A new study concludes communities near sites of hydraulic fracturing, commonly called “fracking,” generally benefit from oil and gas production through the procedure.
Examining nine of the largest shale basins in the United States, the study determined hydraulic fracturing activity delivers $1,300 to $1,900 in annual benefits per local household, totaling roughly $64 billion in yearly household benefits for those living in the nine basins studied. According to the study, these benefits include a “a 7 percent increase in average income, driven by rises in wages and royalty payments, a 10 percent increase in employment, and a 6 percent increase in housing prices.”
“Local government revenues also increased at a faster pace than expenditures” in fracking areas, the study found.
First Nationwide Study
The Local Economic and Welfare Consequences of Hydraulic Fracturing—authored by researchers from the University of Chicago, Princeton University, and the Massachusetts Institute of Technology (MIT) and released in December 2016, is the first nationwide examination of the community impacts of fracking.
“This study makes it clear that on net there are benefits to local economies—which we believe is useful information for leaders in the United States and abroad who are deciding whether to allow fracking in their communities,” said MIT’s Chris Knittel, one of the study’s coauthors, in a press release.
The study notes the benefits from fracking are also significant on the national level, including “abruptly lower energy prices, a reduced trade deficit, stronger energy security, and even lower carbon dioxide emissions in the power sector.”
Says Study ‘Undersells’ Benefits
Chris Warren, vice president of communications with the Institute for Energy Research, says the benefits of fracking may be even greater than the study calculates.
“Without a doubt, the advent of hydraulic fracturing and horizontal drilling has provided an economic boost to local communities,” said Warren. “The shale revolution has created jobs, brought new businesses to these areas, and has also generated local and state revenue for public schools.
“I think it [the study] actually undersells the impact hydraulic fracturing and horizontal drilling have had across the United States and the world,” Warren said.
The study is great news for people in fracking areas, says Isaac Orr, a research fellow in energy and environment policy at The Heartland Institute, which publishes Environment & Climate News.
“This study found a 6 percent increase in home values in these areas, which is terrific news,” Orr said. “The impact of fracking on home prices is typically one of the most contentious issues for communities with oil and gas development, because people spend much of their lives paying the mortgage on their homes and they want to protect their investment.
“People who are critical of oil and gas development often argue local communities with fracking will bear the brunt of the costs and receive few of the benefits,” Orr said. “This study finds locals benefit disproportionately from fracking compared to people in other parts of the country.”
Timothy Benson ([email protected]) is a policy analyst at The Heartland Institute.
Alexander W. Bartik, et al., “The Local Economic and Welfare Consequences of Hydraulic Fracturing,” Social Science Research Network, December 22, 2016: https://heartland.org/publications-resources/publications/the-local-economic-and-welfare-consequences-of-hydraulic-fracturing