Shale Gas Offers Nearby Communities the Good, the Bad and the Uncertain

Photographer: Spencer Platt/Getty Images

A natural gas valve at a hydraulic fracturing site in South Montrose, Pennsylvania. Close

A natural gas valve at a hydraulic fracturing site in South Montrose, Pennsylvania.

Photographer: Spencer Platt/Getty Images

A natural gas valve at a hydraulic fracturing site in South Montrose, Pennsylvania.

Bloomberg BNA — Research on the local impacts of shale gas development finds a host of positive and negative impacts, with the long-term consequences still to be determined, according to scholars reviewing different aspects of the activity.

Three scholars speaking April 10 at the think tank Resources for the Future described a very mixed picture of economic benefits, local burdens, and both increases and decreases in property values.

In Pennsylvania, development of the Marcellus Shale has produced more than $200 million a year in “impact fees” that have been shared between localities and state agencies. The fees help to cope with such problems as increased demand for services of all kinds, increased wear on roads and more traffic accidents.

The recently created Pennsylvania fees generated $204.2 million in their first year, $202.5 million in their second year and $224.5 million in their third year. It remains a point of debate as to whether the fee is better than the more conventional severance tax levied on oil and gas production in many states, said James McElfish, an attorney and director of the Sustainable Use of Land Program of the Environmental Law Institute.

The fee revenues have been trivial for some highly populous areas, such as Allegheny County, which includes Pittsburgh, but in low-population Greene County the fees have provided up to a quarter of the county's revenues, McElfish said.

Property Values Up, Down

Property values have been hurt for landowners with water wells close to shale gas wells, but values have risen for landowners at moderately close distances to gas wells if the landowners use public water systems, said Lucija Muehlenbachs, a University of Calgary assistant professor.

Drilling operations produce negative impressions from both visual appearances and noise as well as fears of groundwater contamination. They also involve a big increase in truck traffic to transport equipment to and from a site, to bring water to a well site for hydraulic fracturing and to remove wastewater.

Muehlenbachs said the measured harmful impacts included declines in property value of 22 percent for property owners with water wells within one kilometer of a shale gas well. Property values increased 6.6 percent for property owners at a distance of 1.5 kilometers from a shale gas well if the properties use piped water from public water systems, she said.

Royalty payments must have been the reason for the increased value of some properties, she said.

Muehlenbachs said county-level statistics from Pennsylvania also indicate an increase in the number and severity of traffic accidents.

No ‘Dutch Disease' Seen

Hunt Allcott, a New York University assistant professor of economics, said analysis of U.S. shale oil and shale gas development indicated there has been no deleterious impact in the form of what economists call “Dutch disease,” an inflation of business costs and consequently competitive harm to manufacturers.

“The data clearly reject the idea of Dutch disease in the United States,” Allcott said, citing his efforts to measure impacts on manufacturers from the upsurge in shale energy development. He had been expecting to find support for the idea, he admitted.

The idea of Dutch disease has been prominent in political debate in Canada, where the big increase in oil sands development has raised fears of inflated business costs and an inflated value for the Canadian dollar, posing a risk of slumping exports of manufactured goods.

A coalition of advocacy groups calling themselves the Multi-State Shale Research Collaborative issued their own report April 10 calling for higher taxes on oil and gas production in Ohio and Pennsylvania and new fees on gas wells in West Virginia.

The coalition characterized the employment benefits of shale gas development as small and temporary. The coalition accumulated long lists of the troublesome impacts that many commentators have noted—the shale gas surge leading to greater need of schools, expanded infrastructure, road repair, police, firefighters, hospital services and housing.

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