how drilling affects their suitability for the nonresidential purposes that give it value.…”

Community Impact of Unconventional gas development: Summary, Challenges and Conceptual Framework

“…A lack of affordable, quality housing has been identified as one of the most critical early impacts unconventional gas development in the United States, especially in small rural communities [5]. Furthermore, a decrease in property value has also been documented with proof of decrease in prices of about 5.6% between 2008 and 2010 within a mile of a well pad [37]. Other researchers [38] analyzed the impact of property prices in Pennsylvania, within a mile of gas wells between 2004 and 2009 and revealed a positive price effect.…”

Costs of Inefficient Regulation: Evidence from the Bakken

“…Previous work has documented the health and pollution impacts of fracking (Olmstead et al, 2013;Hill, 2015); how nearby drilling is capitalized into housing values (Gopalakrishnan and Klaiber, 2014;Muehlenbachs et al, 2015;Bartik et al, 2017); the efficiency of landowner-firm leases (Vissing, 2016); the supply elasticity of fracked versus conventional wells (Newell et al, 2016); and the economic and welfare impacts of these newly reachable resources (Hausman and Kellogg, 2015;Feyrer et al, 2017). Only recently have others begun to analyze firm decision-making, specifically learning, in this setting (Covert, 2015).…”