The Economics of Shale Gas Development

Annual Review of Resource Economics

Volumn 7, Issue 1, 2015, Pages 269-289

  Mason, Charles F ^a,b,c   Muehlenbachs, Lucija A ^c,d   Olmstead, Sheila M ^c,e  

^a UNIVERSITY OF WYOMING   (United States)

^b LONDON SCHOOL OF ECONOMICS   (United Kingdom)

^c RESOURCES FOR THE FUTURE   (United States)

^d UNIVERSITY OF CALGARY   (Canada)

^e UNIVERSITY OF TEXAS AT AUSTIN   (United States)

Author keywords

economic benefits; environmental impacts; hydraulic fracturing; negative externalities; positive externalities

Indexed keywords

EID: 84943247620     PISSN: 19411340     EISSN: 19411359     Source Type: Journal    
DOI: 10.1146/annurev-resource-100814-125023     Document Type: Review

References (119)

1. Abdalla CW, Roach BA, Epp DJ. 1992. Valuing environmental quality changes using averting expenditures: an application to groundwater contamination. Land Econ. 68(2):163-69
2. Allcott H, Keniston D. 2014. Dutch disease or agglomeration? The local economic effects of natural resource booms in modern America. NBER Work. Pap. 20508
3. Allen DT, Torres VM, Thomas J, Sullivan DW, Harrison M, et al. 2013. Measurements of methane emissions at natural gas production sites in the United States. PNAS 110(44):17768-73
4. Arora V. 2014. Estimates of the price elasticities of natural gas supply and demand in the United States. Work. Pap. 54,232, MPRA
5. Arrow KJ, Cropper ML, Eads GC, Hahn RW, Lave LB, et al. 1996. Is there a role for benefit-cost analysis in environmental, health and safety regulation? Science 272(5259):221-22
6. Baumol W, Oates W. 1988. The Theory of Environmental Policy. New York: Cambridge Univ. Press. 2nd ed.
7. Bernstein P, Kinnaman TC,WuM. 2013. Estimating willingness to pay for river amenities and safety measures associated with shale gas extraction. East. Econ. J. 39(1):28-44
8. Bohi DR, Toman MA. 1993. Energy security: externalities and policies. Energy Policy 21(11):1093-109
9. Boslett A, Guilfoos T, Lang C. 2014. Valuation of expectations: a hedonic study of shale gas development, a statewide moratorium, and local resolutions.Work. Pap., Dep. Nat. Resour. Environ. Econ., Univ. R. I.
10. Boyle KJ, Poe GL, Bergstrom JC. 1994.What do we knowabout groundwater values? Preliminary implications from a meta analysis of contingent-valuation studies. Am. J. Agric. Econ. 76:1055-61
11. Brandt AR, Heath GA, Kort EA, O'Sullivan F, Petron G, et al. 2014. Methane leaks from North American natural gas systems. Science 343(6172):733-35
12. Brasier KJ, Filteau MR, McLaughlin DK, Jacquet J, Stedman RC, et al. 2011. Residents' perceptions of community and environmental impacts from development of natural gas in the Marcellus Shale: a comparison of Pennsylvania and New York cases. J. Rural Soc. Sci. 26(1):32-61
13. Brown SPA, Huntington HG. 2013. Assessing the U.S. oil security premium. Energy Econ. 38:118-27
14. Brown SPA, Krupnick AJ. 2010. Abundant shale gas resources: long-term implications for U.S. natural gas markets. Work. Pap., Resour. Future
15. Brunnschweiler CN, Bulte EH. 2008. The resource curse revisited and revised: a tale of paradoxes and red herrings. J. Environ. Econ. Manag. 55:248-64
16. Burtraw D, Palmer K, Paul A, Woerman M. 2012. Secular trends, environmental regulations, and electricity markets. Electr. J. 25(6):35-47
17. Caselli F, Michaels G. 2013. Do oil windfalls improve living standards? Evidence from Brazil. Am. Econ. J. 5(1):208-38
18. CharacklisGW, Griffin RC, Bedient PB. 2005. Measuring the long-termregional benefits of salinity reduction. J. Agric. Resour. Econ. 30(1):69-93
19. Cullen JA, Mansur ET. 2013. Will carbon prices reduce emissions in the U.S. electricity industry? Evidence from the shale gas experience. Work. Pap., Olin Bus. Sch., Wash. U.
20. Cutter WB. 2007. Valuing groundwater recharge in an urban context. Land Econ. 83:234-52
