Repository for Oil and Gas Energy Research (ROGER)

Abstract:
During the onset of shale gas development, a variety of economic impact studies were released through the ‘gray literature’ without formal peer review. In a review of six such impact reports, Kinnaman (2011) speculates about several major issues worth scrutiny arising with analysis using input-output models. His central critique focuses on the assumptions of how industry spending is represented and how leasing and royalty dollars are spent. In this study, we use detailed county records and results from a survey to directly address these assumptions, and compare our results to the findings in an economic impact study of Marcellus Shale development in Pennsylvania which Kinnaman critiqued. Our results, which are only about 52% of the prior study, confirm his supposition that some ex ante studies use unrealistic assumptions which lead to gross overestimates of the impacts.

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We quantify the monetary market and non-market environmental benefits and costs of hydraulic fracturing in the 14 U.S. states whose oil and gas production is dominated by hydraulic fracturing. By far the largest market benefit is $75 billion ($46–$95 billion) in consumer surplus from lower natural gas prices to residential, commercial, and industrial consumers. There are also environmental benefits resulting from the switch by some electric utilities from coal to natural gas ($13.25 billion, range $3.9–$21.9 billion). However, there are also substantial environmental costs associated with hydraulic fracturing. These are dominated by $27.2 billion ($12.5–$41.95 billion) health damages from air pollution. Costs also include $3.8 billion ($1.15–$5.89 billion) in greenhouse gas emissions, $4 billion ($3.5–$4.45 billion) in wildlife habitat fragmentation, and $1 billion ($0.5–$1.6 billion) in pollution of private drinking water wells. Opportunity costs of water usage and property value losses are less than one-quarter of a billion dollars. The market and non-market benefits of hydraulic fracking are widespread geographically but many of the non-market costs are concentrated in the areas of drilling, creating a distributional disconnect that we believe drives much of the controversy over hydraulic fracturing.

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The ascent of the Bakken shale play as a major U.S. oil producer became threatened by the 2014–2016 oil price fall. This benchmark study assesses and compares the economic performance of typical Bakken wells across three different fiscal regimes: North Dakota (ND) and Montana (MT) in the U.S., and the Canadian province of Saskatchewan (SK). Decline curve analysis and discounted cash flow analysis are applied to evaluate and re-appraise both the productivity and economic performance (internal rate of return, IRR) of typical Bakken wells in each region. For wells of similar estimated ultimate recovery (EUR), the fiscal regime of Montana (IRR 27%) is slightly more advantageous than North Dakota's (IRR 24%). If wells can be identified in SK akin to ND's reference well of 555 Mbbls EUR, the Canadian province provides the most attractive after tax return (180%). However, type curves for Bakken wells in SK and MT analyzed in our study typically have EURs at only 14% and 37% of the ND reference well (EUR∼555 Mbbls) and IRRs adjusted for EUR in MT and SK are negative in both regions at the historic reference price of $80/bbl. A sensitivity analysis using oil prices ranging between $20–100/bbl accounts for any of the price levels seen in the 2014–2016 price fall, and can be projected forward. The evaluation of single well economics and sensitivity to oil price changes and drilling and completion cost is subsequently expanded with a representative firm approach considering certain asset development options with multiple wells in each of the three Bakken jurisdictions (ND, MT, SK).

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In recent years, the U.S.A. natural gas market has seen enormous changes. The expectations of abundant supply of shale gas and the slow U.S.A. economic recovery have pushed gas prices below US$ 4 MMBtu. Although shale gas is a new promising source of unconventional energy, investors face uncertain investment plans. In this study, we investigate the risk premium by comparing behaviour before and after the change point in agents risk perception. Unlike traditional empirical research on risk premium, we use the parametric, two-factor model of Schwartz and Smith (2000) to evaluate the implied risk premium term structure from futures prices traded on the New York Mercantile Exchange (NYMEX). We compare our findings with other empirical results and find that the change point lies at the beginning of the low-price regime. When we compare periods before and after the change point, we observe that the risk premium changed, not only in sign, but also in magnitude.

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Threshold cointegration between market pairs before and after the potential structural break associated with the shale gas revolution is examined. Pairwise transaction costs differ between the pre- and post-break periods. During the post-break period, five of seven pairwise transaction costs decrease, while the remaining two pair-wise transaction costs increase relative to the pre-break period. Alterations in natural gas flows as the result of the shale gas revolution partially explain the changes in transaction costs.

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This article explores the global social–economic impact of shale gas extraction, comparing the differing social and economic impacts shale gas extraction may have on communities in developed and developing countries. It argues that the benefits of fracking are more likely to be enjoyed by communities in highly and very highly developed countries rather than by those in countries with low or medium levels of development . Additionally, it shows that the potential risks and drawbacks of shale gas and its extraction are more likely to be experienced by communities in these latter countries than by those in highly or very highly developed countries. However, it also demonstrates that even communities in developed countries are vulnerable to environmental and health risks associated with shale gas extraction.

