Fluid Power

Researchers: Hydraulic Fracturing Boosts Local Economies

28 December 2016

Pennsylvania fracking site. Image credit: Ostroff Law / CC BY-SA 3.0Pennsylvania fracking site. Image credit: Ostroff Law / CC BY-SA 3.0The first nationwide study of the comprehensive local impacts of hydraulic fracturing finds that when costs and benefits are added up, communities on average benefit from allowing it.

In studying the economic impacts of the technology that's become critical to U.S. oil and natural gas production, Michael Greenstone, the Milton Friedman professor in economics at the University of Chicago, and his co-authors take into account local changes in amenities, including factors that contribute to the quality of life such as truck traffic, criminal activity and beliefs regarding negative health effects. The researchers found such costs are outweighed by the benefits, which total $1,200 to $1,900 a year for the average household.

In the last decade, hydraulic fracturing, or fracking, has helped deliver lower energy prices, enhanced energy security, and lower air pollution and greenhouse gas emissions. But there have been concerns over negative health and social impacts outweighing the economic benefits for local communities where such drilling takes place.

According to the research, the benefits include a six percent increase in average income driven by rises in wages and royalty payments, a 10 percent increase in employment, and a six percent increase in housing prices. On the costs side, fracking reduces the typical household's quality of life by about $1,000 to $1,600 annually—excluding the increase in household income.

The authors also found that each region is affected differently, with some benefiting more than others. For example, the estimated effect on house prices was much larger in North Dakota's Bakken shale and Pennsylvania's Marcellus shale than in other regions.

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Discussion – 2 comments

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Re: Researchers: Hydraulic Fracturing Boosts Local Economies
2016-Dec-29 10:35 PM

"....Exploiting geological variation within shale deposits and timing in the initiation of hydraulic fracturing, this paper finds that allowing fracing leads to sharp increases in oil and gas recovery and improvements in a wide set of economic indicators. At the same time, estimated willingness-to-pay (WTP) for the decrease in local amenities (e.g., crime and noise) is roughly equal to -$1000 to -$1,600 per household annually (-1.9% to -3.1% of mean household in-come). Overall, we estimate that WTP for allowing fracing equals about $1,300 to $1,900 per household annually (2.5% to 3.7%), although there is substantial heterogeneity across shale regions...."

'Crime and noise'? Why is there increased crime associated with fracking?

Personally I would be more concerned with risks to water quality. Perceived effects or risks to water and air quality could certainly effect housing prices as well.

Interestingly this paper calculated the cost from ground air and water polution by looking at housing values. I'm not sure if this is smug, audacious or naive. If pollution is occuring now in soil and water, it is not immediately realized, certainly not in housing prices especially in a market trying to keep up with suddenly increased housing demand.

Ignoring the delay and likely significant mismatch is essentially disregarding the cost of potential environmental damage. Environmental accidents aren't guaranteed at every site. Hopefully far from it. But accidents will happen and the cost modified by the risk should be included in the calculation.


This study has the appearance of knowing the conclusion from the very outset.

Re: Researchers: Hydraulic Fracturing Boosts Local Economies
In reply to #1
2016-Dec-29 10:37 PM

BtW....the increase in crime is specifically an increase in violent crime even with a ~20% increase in expenditure for things like policing.

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