21. Darrah TH, Vengosh A, Jackson RB, Warner NR, Poreda RJ. 2014. Noble gases identify the mechanisms of fugitive gas contamination in drinking-water wells overlying the Marcellus and Barnett Shales. PNAS 111(39):14076-81
22. Delgado MS, Guilfoos T, Boslett A. 2014. The cost of hydraulic fracturing: a hedonic analysis. Work. Pap., Dep. Agric. Econ., Purdue Univ.
23. Deutch J. 2011. The good news about gas: the natural gas revolution and its consequences. Foreign Aff. 90(1):82-93
24. Doherty KE, Naugle DE, Evans JS. 2010. A currency for offsetting energy development impacts: horse-trading sage-grouse on the open market. PLOS ONE 5(4):1-9
25. Drohan PJ, Brittingham M, Bishop J, Yoder K. 2012. Early trends in landcover change and forest fragmentation due to shale-gas development in Pennsylvania: a potential outcome for the Northcentral Appalachians. Environ. Manag. 49(5):1061-75
26. Ellsworth WL. 2013. Injection-induced earthquakes. Science 341(6142):1225942
27. Entrekin S, Evans-WhiteM, Hagenbuch JB. 2011. Rapid expansion of natural gas development poses a threat to surface waters. Front. Ecol. Environ. 9:503-11
28. Fahrig L. 2003. Effects of habitat fragmentation on biodiversity. Annu. Rev. Ecol. Evol. Syst. 34:487-515
29. Fell HG, Kaffine D. 2014. What's killing coal? The effects of natural gas abundance and renewables on coalfired plants. Work. Pap., Div. Econ. Bus., Colo. Sch. Mines
30. Fetzer T. 2014. Fracking growth. Discuss. Pap. 1,278, Cent. Econ. Perform., Lond. Sch. Econ.
31. Feyrer J, Mansur ET, Sacerdote B. 2014. Where'smy fracking job? Geographic dispersions of economic shocks from hydrofracturing. Work. Pap., Dep. Econ., Dartmouth Coll.
32. Fitzgerald T, Rucker RR. 2014. US private oil and natural gas royalties: estimates and policy considerations. Work. Pap., Dep. Agric. Econ. Econ., Mont. State Univ.
33. Fox J, dir. 2010. Gasland. Video
34. Gamper-Rabindran S. 2014. Information collection, access, and dissemination to support evidence-based shale gas policies. Energy Technol. 2:977-87
35. Gilman JB, Lerner BM, KusterWC,GouwJAD. 2013. Source signature of volatile organic compounds from oil and natural gas operations in northeastern Colorado. Environ. Sci. Technol. 47(3):1297-305
36. Gopalakrishnan S, Klaiber HA. 2014. Is the shale energy boom a bust for nearby residents? Evidence from housing values in Pennsylvania. Am. J. Agric. Econ. 96(1):43-66
37. Hanak E. 2005. Stopping the drain: third-party responses to California's water market. Contemp. Econ. Policy 23:59-77
38. Hansen LT, Hallam A. 1991. National estimates of the recreational value of streamflow. Water Resour. Res. 27:167-75
39. Healy J. 2013. As oil floods plains towns, crime pours in. N. Y. Times, Nov. 30
40. Helmig D, Thomson CR, Evans J, Huebar BJ, Park JH. 2014. Highly elevated atmospheric levels of volatile organic compounds in the Uintah Basin, Utah. Environ. Sci. Technol. 48(9):4707-15
41. Hill E. 2012. Shale gas development and infant health: evidence from Pennsylvania. Work. Pap., Dep. Appl. Econ. Manag., Cornell Univ.
42. Hill E. 2013. The impact of oil and gas extraction on infant health in Colorado.Work. Pap., Dep. Appl. Econ. Manag., Cornell Univ.
43. Holladay JS, LaRiviere J. 2014. How does welfare from non-pecuniary policies vary with market prices? Evidence from fracking, natural gas and emissions from electricity generation. Work. Pap., Univ. Tenn., Knoxville
44. Horwitz S. 2014. Dark side of the boom. Wash. Post, Sept. 28
45. IPCC. 2001. Climate Change 2001: The Scientific Basis. Contribution of Working Group I to the Third Assessment Report of the Intergovernmental Panel on Climage Change. Cambridge, UK/New York: Cambridge Univ. Press
46. Jacobsen GD, Parker DP. 2015. The economic aftermath of resource booms: evidence from boomtowns in the American West. Econ. J. In press; doi: 10.1111/ecoj.12173
47. Jacoby HD, O'Sullivan FM, Paltsev S. 2012. The influence of shale gas on U.S. energy and environmental policy. Econ. Energy Environ. Policy 1(1):37-51