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We use dynamic panel methods at the state level to understand how the increase in exploration and production of oil and natural gas since the mid-2000s has impacted employment. We find robust statistical support for the hypothesis that changes in drilling do, in fact, have an economically meaningful and positive impact on employment. The strongest impact is contemporaneous, though months later in the year also experience statistically and economically meaningful growth. Once dynamic effects are accounted for, we estimate that an additional rig count results in the creation of 31 jobs immediately and 315 jobs in the long run. Robustness checks suggest that these multipliers could be even bigger. Our results imply that the national impact of upstream investment remains small, perhaps due to the sector's small size and inter-state migration.

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The decline of domestic natural gas supply and rising demand requires Mexico to import 1/3 of its annual gas consumption of 2.5 trillion cubic feet (Tcf). Yet, Mexico's estimated resource of technically recoverable shale gas (545 Tcf) is the 6th largest such gas resource in the World. Much of Mexico's shale gas resource is in the Eagle Ford Shale, which is a mature shale gas and oil play in the U.S. To aid in determination of whether development of the Eagle Ford Shale in Mexico could reduce the country's dependency on natural gas imports, we evaluated the potential of Mexican shale acreage by comparing the after-tax net present value (NPV) and internal rate of return (IRR) of Eagle Ford shale wells on either side of the U.S.-Mexico border. The initial development of Mexican acreage occurs with a much larger well-spacing (leading to higher acreage acquisition cost per well), which would require 25% higher development cost as compared to Texas acreage. Consequentially, Texas wells have better net present value (NPV) and higher internal rate of return (IRR) than Mexican wells, in general. The principal explanation is that the signing bonus will be much higher in Mexico than in Texas, partly effectuated by the lower well spacing for unrisked acreage. Results of our study provide potential operators and investors with a preliminary indication of Eagle Ford Shale well economics in Mexico. Our study includes sensitivity analyses for both non-escalated and escalated gas prices, for drilling and completion (D&C) costs, and for leasehold cost. The economic appraisal accounts for both single- and multiple-well development scenarios with P10, P50 and P90 production forecasts.

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Governments across the globe are exploring ways to reduce the environmental and human health impacts created by shale energy production. In active areas, environmental regulations tend to be limited. We apply established instruments to empirically estimated environmental impact abatement cost curves for the development of 56 sites in Pennsylvania, USA. We compare the cost to industry of setting a cap on environmental impacts from land-clearing and building of surface infrastructure under two regulations: cap and trade versus a uniform, inflexible regulation. Greatest differences in cost are achieved when firm-level permits are allocated to reduce market-wide potential impacts by 36%. Cap and trade achieved this cap at a cost of 0.05% of not developing and allowed all development to proceed. The uniform, inflexible regulation cost 32% of not developing for a similar outcome and prevented 18% of firms from developing. Cap and trade's performance depended on the regulator's ability to accurately allocate firm-level permits that reflect developers' options. In extreme cases, inaccurate allocations made cap and trade perform worse than other the approach. We conclude that, where developers differ in their ability and cost of minimizing impacts, cap and trade should be explored as an inexpensive alternative to traditional approaches.

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In this study we estimate the effect of hydraulically fractured natural gas wells on residential real estate prices. We exploit variation in distance to nearby gas wells in home sale prices to estimate this effect. In contrast to previous studies, we focus on a relatively densely populated area, a section of the Dallas-Ft. Worth-Arlington urban area. Using a dataset of 127,556 observations from Tarrant County, Texas over the period 2005-2011, we find robust evidence that increased proximity to a well leads to reduced home sale prices. Existence of wells within 3,500 feet of a property reduces property values by approximately 1.5-3%. We demonstrate that the reduction seems to be driven by unconventional rather than conventional wells, and that well construction causes an added 1-2% reduction in home value.

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Unconventional hydrocarbon applications have been growing rapidly in recent years. Unconventional oil can be produced from oil sands, oil shale, extra heavy oil, gas to liquids (GTL), and other liquids. Conventional fossil energy will not be enough to meet the continuously increasing need for energy in the future. In this case, renewable energy sources will become important. Conventional oil sources are currently preferred because they are less expensive than unconventional sources. New technologies are being developed to reduce unconventional oil production costs.

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U.S. unconventional hydrocarbon production is a driver of economic growth, but mineral wealth ownership is poorly understood and shrouded in local wealth mythology that claims royalties from hydrocarbons mostly benefit people who live near sites of production. Mineral property tax appraisals, as proxies for mineral wealth from Live Oak County, a representative Eagle Ford Shale county in Texas, show that 96 percent of assessed mineral wealth concentrates among energy firms and individuals in Texas metropolitan regions; 1.95 percent of mineral wealth remains local to the production county, challenging local wealth myths. Deviating from nation-state scalar approaches, local and regional spatial studies of other energy regions might reveal similar wealth distributions, enabling generalizations about hydrocarbon production economic outcomes.

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The majority of shale gas studies so far have focused on environmental impacts with few considering societal aspects. This paper presents a first and most comprehensive assessment of the social impacts of shale gas production and utilisation for electricity generation, focusing on the UK context. The assessment has been carried out based on 14 indicators, addressing the following social sustainability issues: employment, health and safety, nuisance, public perceptions, local communities, infrastructure and resources. Shale gas is compared to a range of other electricity options, including other fossil fuels, nuclear and renewables. Where appropriate and possible, the social impacts are evaluated on a life cycle basis. The results suggest that extraction and utilisation of shale gas would lead to a range of benefits, including employment opportunities and financial gains by local communities. However, these are limited and countered by a number of social barriers that need to be overcome, including low public support, noise, traffic, strain on infrastructure (e.g. wastewater treatment facilities), land use conflict and availability of regulatory resources. Furthermore, shale gas does not present a notable opportunity for increasing energy security, unless its production increases significantly above current predictions. These findings can be used by policy makers, operators and other shale gas stakeholders with an interest in the social impacts of shale gas development. The results can also be useful for other countries planning to exploit their shale gas reserves.

