Repository for Oil and Gas Energy Research (ROGER)

Abstract:
We use the synthetic control method to determine the economic impact of the shale boom to Ohio, Pennsylvania, and West Virginia. Estimation results are mixed. The shale development decreased the poverty rate and increased the employment growth rate in Pennsylvania and West Virginia in the short run. Top oil and gas producing counties in West Virginia also experienced short-term personal income growth due to fracking. However, most of the positive impacts disappeared a few years after the initial boom periods. The shale development did not bring significant economic benefits to Ohio. Further, shale drilling activities exert a potential long-term negative effect on population growth in all three states.

Abstract:
The Permian Basin is one of the most prolific oil and natural gas geologic basins in the US. With soaring production in the last decade, the economic impact of oil and gas development in the basin has become a pressing policy question to answer. This paper presents the first basin-wide study that examines both the employment effect and the income effect of the Permian Basin development. We consider not only the local impact but also the spatial spillover effect and the industry-level spillover effect. To correct for the estimation bias due to the potential simultaneity between drilling decisions and economic activities, an instrumental variables (IV) regression model is proposed. We find that both the employment effect and the income effect of shale development in the basin are highly significant. We also show that there are significant spatial spillover effects and spillover effects onto the indirect industries. Relevant policy implications for the long-run economic prosperity in the Permian Basin are discussed.

Abstract:
This paper examines the impact of earthquakes on residential property values using sales data from Oklahoma from 2006 to 2014. Before 2010, Oklahoma had only a couple of earthquakes per year that were strong enough to be felt by residents. Since 2010, seismic activity has increased, bringing potentially damaging quakes several times each year and perceptible quakes every few days. Using repeat-sales and difference-in-differences models, we estimate that prices decline by 3–4 percent after a home has experienced a moderate earthquake measuring 4 or 5 on the Modified Mercalli Intensity Scale. Prices can decline 9 percent or more after a potentially damaging earthquake with intensity above 6. We also find significant increases in the time-on-market after earthquake exposures. Our findings are consistent with the experience of an earthquake revealing a new disamenity and risk that is then capitalized into house values.

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.

Abstract:
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).

Abstract:
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.

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.

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.