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Shale Gas Development and Property Values: Differences Across Drinking Water Sources

Shale Gas Development and Property Values: Differences Across Drinking Water Sources

Lucija Muehlenbachs, Elisheba Spiller and Christopher Timmins


Source / Publisher:
Economic Research Initiatives at Duke (ERID) Working Paper No. 131

Key findings:

One of the gravest dangers posed by urban oil-well drilling and production is the potential for explosive methane gas to migrate to the surface from several thousand feet underground. Unless the present-day practices are change, underground migration of methane from oil and gas reservoirs will continue to pose a significant explosion threat.

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 triple-difference estimator and exploit the public water service area boundary in Washington County, Pennsylvania to identify the housing capitalization of groundwater risk, differentiating it from other externalities, lease payments to homeowners, and local economic development. We find that proximity to wells increases housing values, though risks to groundwater fully offset those gains. By itself, groundwater risk reduces property values by up to 24 percent.


See also:
Danielle Muoio, Duke researchers show dip in home value caused by nearby fracking, The Chronicle | November 16 2012


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