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This paper quantifies the local economic impacts of hydraulic fracturing. We match extremely detailed oil and natural gas well data to county-level aggregate and sectoral employment data. Controlling for time-varying unobserved determinants of job growth, we find approximately 550,000 local jobs attributable to the shale boom. While this is substantial, it is smaller than previous studies. We also show that the effects are heterogeneous across sectors. Impacts are concentrated in extractive industries, in local non-tradable and service sectors, and in areas with the largest increase in drilling activity.

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Recent advances in hydraulic fracturing technology have reduced US dependence on oil imports, inspiring claims that “energy independence” is within reach. In this article we contest the construction of space that undergirds this notion of energy independence. Specifically, we find that the discourse of “energy independence” constructs the world as a struggle between territorial states. The geographical worldview of the energy independence script is made of territorial states as containers of bounded, exclusive, sovereignty, referred to by Agnew as the “territorial trap”. This obscures how international networks of commerce and investment rest on a basis of binding links of interdependence, cooperation and coproduction (1994). Using a mix of qualitative and quantitative evidence from Pennsylvania, we show how elites used notions of struggles between territorial powers to legitimate the infusion of international circuits of capital into local extractive zones. We find that the global network of investment that settled in Pennsylvania, with the goal of exporting gas as LNG, directly contradicted the spatial assumptions made by energy independence rhetoric. In making our argument we draw on evidence from interviews with elites within the fracking debate in Pennsylvania.

Abstract:
The impacts associated with unconventional oil and gas (UOG) extraction will be cumulative in nature and will most likely occur on a regional scale, highlighting the importance of using strategic decision-making and management tools. Managing possible impacts responsibly is extremely important in a water scarce country such as South Africa, versus countries where more water may be available for UOG extraction activities. This review article explains the possible biophysical and socio-economic impacts associated with UOG extraction within the South African context and how these complex impacts interlink. Relevant policy and governance frameworks to manage these impacts are also highlighted.

Abstract:
INTRODUCTION The oil and gas industry, along with nearly all extraction industries, inherently provides substantial economic benefits due to its integrated supply chain, high-wage jobs, and propensity to sell nationally and globally. It brings in outside investment and often operates in rural areas where high-wage jobs are scarce and industry is fleeting. Much of Colorado's oil and gas is sold outside of the state, contributing wealth to owners, employees, governments, and schools, all of which are beneficiaries of oil and gas revenues. In 2011, Colorado's oil and gas industry recorded $10.5 billion in production value, accounting for some 27,300 direct drilling, extraction, and support jobs with average annual wages in excess of $105,000. Coupled with the oil and gas supply chain within Colorado—transportation, refining, wholesalers, parts manufacturers, and gasoline stations—direct employment totaled nearly 49,400 jobs, with average wages over $80,000, which is 65% higher than the state average for all industries. Collectively, this industry contributed nearly $3.8 billion in employee income to Colorado households in 2011, or 2.9% of total Colorado salary and wages. In addition, $664 million went to private land owners in 2011, assuming private land owners capture royalty and lease terms similar to those of the government. The oil and gas industry contributed substantial public revenues in 2011—totaling nearly $1.5 billion, of which $861 million was derived directly from severance taxes, public leases, public royalties, and property taxes. This industry is subject to taxes and assessments beyond what other industries contribute. Ad valorem taxes, for instance, are 3 times higher for oil and gas production than for commercial property within the state and 11 times higher than residential property. Oil and gas property taxes exceeded $510 million in 2011. Severance taxes paid by the industry totaled $130.7 million in 2011. The industry also paid $282.9 million in royalties to state and federal governments in 2011, of which $150.4 million stayed within Colorado. The State of Colorado received almost $64.7 million in state lease revenue from oil and gas in 2011, a record high. Oil and gas prices tended to be relatively volatile from 2000–2011, causing government revenue driven by production value to fluctuate year to year. Price stability is expected moving forward, primarily due to technological improvements in drilling and extraction, and greater reserve estimates. While this industry has substantial operations on state and federal lands, a vast majority—more than 69%—transpires on private lands. The oil and gas industry is dominated by gas production, with natural gas accounting for 64% of sales-based value in 2011, oil accounting for 32%, and carbon dioxide, 4%.

Abstract:
Oil production in the United States increased in 2009 for the first time since the oil peak due to fracking. This and the slight decrease in oil consumption, resulted in a significant fall in U.S. oil imports. This major change inspired this paper, in which we analyse potential changes in self-supply (the extent to which the international oil production of transnational companies meets the oil requirements of the United States). The period between 2009 and 2013 was studied, and compared with that of 2005 to 2008, by estimating and evaluating a set of indicators related to the degree of self-supply of these transnational companies. The relevance of this work is twofold: on the one hand, because of the economic and geopolitical implications of this self-supply and on the other hand, because of the contribution of the research to energy economics. The research suggests a continuation of a low degree of self-supply but for other reasons than those formulated in the hypothesis which are based on the consequences of fracking.