48. James A, James J. 2014. A canary near a gas well: gas booms and housing market busts in Colorado. Work. Pap., Dep. Econ. Public Policy, Univ. Alsk., Anchorage
49. James A, Smith B. 2014. There will be blood: crime rates in shale-rich U.S. counties. Work. Pap. 140, OxCarre, Univ. Oxford
50. Jenner S, Lamadrid AJ. 2013. Shale gas vs. coal: policy implications from environmental impact comparisons of shale gas, conventional gas and coal on air, water and land in the United States. Energy Policy 53:442-53
51. Jiang M, Hendrickson CT, VanBriesen JM. 2014. Life cycle water consumption and wastewater generation impacts of a Marcellus Shale gas well. Environ. Sci. Technol. 48:1911-20
52. Johnson J, Tullo AH. 2013. Chemical and gas suppliers battle over LNG exports.Chem. Eng. News 91(10):9-13
53. Joskow PL. 2013. Natural gas: from shortage to abundance in the United States. Am. Econ. Rev. Proc. 103(3):338-43
54. Graham J, Irving J, Tang X, Sellers S, Crisp J, et al. 2015. Increased traffic accident rates associated with shale gas drilling in Pennsylvania. Accid. Anal. Prev. 74:203-9
55. Kemball-Cook S, Bar-Ilan A, Grant J, Parker L, Jung J, et al. 2010. Ozone impacts of natural gas development in the Haynesville Shale. Environ. Sci. Technol. 44(24):9357-63
56. King GE. 2012. Hydraulic Fracturing 101: what every representative, environmentalist, regulator, reporter, investor, university researcher, neighbor and engineer should know about estimating frac risk and improving frac performance in unconventional oil and gas wells. Presented at Soc. Pet. Eng. Hydraul. Fract. Technol. Conf., Woodlands, Tex., Feb. 6-8
57. Knittel CR, Metaxoglou K, Trindade A. 2014. Dash for gas: the sequel.Work. Pap., Sloan Sch. Manag., MIT
58. Krauss C. 2014. OPEC split as oil prices fall sharply. N. Y. Times, Oct. 13
59. Krichene N. 2002. World crude oil and natural gas: a demand and supply model. Energy Econ. 24(6):557-76
60. Krupnick A, Gordon H, Olmstead S. 2013a. Pathways to dialogue: what the experts say about the environmental risks of shale gas development. Work. Pap., Resour. Future
61. Krupnick A, Wang Z, Wang Y. 2013b. Sector effects of the shale gas revolution in the United States. Work. Pap., Resour. Future
62. Kuwayama Y, Krupnick A, Olmstead S. 2014. Water resources and unconventional fossil fuel development: linking physical impacts to social costs. Work. Pap., Resour. Future
63. LaRiviere J, Shapiro J, Tefft N, Wolff H. 2014. Quantifying environmental benefits of fracking: the decline of coal, air quality and asthma rates. Work. Pap., Dep. Econ., Univ. Tenn., Knoxville
64. Leiby P. 2007. Estimating the energy security benefits of reduced U.S. oil imports. Rep. ORNL/TM-2007/028, Oak Ridge Natl. Lab.
65. Linn J, Mastrangelo E, Burtraw D. 2014a. Regulating greenhouse gases from coal power plants under the Clean Air Act. J. Assoc. Environ. Resour. Econ. 1(1):97-134
66. Linn J, Muehlenbachs L, Wang Y. 2014b. How do low natural gas prices affect electricity consumers and the environment? Work. Pap., Resour. Future
67. Litovitz A, Curtright A, Abramzon S, Burger N, Samaras C. 2013. Estimation of regional air-quality damages from Marcellus Shale natural gas extraction in Pennsylvania. Environ. Res. Lett. 8(1):014017; doi: 10.1088/1748-9326/8/1/014017
68. Loomis J, Kent P, Strange L, Fausch K, Covich A. 2000. Measuring the total economic value of restoring ecosystem services in an impaired river basin: results from a contingent valuation survey. Ecol. Econ. 33:103-17
69. Loomis JB. 1987. The economic value of instream flow: methodology and benefit estimates for optimum flows. J. Environ. Manag. 24:169-79
70. Maniloff P, Mastromonaco R. 2014. The local economic impacts of unconventional shale development. Work. Pap., Div. Econ. Bus., Colo. Sch. Mines
71. Marchand J. 2012. Local labor market impacts of energy boom-bust-boomin Western Canada. J. Urban Econ. 71(1):165-74
