Valuation of expectations: A hedonic study of shale gas development and New York’s moratorium

Abstract

This paper examines the local impacts of shale gas development (SGD). We use a hedonic framework and exploit a discrete change in expectations about SGD caused by the New York State moratorium on hydraulic fracturing. Our research design combines difference-indifferences and border discontinuity, as well as underlying shale geology, on properties in Pennsylvania and New York. Results suggest that New York properties that were most likely to experience both the financial benefits and environmental consequences of SGD dropped in value 23% as a result of the moratorium, which under certain assumptions indicates a large and positive net valuation of SGD.

Broadening Benefits from Natural Resource Extraction: Housing Values and Taxation of Natural Gas Wells as Property

“…The study period covers a decade of development: drilling started in the early 2000s, peaked in 2008, and by 2013 had slowed to the level observed in 2001. This particular study of the Barnett Shale departs from existing studies of shale development on housing values (Boslett, Guilfoos, & Lang, 2015;Gopalakrishnan & Klaiber, 2013;Muehlenbachs, Spiller, & Timmins 2012, 2015, which focus on Pennsylvania-a state that excludes oil and gas wells from property taxes. Consequently, development would have no clear effect on housing values via the tax base, and the authors understandably omit discussion of how public finance policy may shape the welfare consequences of shale development.…”

The Local Economic and Welfare Consequences of Hydraulic Fracturing

“…Additionally, within shale plays there is substantial variation in how amenable different counties are to fracking, so these play-based strategies may be less powered relative to strategies that also exploit within-play variation. Others have taken advantage of a border discontinuity design, based on comparing areas in Pennsylvania, where fracking has been embraced, with bordering areas in New York, where it has been banned (Boslett, Guilfoos, and Lang 2016). This design is appealing for reasons of internal validity.…”

Who Wins in an Energy Boom? Evidence From Wage Rates and Housing

“…With respect to housing, this article contributes to a recent literature that has documented mixed evidence on the effect of the shale boom on housing values. On the negative side, Muehlenbachs, Spiller, and Timmins (2015) find that shale gas development had a negative effect on groundwater-dependent homes in Pennsylvania and Gopalakrishnan and Klaiber (2014) find that shale extraction had a negative effect on housing values in Washington County, PA. 7 On the positive side, Weber, Burnett, and Xiarchos (2016) find evidence that the shale boom increased housing values in zip codes with shale endowments in northeastern Texas and Boslett, Guilfoos, and Lang (2016) find that the moratorium on shale drilling in New York state decreased home values, indicating a positive relationship between drilling and home values. Bartik et al (2017) find that fracking increased median housing values by 5.7% and median rental prices by 2.0%.…”