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Abstract:
This paper aims at examining the impacts of shale gas revolution on industrial production in the US. To this end, this paper, first, throughout literature review, exposes the features of shale gas revolution in the US in terms of energy technology and energy markets. However, the potential influences of shale gas extraction on the US economy are not explicit in the existing literature. Thus, considering mainly the output of shale gas revolution on the US economy in this research, later, the paper conducts econometric models to reveal if there exists significant effect(s) of shale gas revolution on the US economy. Therefore, the paper employs unit root tests and cointegration tests by following relevant US monthly data from January 2008 to December 2013. Then, this paper observes long run impact of shale gas production on industrial production in the US through dynamic ordinary least squares estimation with dummy structural breaks and conducts Granger causality test based on vector error correction model. The dynamic ordinary least squares estimator explores that shale gas production has a positive effect on industrial production. Besides, the Granger causality test presents that shale gas production Granger causes industrial production in the long run. Based on the findings of the long run estimations, the paper yields that industrial production is positively related to shale gas production. Eventually, upon its findings, this paper asserts that (i) the shale gas revolution in the US has considerable positive effects on the US economy within the scope of the validity of the growth hypothesis, (ii) new technologies might be developed to mitigate the possible negative environmental effects of shale gas production, (iii) the countries having shale gas reserves, as in US, may follow energy policies to utilize their shale reserves more in the future to meet their energy demand and to increase their economic welfare.

Abstract:
There has been a recent boom in natural gas and oil production in the US due to high energy prices and technological advances in hydraulic fracturing and horizontal drilling. While North Dakota oil production has increased significantly since 2005 with the development of Bakken formation, the impact on the rest of the economy including agriculture, historically the largest industry in North Dakota, has received little attention. We employ a variant of the Corden-Neary resource development model to test the impact of the oil boom in North Dakota caused by technical change on employment and wages in two tradable sectors of the state economy: agriculture and energy, alongside the rest of the state’s economy, using a Vector Error Correction (VEC) model marking the very first use of the dynamic vector autoregression (VAR) analysis in this theoretical framework. It was determined that the oil boom, as represented by the number of rigs in the state, led to an increase in employment and wages in energy sector, as expected, but also in the rest of the economy. Oil development activity had no significant impact on agricultural wages. Both energy sector equations, employment and wage, suggest relative independence of these variables from the movements in agriculture and the rest of the economy, and being impacted mostly by the changes in energy sector itself. Seasonality does not play significant role in energy sector employment and wages unlike in agriculture and the rest of the economy.

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We study how much private mineral owners capture geologically-driven advantages in well productivity through a higher royalty rate. Using proprietary data from nearly 1.8 million leases, we estimate that the six major shale plays generated $39 billion in private royalties in 2014. There is limited pass-through of resource abundance into royalty rates. A doubling of the ultimate recovery of the average well in a county increases the average royalty rate by 1–2 percentage points (a 6–11 percent increase). Thus, mineral owners benefit from resource abundance primarily through a quantity effect, not through negotiating better lease terms from extraction firms. The low pass-through likely reflects a combination of firms exercising market power in private leasing markets and uncertainty over the value of resource endowments.

Abstract:
We focus on identification and estimation of potentially negative environmental impacts of unconventional natural gas extraction on property values in the United States and advance previous research by contributing new data and new identification strategies for isolating these potential impacts. Our study area consists of two counties in Pennsylvania that are home to large amounts of unconventional natural gas extraction but are otherwise isolated from other resource extraction industries or large urban areas. We deploy parametric, semi-parametric, and matching hedonic regression models that include recent quasi-experimental methods and, in contrast to previous research and much popular intuition, we fail to find robust significance that negative environmental externalities of natural gas extraction are manifested in nearby property values. While there may be plausible risks associated with unconventional natural gas extraction, we do not find consistent evidence to suggest that these risks significantly affect nearby property values.

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We review the economic benefits and external costs of unconventional gas production (UCG) in the United States from a policy perspective. Based on an overview of state regulation in Pennsylvania, a state that has witnessed very rapid growth of gas production over the past 5 years, and global experiences we present 10 key principles that are proposed to reduce the risks and to increase the net rewards of UCG. Application of these principles has the potential to reduce the risks of UCG, especially at a local level, while maximizing the benefits of gas developments.

Abstract:
Unconventional oil and gas production in the United States reversed a decades-old trend of rising oil imports, provided an argument for lifting the U.S. crude oil export ban and motivated the development of domestic natural gas export facilities. But the most visible impact of unconventional-hydrocarbon extraction is the creation of boomtowns in rural regions. Despite widespread media coverage, scholarly analysis of boomtowns is restricted to regional econometric studies with little attention to how economic stakeholders understand and respond to booming economies. Here we analyze interviews with key economic stakeholders in the Eagle Ford Shale in Texas. Respondents consider their community's economic success relative to the price of oil and indicate concerns about the deterioration of roads, high housing demand, and skyrocketing wages. We also re-examine John Gilmore's foundational work on boomtowns in the 1970s in the context of contemporary unconventional extraction. Keywords: hydraulic fracturing, problem triangle, resource materiality, social disruption. This article is protected by copyright. All rights reserved.