72. McKenzie LM, Guo R, Witter RZ, Savitz DA, Newman LS, Adgate JL. 2014. Birth outcomes and maternal residential proximity to natural gas development in rural Colorado. Environ. Health Perspect. 122(4):412-17
73. Metcalf GE. 2014. The economics of energy security. Annu. Rev. Resour. Econ. 6:155-74
74. Michaels G. 2010. The long term consequences of resource-based specialisation. Econ. J. 121(551):31-57
75. Miller SM,Wofsy SC, Michalak AM, Kort EA, Andrews AE, et al. 2013. Anthropogenic emissions of methane in the United States. PNAS 110(50):20018-22
76. Mitchell AL, Mitchell S, Casman EA. 2013. Surface water withdrawals for Marcellus Shale gas development: performance of alternative regulatory approaches in the Upper Ohio River Basin. Environ. Sci. Technol. 47:4918-25
77. Muehlenbachs L. 2015. A dynamic model of cleanup: estimating sunk costs in oil and gas production. Int. Econ. Rev. 56(1):155-85
78. Muehlenbachs L, Spiller E, Timmins C. 2014. The housing market impacts of shale gas development. NBER Work. Pap. 19796
79. Murray KE. 2013. State-scale perspective on water use and production associated with oil and gas operations, Oklahoma, U.S. Environ. Sci. Technol. 47:4918-25
80. Nicot JP, ScanlonBR. 2012.Water use for shale-gas productioninTexas,U.S.Environ. Sci.Technol. 46:3580-86
81. Nicot JP, Scanlon BR, Reedy RC, Costley RA. 2014. Source and fate of hydraulic fracturing water in the Barnett Shale: a historical perspective. Environ. Sci. Technol. 48:2464-71
82. Northam J. 2014. German chemical giant BASF benefits from cheap U.S. gas. NPR, Morning Edition, Mar. 26
83. Northrup JM, Wittemyer G. 2013. Characterising the impacts of emerging energy development on wildlife, with an eye towards mitigation. Ecol. Lett. 15(1):112-25
84. Ojeda MI, Mayer AS, Solomon BD. 2008. Economic valuation of environmental services sustained by water flows in the Yaqui River Delta. Ecol. Econ. 65:155-66
85. Oliver ME,Mason CF, Finnoff D. 2014. Pipeline congestion and basis differentials. J. Regul. Econ. 46:261-91
86. Olmstead SM. 2010. The economics of water quality. Rev. Environ. Econ. Policy 4(1):44-62
87. Olmstead SM, Muehlenbachs LA, Shih J-S, Chu Z, Krupnick AJ. 2013. Shale gas development impacts on surface water quality in Pennsylvania. PNAS 110(13):4962-67
88. Osborn SG, Vengosh A, Warner NR, Jackson RB. 2011. Methane contamination of drinking water accompanying gas-well drilling and hydraulic fracturing. PNAS 108(20):8172-76
89. Papoulias DM, Velasco AL. 2013. Histopathological analysis of fish from Acorn Fork Creek, Kentucky, exposed to hydraulic fracturing fluid releases. Southeast. Nat. 12(4):92-111
90. Parkhurst GM, Shogren JF, Bastian C, Kivi P, Donner J, et al. 2002. Agglomeration bonus: an incentive mechanism to reunite fragmented habitat for biodiversity conservation. Ecol. Econ. 41(2):305-28
91. Poor PJ, Pessagno KL, Paul RW. 2007. Exploring the hedonic value of ambient water quality: a local watershed-based study. Ecol. Econ. 60(4):797-806
92. Provencher B, Burt O. 1993. The externalities associated with the common property exploitation of groundwater. J. Environ. Econ. Manag. 24:139-58
93. Raimi D, Newell RG. 2014. Oil and gas revenue allocation to local government in eight states. Work. Pap., Duke Univ. Energy Initiat.
94. Sachs JD, Warner AM. 1995. Natural resource abundance and economic growth. NBER Work. Pap. 5398
95. Siikamäki J, Krupnick A. 2014. Information and the willingness to pay to reduce shale gas risks. Presented at World Congr. Environ. Resour. Econ., 5th, Istanbul, June 28-July 2
96. Smith JL. 2014. The option to hold a petroleum lease by production: a user's guide to the shale gas drilling boom. Work. Pap., Sch. Bus., South. Methodist Univ.
97. Smith MD, Krannich RS, Hunter LM. 2001. Growth, decline, stability, and disruption: a longitudinal analysis of social well-being in four western rural communities. Rural Sociol. 66(3):425-50
