What can we learn about shale gas development from land values? Opportunities, challenges, and evidence from Texas and Pennsylvania

Weber, Jeremy and Hitaj, Claudia (2015): What can we learn about shale gas development from land values? Opportunities, challenges, and evidence from Texas and Pennsylvania. Forthcoming in: Agricultural and Resource Economics Review (October 2015)

Abstract

We study farm real estate values in the Barnett Shale (Texas) and the northeastern part of the Marcellus Shale (Pennsylvania and New York). Shale gas development caused appreciation in both areas but the effect was much larger in the Marcellus, suggesting broader ownership of oil and gas rights by surface owners. In both regions, most appreciation occurred when land was leased for drilling, not when drilling and production boomed. We find evidence that effects vary by farm type, which may reflect a correlation between farm type and the presence of oil and gas rights.

• Item Type: MPRA Paper
• Language: English
• Keywords: Barnett Shale, land values, Marcellus Shale, natural gas, oil and gas rights
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q15 - Land Ownership and Tenure ; Land Reform ; Land Use ; Irrigation ; Agriculture and Environment; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q32 - Exhaustible Resources and Economic Development; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q51 - Valuation of Environmental Effects

References

Bamberger, M. and R.E. Oswald. 2012. "Impacts of gas drilling on human and animal health." New Solutions: A Journal of Environmental and Occupational Health Policy 22 (1): 51-77.

Black, D, McKinnsh, T., and S. Sanders. 2005. “The Economic Impact of the Coal Boom and Bust.” The Economic Journal 115, 449-76.

Borchers, A., Ifft, J., and T. Kuethe. 2014. "Linking the Price of Agricultural Land to Use Values and Amenities." American Journal of Agricultural Economics 96 (5):1307-1320.

Brown, J.P. 2014. “Production of Natural Gas fom Shale in Local Economies: A Resource Blessing or Curse?” Economic Review (1). Federal Reserve Bank of Kansas City.

Cameron, A.C., and P.K. Trivedi. 2009. Microeconometrics Using Stata. College Station, TX: Stata Press.

ERS-USDA. 2013. Major Land Uses: Overview. Available at http://www.ers.usda.gov/data-products/major-land-uses.aspx#25962

Fitzgerald, T. 2014. “Mineral Rights and Royalty Interest: Importance for Rural Residents and Agricultural Producers.” Choices 29(4).

Gopalakrishnan, S., and H. A. Klaiber. 2014. “Is the Shale Energy Boom a Bust for Nearby Residents? Evidence from Housing Values in Pennsylvania.” American Journal of Agricultural Economics 96 (1): 43-66.

Hill, E. L. 2013. “Unconventional Natural Gas Development and Infant Health: Evidence from Pennsylvania.” Charles H. Dyson School of Applied Economics and Management Working Paper 2012-12.

Marchand, J., 2012. “Local Labor Market Impacts of Energy Boom-Bust-Boom in Western Canada.” Journal of Urban Economics 71: 165-174.

Muehlenbachs, L., Spiller, E., and C. Timmins, 2013. “The Housing Market Impacts of Shale Gas Development.” Resources for the Future Discussion Paper 13-39.

New York City Department of Environmental Protection (NY DEP), 2009. Department of Environmental Protection Calls for Prohibition on Drilling in the New York City Watershed. Press Release, December 23, 2009.New York Department of Environmental Conservation (NY DEC), 2008. Commissioner’s Testimony at NYS Assembly Hearing on Oil and Gas Drilling October 15, 2008. Available at: http://www.dec.ny.gov/energy/47910.html (accessed on February 26, 2014).

Olmstead, S.M., Muehlenbachs, L.A., Shih, J.S., Chu, Z., and A. Krupnick. 2013. “Shale gas development impacts on surface water quality in Pennsylvania.” Proceedings of the National Academy of Sciences 110 (13): 4962-4967.

Pennsylvania Department of Environmental Protection (PA DEP), 2014. Oil and Gas Reports. Available at: http://www.portal.state.pa.us/portal/server.pt/community/oil_and_gas_reports/20297 (accessed on February 26, 2014).

Pepe, R.P. 2009. “Real Property Taxation of the Marcellus Shale and Other Mineral Interests in Pennsylvania.” Oil and Gas/Real Estate Alert. K&L Gates LLP. Available at: http://www.klgates.com/files/tempFiles/dbdde4c2-7179-4cb8-ba88-f243fa14a57e/4-17-09-Real_Property_Tax_Marcellus_Shale_Alert.pdf

Pope, C. Arden, III, and H.L Goodwin Jr. 1984. “Impacts of Consumptive Demand on Rural Land Values.” American Journal of Agricultural Economics 66 (5): 750-754. Seeley, R. 2014. “BP plans to exit Utica shale.” The Oil and Gas Journal, May.

Weber, J.G., Burnett, J.W., and I.M. Xiarchos. 2014. “Shale Gas Development and Housing Values Over a Decade: Evidence from the Barnett Shale.” US Association for Energy Economics Working Paper 14-165. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2467622

Weber, J.G., Brown, J.P, and J. Pender. 2013. “Rural Wealth Creation and Emerging Energy Industries: Lease and Royalty Payments to Farm Households and Businesses.” Federal Reserve Bank of Kansas City Working Paper RWP 13-07. Weber, J.G. 2013. “A decade of natural gas development: The makings of a resource curse?” Resource and Energy Economics 37: 168-183.

Weber, J.G. 2012. “The effects of a natural gas boom on employment and income in Colorado, Texas, and Wyoming.” Energy Economics 34(5), 1580-1588.

Wilber, T. 2012. Under the Surface: Fracking, Fortunes, and the Fate of the Marcellus Shale. Ithaca, NY: Cornell University Press.