Abstract:
The US shale boom has intensified interest in how the expanding oil and gas sector affects local economic performance. Research has produced mixed results and has not compared how energy shocks differ from equal-sized shocks elsewhere in the economy. What emerges is that the estimated impacts of energy development vary by region, empirical methodology, as well as the time horizon that is considered. This paper captures these dimensions to present a more complete picture of energy boomtowns. Utilizing US county data, we estimate the effects of changes in oil and gas extraction employment on total employment growth as well as growth by sector. We compare this to the effects of equal-sized shocks in the rest of the economy to assess whether energy booms are inherently different. The analysis is performed separately for nonmetropolitan and metropolitan counties using instrumental variables. We difference over 1-, 3-, 6-, and 10-year time periods to account for county-fixed effects and to assess responses across different time horizons. The results show that in nonmetro counties, energy sector multiplier effects on total county employment first increase up to 6-year horizons and then decline for 10-year horizons. We also observe positive spillovers to the non-traded goods sector, while spillovers are small or negative for traded goods. In metro counties, there are no significant effects on total employment, although positive spillovers are present in some sectors. Yet, equal-sized shocks in the rest of the economy produce more jobs on average than oil and gas shocks, suggesting that policymakers should seek more diversified development.

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This paper investigates the impact of the North American shale gas revolution on price movement regimes in the North American and European gas markets, using the Markov regime-switching model. It then measures price spreads between oil and gas from 1998 to 2015 to identify the impact of the revolution on the relationship between oil and regional gas prices. The results show that the typical movement regime of Henry Hub prices changes from 'slightly upward' to 'sharply downward'. In addition, the clear seasonal effect of Henry Hub prices has disappeared after the shale gas revolution. The typical movement of national balancing point (NBP) prices has changed gradually from a 'sharply upward' regime to the alternative regimes between 'sharply downward' and 'slightly upward', tending to follow oil prices. This indicates that the shale gas revolution has had little impact on NBP price movement. Meanwhile, Henry Hub prices have decoupled from WTI prices, while NBP and Brent prices have continued to exhibit a long-term equilibrium level around which they have swung in the short time-frame since the shale gas revolution. Pertinent energy policy makers and energy market participants should pay attention to these changes and adjust their trade, production and investment strategies accordingly.

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The energy extraction boom of the mid 2000s impacted local economies in areas with substantial shale oil and gas reserves. I examine the impact of the energy boom on the labor market by exploiting a natural experiment in the Marcellus region. In particular, I compare counties with fracking activity in Pennsylvania, Ohio and West Virginia to the control group of counties in New York, which imposed a moratorium and later ban on fracking. I look at how the benefits to the labor demand shock are shared between industries as well as how employment and wages in related industries adjust over the course of the resource boom. The results suggest total employment and wages per job increase by 7% and 11% respectively above pre-boom levels in the three years after the boom, but decline after 4 years or more. The results also show significant positive spillovers to related sectors, such as construction, transportation, retail trade and accommodations. However, there is no evidence of the so called ‘resource curse’ crowding out employment or increasing wages in manufacturing.

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The growth of the shale gas industry in the US has raised expectations that other nations could boost domestic gas production, leading to lower energy prices and improved energy security. However, the degree to which the US experience is transferable to other countries is uncertain. Furthermore, sustainability implications of shale gas development remain largely unknown. In an attempt to find out if and how shale gas could be exploited in a sustainable way, this paper reviews the economic, environmental, and social aspects of shale gas. These include costs, energy security, employment, water and land pollution, greenhouse gas emissions, earthquakes, and public perception. The literature suggests that it is possible to develop shale gas in a sustainable way, but its future will depend on the industry being able to address the environmental concerns, the political will to see the industry through to maturity, and public support, with the latter most likely being the biggest determinant.

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We discuss the environmental implications of the dramatic drop in the price of natural gas following the US shale gas boom due to the rise of modern hydraulic fracturing. In the first part of the paper, we argue that the ensuing drop in the price of natural gas has an ambiguous effect on global carbon emissions because of three countervailing effects: coal-to-gas switching in the US electric power sector, an increase in the relative cost of US renewable energy sources, and an increase in US coal exports. Our position is that without a meaningful cap, the shale gas boom is likely to increase global emissions and the period during which natural gas is used as a bridge fuel to clean energy should be limited. In the second part of the paper, we review recent environmental policies for the US electric power sector that have contributed to reducing carbon emissions, and discuss the complex economics of the newly introduced Clean Power Plan. Although the availability of cheap natural gas has been factored in US environmental policy and has helped electricity generators to achieve compliance with various rules and regulations, it should not derail policy from its long-run objective, which is the transition to a less fossil-fuel dependent economy.

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We study the effects of the property tax base shock caused by natural gas drilling in the Barnett Shale in Texas—a state that taxes oil and gas wells as property. Over the boom and bust in drilling, housing appreciation closely followed the oil and gas property tax base, which expanded the total tax base by 23 percent at its height. The expansion led to a decline in property tax rates while maintaining or increasing revenues to schools. Overall, each $1 per student increase in the oil and gas property tax base increased the value of the typical home by $0.15. Some evidence suggests that the cumulative density of wells nearby may lower housing values, indicating that drilling could reduce local welfare without policies to increase local public revenues.