98. Stegen KS. 2011. Deconstructing the "energy weapon": Russia's threat to Europe as case study. Energy Policy 39(10):6505-13
99. Sun H, Bergstrom J, Dorfman J. 1992. Estimating the benefits of groundwater contamination control. South. J. Agric. Econ. 24(2):63-71
100. Theodori GL. 2009. Paradoxical perceptions of problems associated with unconventional natural gas development. South. Rural Sociol. 24(3):97-117
101. Unconv. Oil Gas Rep. 2013. Haynesville continues decline as operators seek out wet gas plays. Unconv. Oil Gas Rep., Dec. 13
102. US Energy Information Administration. 2007. Annual energy outlook 2007, with projections to 2030. Rep., US Energy Information Administration. http://www.eia.gov/forecasts/archive/aeo07/pdf/0383(2007).pdf
103. US Energy Information Administration. 2011. "Other" petroleum products consumption module-shortterm energy outlook model. Rep., US Energy Information Administration. http://www.eia.gov/forecasts/steo/documentation/other-petroleum-cons.pdf
104. US Energy Information Administration. 2014a. Annual energy outlook 2014, with projections to 2040. Rep., US Energy Information Administration. http://www.eia.gov/forecasts/aeo/pdf/0383(2014).pdf
105. US Energy Information Administration. 2014b. Some Appalachian natural gas spot prices are well below the Henry Hub national benchmark. Rep., US Energy Information Administration. http://www.eia.gov/todayinenergy/detail.cfm?id518391
106. US Environmental Protection Agency. 2014a. Guidelines for preparing economic analyses. Rep. 240-R-10-001, US Environmental Protection Agency
107. US Environmental Protection Agency. 2014b. Inventory of U.S. greenhouse gas emissions and sinks: 1990-2012. Rep. 430-R-14-003 US Environmental Protection Agency
108. Van der Ploeg F. 2011. Natural resources: curse or blessing? J. Econ. Lit. 49(2):366-420
109. Veil J. 2010. Water management technologies used by Marcellus Shale gas producers. Final Rep., Argonne Natl. Lab. for US Dep. Energy
110. Vengosh A, Jackson RB, Warner N, Darrah TH, Kondash A. 2014. A critical review of the risks to water resources from unconventional shale gas development and hydraulic fracturing in the United States. Environ. Sci. Technol. 48(15):8334-48
111. Venkatesh A, Jaramilo P, Griffin WM, Matthews HS. 2012. Implications of changing natural gas prices in the United States electricity sector for SO2, NOx and life cycle GHG emissions. Environ. Res. Lett. 7(3):034018
112. Vissing A, Timmins C. 2014. Shale gas leases: Is bargaining efficient and what are the implications for homeowners if it is not? Work. Pap., Dep. Econ., Duke Univ.
113. Warner NR, Christie CA, Jackson RB, Vengosh A. 2013a. Impacts of shale gas wastewater disposal on water quality in Western Pennsylvania. Environ. Sci. Technol. 47:11849-57
114. Warner NR, Timothy M, Kresse PD, Hays AD, Karr JD, et al. 2013b. Geochemical and isotopic variations in shallow groundwater in areas of the Fayetteville Shale development, north-central Arkansas. Appl. Geochem. 35:207-20
115. Weber JG. 2012. The effects of a natural gas boom on employment and income in Colorado, Texas, and Wyoming. Energy Econ. 34(5):1580-88
116. Weber JG, Burnett J, Xiarchos IM. 2014. Shale gas development and housing values over a decade: evidence from the Barnett Shale. Work. Pap. 14-165 US Assoc. Energy Econ.
117. Wilson JM, Van Briesen JM. 2013. Source water changes and energy extraction activities in the Monongahela River, 2009-2012. Environ. Sci. Technol. 47:12575-82
118. Zhang T, Gregory K, Hammack RW, Vidic RD. 2014. Co-precipitation of radium with barium and strontium sulfate and its impact on the fate of radium during treatment of produced water from unconventional gas extraction. Environ. Sci. Technol. 48:4596-603
119. Zuckerman G. 2013. The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters. New York: Penguin