By December 23, 2016 1 Comments Read More →

New study finds fracking brings ‘enormous benefits’ to local economies


Fracking study

Latest study further evidence how far out of touch “Keep it In The Ground” activists have become

Fracking is generating “enormous benefits” to local economies — and to average households “by roughly $1,300 to $1,900 per year” — according to a new report from researchers at the Massachusetts Institute of Technology (MIT), Princeton University, the University of Chicago and the National Bureau of Economic Research (NBER).

As a research summary released alongside the study explains:

“Counties with a high level of hydraulic fracturing experience marked increases in economic activity. Specifically, the study found up to a 7 percent increase in average income, driven by increases in wages and other factors such as royalty payments from the drilling to local land owners. Employment also increased about 10 percent, with a 40 percent increase alone in natural resources and mining jobs. The construction and transportation industries also saw an increase, while no industries experienced job losses.

Calling their work the “most comprehensive assessment to date,” the group looked at the economic benefits of fracking across nine shale regions, while also factoring in costs associated with energy development such as increased truck traffic into their conclusions.

And even when those costs were factored in, the group concludes “that the average local benefits from hydraulic fracturing outweigh the costs.” From the research summary:

“The application of hydraulic fracturing to develop oil and natural gas found in shale deposits has led to a sharp increase in U.S. energy production and generated enormous benefits, including abruptly lower energy prices, a reduced trade deficit, stronger energy security and even lower carbon dioxide emissions in the power sector.” (emphasis added)

The study also finds significant benefits on a national scale, including increased energy security and lower trade deficits resulting from domestic energy production.

Also from the research summary:

“Higher levels of domestic energy production have also cut the trade deficit and increased energy security by reducing the amount of fuel purchased abroad. A decade ago, the U.S. imported 60 percent of its net liquid fuel needs. Last year, it imported just 24 percent. Combined with lower prices, this has sharply reduced U.S. expenditure on oil imports, which had averaged more than half of the trade deficit from 2008 to 2013. The net result was a $304 billion reduction in capital outflows in 2015 compared to 2008.” (emphasis added)

Also noteworthy within the study is further evidence that anti-fracking activists’ frequent claims that shale development is lowering home values simply is simply not true. From the study:

“The estimates indicate that median and mean housing values for owner-occupied homes increased by 5.7 percent due to fracing. Further, the median price of mobile homes increased by almost 8 percent.”

The study continues:

“Overall, we conclude that the initiation of fracing led to meaningful increases in housing prices in counties especially amenable to fracing, relative to other counties in the same shale play.” (emphasis added)

In conducting their research, the authors looked at the potential impacts increased shale development has on local governments and quality of life.

These include increased demands on infrastructure such as roads and health services and a “marginally significant” increase in crime. But even with these factors taken into account, the authors conclude:

“Despite the heterogeneity, the overall trend is clear… All in all, the current data shows that on average the overall benefits to local communities outweigh the costs.”” (emphasis added)

This latest report is just further evidence as to how far out of touch “Keep it In The Ground” activists have become.

It is clear that while these groups crisscross the country staging fake accidents and disrupting federal business, the very thing they are protesting is actually delivering significant benefits to the people who live closest to oil and natural gas development.

Of course, that is likely why elected Democrats and Republicans alike are staying far away from their radical agenda.

Posted in: Energy News

1 Comment on "New study finds fracking brings ‘enormous benefits’ to local economies"

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  1. Cathie Reid says:

    What use is an “economic” impact study if it doesn’t include consideration of a full ‘economy’and the costs of externalities? For instance, the study states: “The global welfare e↵ects of fracing include potentially very important consequences for petroleum, natural gas and electricity prices, local air pollution, global warming, and geopolitics. All of these impacts are outside the scope of this paper;”

    Cost averaging any perceived net economic benefit/attributing it to a per household amount is disingenuous when only a small number of local households will benefit (hardly any of the existing households other than those who hold oil/gas/mineral rights to royalties…and it is primarily the fracing investors who benefit – who are unlikely to pay taxes into the local economy. Note that the underlying study states:
    “Third, there is evidence of deterioration in the quality of life or total amenities.”
    “In an important paper, Muehlenbachs et al. (2014a) find that in a sample of roughly 1000 Marcellus region houses, proximity to a fracing site reduces prices by 20 percent for houses that rely on well water, relative to those that utilize piped water. Nor does our paper deal with the more global issue of how fracing a↵ects global greenhouse gas emissions and geopolitics.”

    “7The EPA released a preliminary report on a wide-ranging study on the health and environmental risks of fracing (Environmental Protection Agency, Oce of Research and Development (2015)). Regulations also continue to evolve.”

    “the paper’s results come from a period when petroleum prices were higher than they are currently”

    “Hydraulic fracturing is also likely to lead to changes in the composition of the workforce and population, because many of the jobs associated with fracing are held by men in their 20s and 30s. The increase in demand for these workers may lead to in-migration of young males, but could also lead to out-migration of other age groups and women
    Finally, we note that we attempted to measure whether air quality in top-quartile counties was a↵ected by fracing-related activity. The EPA air pollution monitoring network is sparse in the countries covered by shale plays and it was not possible to develop reliable estimates.”

    “It is worth underscoring that Table 10 has reported average estimates of WTP and it is unlikely that all residents are made better o↵ by allowing fracing. For example, individuals who are not in the labor force will not benefit from the increase in local productivity. Renters who are not in the labor force are likely to fare especially poorly because they will face higher rents and no change in income. Additionally, homeowners who do not own the mineral rights to their property will not benefit from the drilling royalties, but may experience the negative impacts of drilling activity. The extent of the heterogeneity in the impacts of local productivity shocks and of changes in local amenities is a promising area for future research that requires more detailed micro data.
    Two final points are noteworthy. First, these revealed preference estimates of WTP to allow fracing (and for amenity changes) are ultimately determined by households’ knowledge. If new information causes households to update their estimates of fracing?s environmental and quality of life impacts, then this paper?s WTP estimates will necessarily change. Second, this paper?s estimates of WTP to allow fracing only reflect local changes in welfare. The global welfare e↵ects of fracing include potentially very important consequences for petroleum, natural gas and electricity prices, local air pollution, global warming, and geopolitics. All of these impacts are outside the scope of this paper; however, none of them become relevant if local communities do not allow fracing within their jurisdictions.”

    “Third, there is evidence of deterioration in the quality of life or total amenities, perhaps most notably marginally significant estimates of higher violent crime rates, despite a 20 percent increase in public safety expenditures. We estimate that annual willingness-to-pay (WTP) for fracing-induced changes in local amenities are roughly equal to -$1,000 to -$1,600 per household annually (i.e., -1.9 to -3.1 percent of annual mean household income). Fourth, we estimate that mean WTP for allowing fracing equals about $1,300 to $1,900 per household annually (2.5 to 3.7 percent of median household income) among original residents of counties with high fracing potential.”

    There is no need for increased fossil fuel infrastructure. Cleaner renewables can meet domestic energy security.

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