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Planning of shale gas infrastructure and drilling sites for hydraulic fracturing has important spatial implications. The evaluation of conflicting and competing objectives requires an explicit consideration of multiple criteria as they have important environmental and economic implications. This study presents a web-based multicriteria spatial decision support system (SDSS) prototype with a flexible and user-friendly interface that could provide educational or decision-making capabilities with respect to hydraulic fracturing site selection in eastern Ohio. One of the main features of this SDSS is to emphasize potential trade-offs between important factors of environmental and economic ramifications from hydraulic fracturing activities using a weighted linear combination (WLC) method. In the prototype, the GIS-enabled analytical components allow spontaneous visualization of available alternatives on maps which provide value-added features for decision support processes and derivation of final decision maps. The SDSS prototype also facilitates nonexpert participation capabilities using a mapping module, decision-making tool, group decision module, and social media sharing tools. The logical flow of successively presented forms and standardized criteria maps is used to generate visualization of trade-off scenarios and alternative solutions tailored to individual user's preferences that are graphed for subsequent decision-making.

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With the recent shale gas boom, the U.S. is expected to have very large natural gas resources. In this respect, the key question is would it be better to rely completely on free market resource allocations which would lead to large exports of natural gas or to limit natural gas exports so that more could be used in the U.S.. After accounting for the cost of liquefying the natural gas and shipping it to foreign markets, the current price difference leaves room for considerable profit to producers from exports. In addition, there is a large domestic demand for natural gas from various sectors such as electricity generation, industrial applications, and the transportation sector etc. A hybrid modeling approach has been carried out using our version of the well-known MARket ALlocation (MARKAL)-Macro model to keep bottom-up model richness with macro effects to incorporate price and gross domestic product (GDP) feedbacks. One of the conclusion of this study is that permitting higher natural gas export levels leads to a small reduction in GDP (0.04%–0.17%). Higher exports also increases U.S. greenhouse gas (GHG) emissions and electricity prices (1.1%–7.2%). We also evaluate the impacts of natural gas exports in the presence of a Clean Energy Standard (CES) for electricity. In this case, the GDP impacts are similar, but the electricity and transport sector impacts are different.

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Despite the considerable attention hydraulic fracturing of shale has generated around the world, few academic studies to date have examined the potential impacts shale development has had on local housing markets. This study aims to partially fill this void by examining the temporal relationship between shale development and foreclosure levels in Pennsylvania zip codes. The empirical models measure how foreclosure levels change in relation to the number of unconventional gas well permits, drill starts, and well completions for all Pennsylvania zip codes from January 2007 to June 2012. Zip code and quarterly fixed effects are included. The results suggest that past shale development was associated with an increase in foreclosure levels in comparison to neighboring and socioeconomically similar zip codes without shale development. The estimates are larger and more consistent after 2009 and in comparison to neighboring zip codes.

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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-in-differences 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.

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This paper examines the economic experience of past energy booms and that of current unconventional shale gas and oil development. We focus on key economic characteristics of gas and oil production such as its employment potential, its geography, and its boom-bust nature. This background is used to discuss important economic policy issues arising with unconventional oil and gas development such as taxation, governmental use of those revenues, preemption, and equity in the distribution of costs and benefits. The paper concludes with economic policy recommendations for states and communities affected by such development including not viewing oil and gas development as an effective long-run economic development strategy, leveraging short-run financial gains from the development into permanent advantages, and strengthening the capacity for local governments to understand and manage this activity.

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In the US, the shale gas revolution ensured that the development costs of unconventional natural gas plummeted to the levels of $2–3/Mcf. This success has motivated the development of shale gas in other regions, including Australia and Europe. This study, focussing primarily on aspects of economic impact analysis, estimates the development costs of shale gas extraction in both Australia and Europe, based on both direct and fiscal costs, and also suggests policy initiatives. The increasing liquefied natural gas (LNG) developments in Australia are already straining domestic gas supplies. Hence, the development of more natural gas resources has been given a high priority. However, a majority of the Australian shale resources is non-marine in origin and significantly different to the marine-type shales in the US. In addition, the challenges of high development costs and the lack of infrastructure, service capacity and effective government policy are inhibiting shale gas development. Increasing the attractiveness of low risk investment by new, local, developers is critical for Australian shale gas success, which will simultaneously increase domestic gas security. In the European context, unconventional gas development will be challenged by direct, rather than fiscal costs. High direct costs will translate into average overall gas development costs over $13/Mcf, which is well over the existing market price.

Abstract:
The trend towards globalization can be observed for many years. It is reflected by the ongoing elimination of trade barriers between countries and the introduction of a system of mutual recognition of quality standards. The best example is the European Union, where a common market for many industries has been developed. Such a common market has already existed before in the United States of America and that this is why the negotiations on the merger of the largest and most developed economies in the world started in 2013. The currently negotiated agreement, the Transatlantic Trade and Investment Partnership (TTIP) is designed to eliminate barriers to trade and capital flows between the two mentioned markets. The article attempts to evaluate the trade of energy commodities, namely crude oil and natural gas, between the European Union and the United States. The estimates for the next years are based on historical data and the current state. The dynamics of natural gas and crude oil production in the European Union and the United States, as well as changes in the import and export of these energy resources, have been shown. The volume of gas production from the largest North American deposits was also subjected to analysis. Special attention was paid to natural gas from unconventional deposits, as its production is expected to grow continuously until 2040. Meanwhile, the production of gas from conventional deposits is expected to decrease. The rest of the paper is focused on the balance sheets of cash for oil and natural gas. It was pointed out that the market situation for both commodities is different. In the EU, the production and consumption of both crude oil and natural gas gradually decreases, while in the United States this trend is reversed. On the other hand, some similarities can be seen in the refining industry. In recent years, many refineries were closed both in the European Union and in the United States. However, though this trend was more pronounced in Europe. In the case of liquefied gas (LNG), the expansion of US gas to Europe can be expected. Currently, the United States is building about 30 export terminals and production surpluses will certainly be exported to Europe. Judging by the pace of development of export terminals, it can be assumed that the power of condensation can reach up to 110 million tons in the near future and, as a consequence, natural gas in the form of LNG will be supplied to the European market.

Abstract:
This paper empirically investigates the regional economic impact of oil and gas extraction in Texas during the recent shale oil boom. Regressions with county-level data over the period 2009–2014 support smaller multiplier effects on local employment and income than corresponding estimates drawn from popular input–output-based studies. Economic impacts were larger for extraction from gas wells than oil wells, while the drilling phase generated comparable impacts. Estimates of economic impacts are greater in a dynamic spatial panel model that allows for spillover effects across local economies as well as over time.

Abstract:
Liquefied petroleum gases (LPGs) together with other natural gas liquids (NGLs) have played an important role in the current U.S. shale gas boom. Depressed gas prices in recent years have made pure natural gas operations less profitable. The result is that liquids components in gas production have become increasingly important in ensuring the profitability of shale gas operations. In this paper we investigate whether the shale gas expansion, which has led to an increase in associated LPG production, has also affected the historically strong relationship between LPG and oil prices. Revealing the strength and stability of the LPG/oil relationship is relevant when it comes to the future profitability and development of the U.S. natural gas sector. Our results suggest that the LPG/oil relationship has weakened in recent years with a move towards cheaper liquids relative to oil. This is consistent with developments in the natural gas sector with increased liquids production. A consequence is that U.S. natural gas operations cannot automatically rely on high liquids prices to ensure profitability.

Abstract:
Development of unconventional shale gas resources involves intensive capital investment accompanying large commercial production uncertainties. Economic appraisal, bringing together multidisciplinary project data and information and providing likely economic outcomes for various development scenarios, forms the core of business decision-making. This paper uses a discounted cash flow (DCF) model to evaluate the economic outcome of shale gas development in the Horn River Basin, northeastern British Columbia, Canada. Through numerical examples, this study demonstrates that the use of a single average decline curve for the whole shale gas play is the equivalent of the results from a random drilling process. Business decision based on a DCF model using a single decline curve could be vulnerable to drastic changes of shale gas productivity across the play region. A random drilling model takes those drastic changes in well estimated ultimate recovery (EUR) and decline rates into account in the economic appraisal, providing more information useful for business decisions. Assuming a natural gas well-head price of $4/MCF and using a 10 % discount rate, the results from this study suggest that a random drilling strategy (e.g., one that does not regard well EURs), could lead to a negative net present value (NPV); whereas a drilling sequence that gives priority to developing those wells with larger EURs earlier in the drilling history could result in a positive NPV with various payback time and internal rate of return (IRR). Under a random drilling assumption, the breakeven price is $4.2/MCF with more than 10 years of payout time. In contrast, if the drilling order is strictly proportional to well EURs, the result is a much better economic outcome with a breakeven price below the assumed well-head price accompanied by a higher IRR.

Abstract:
There is much debate about the employment effect of shale gas development, especially as it...

Abstract:
In this work, the life cycle economic and environmental optimization of shale gas supply chain network design and operations is addressed. The proposed model covers the well-to-wire life cycle of electricity generated from shale gas, consisting of a number of stages including freshwater acquisition, shale well drilling, hydraulic fracturing and completion, shale gas production, wastewater management, shale gas processing, electricity generation as well as transportation and storage. A functional-unit based life cycle optimization problem for a cooperative shale gas supply chain is formulated as a multiobjective nonconvex mixed-integer nonlinear programming (MINLP) problem. The resulting Pareto-optimal frontier reveals the trade-off between the economic and environmental objectives. A case study based on Marcellus shale play shows that the greenhouse gas emission of electricity generated from shale gas ranges from 433 to 499 kg CO(2)e/MWh, and the levelized cost of electricity ranges from $69 to $91/MWh. A global optimization algorithm is also presented to improve computational efficiency.

Abstract:
This paper reviews major findings and insights from a series of integrated geologic, engineering, economic, and econometric analyses performed on the four largest US. shale gas plays. Developments in the Barnett Shale, Fayetteville Shale, Haynesville Shale, Shale, and Marcellus Shale plays are explained on the basis of a comprehensive data set, including existing wells production histories, drilling path data, geologic attributes and natural gas market parameters. The paper presents the data-driven methodology consistently applied to all four plays. The key insights discussed include the relationship between a play's geology and well production; the impact of technological improvements of well productivity and inventory of future wells; and the dependence of well economics on geology, technology, and regulations.

Abstract:
Using data from Pennsylvania and an array of empirical techniques to control for confounding factors, we recover hedonic estimates of property value impacts from nearby shale gas development that vary with water source, well productivity, and visibility. Results indicate large negative impacts on nearby groundwater-dependent homes, while piped-water-dependent homes exhibit smaller positive impacts, suggesting benefits from lease payments. Results have implications for the debate over regulation of shale gas development.

Abstract:
The remarkable growth of shale gas production in the U.S. has given rise to increasing interest in the exploration of shale resources in other areas of the world, especially in China. This study focuses on analyzing the socioeconomic impacts of China's nearly six years' shale exploration and in the process of exploitation practices. Findings reveal that China's shale gas resource potential is unconfirmed and its contribution to improving the structure of energy consumption is limited. The plans for shale gas exploration and development reflect the desire to achieve quick success and instant benefits despite a lack of long-term strategy. The exploitation of shale gas remains a pollute first, pay later model, which brings many ecological and environmental risks. To accelerate the progress of shale gas exploration, China should formulate a long-term plan and strengthen basic technology research into shale gas exploitation. Moreover, the strength and breadth of government incentives must be expanded, and water resources should be reasonably allocated during shale gas exploitation.

Abstract:
This paper presents an intensive survey of literature focused on the different aspects of fracking as related to the environment, economy, energy security and sustainability and establishes an understanding of the economic benefits and negative impacts of fracking on the environmental sustainability. The paper is also suggesting the use of all of those implications in a more comprehensive framework that can identify the real cost and benefit in fracking such as the Life Cycle Costing which can use all these implications along with others that occur across all the phases of the fracking process to come up with the real value and worth of the fracking process.

Abstract:
Shale gas revolution that took place in the United States at the beginning of the 21st century has still been shaping our global fossil fuel market. In 2012, the U.S. has surpassed Russia in natural gas production for the first time since 1982. At the same year, annual average U.S. Henry hub natural gas spot price decreased to $2.75 per million BTU, which was $8.69 per million BTU in 2005. In 2013, proved shale gas reserves of the world is estimated at nearly 2.7 trillion cubic metres (tcm) and unproved resources at staggering 203.9 tcm. As a result, there is a global rush to develop most of this resource as possible. However, shale gas is no miracle fuel. It has been suggested that its effects on the environment could be worse than conventional natural gas. Fugitive methane emissions, groundwater pollution, and increased seismicity are amongst the most important potential environmental side effects. There is also concern about the accuracy of resource potential estimations due to lack of data and specifically designed shale gas reservoir models. Nonetheless, the analysis in this study clearly showed that without developing global shale gas resources we have to consume 66% of our proved natural gas reserves to supply the demand till 2040. This would make most of the world natural gas importers, and rules of economy dictate that limited supply and increasing demand would skyrocket natural gas prices. Therefore, shale gas resource development is not an option but a must for the continuance of our global energy market and economy.

Abstract:
This study models the uncertainty range in the future gas production output from US shale plays up to 2025. The future spread in gas output in our models follows from variations in the number of wells that will be drilled according to three distinct scenarios. Each scenario assumes a well development plan for the six major shale plays over the studied period and then quantifies the cumulative US production output from the combined shale plays. We compare the bottom-up model results with other model projections for future US shale gas output, including the top-down shale gas production forecasts by the US National Energy Modeling System (NEMS). The remarkable growth of North American gas output from unconventional resources has been highlighted in numerous industry reports and government publications, but what has remained relatively underexposed is the deterioration of economic margins due to the failure to predict the gas price decline in the North American market. The past development record of North America’s shale gas resources suggests that security of future gas supplies seems ensured, but here we develop a contrarian view. Our scenario models take into account the effect of recent declines in gas rig counts and decline in gas well completions due to the depressed gas prices. A scenario with declining shale gas output – one of three scenarios considered – cannot be excluded as being unlikely to occur, which means the future security of US gas supply that assumes a steady growth of shale gas supply cannot be ascertained at present.

Abstract:
The development of natural gas resources in the Marcellus Shale formation has progressed rapidly in the last several years, particularly in the Commonwealth of Pennsylvania. These activities require many heavy truck trips for equipment and materials, which can damage state and local roads that were not designed for high volumes of heavy truck traffic. For state transportation agencies, one measure of costs of shale gas development is the potential degradation of roadways resulting from shale gas development. This technical note, provides a first-order an estimate of roadway consumptive use costs of additional heavy truck traffic on Pennsylvania state-maintained roadways from Marcellus Shale natural gas development in 201, estimated at 1 about $13,000–$23,000 per well for all state roadway types, or $5,000–$10,000 per well if state roads with the lowest traffic volumes are excluded. This initial estimate of costs, is based on data on the distribution of well activity and roadway type in Pennsylvania, estimates for the number of heavy truck trips to construct and operate a single well, the corresponding equivalent single-axle loadings, and estimates of roadway life and reconstruction costs by roadway maintenance class in Pennsylvania.