Pollution Fears Crush Home Prices Near Fracking Wells

Apr 10 2014, 4:33pm CDT | by

Whether or not fracking causes groundwater pollution, people fear the risk enough that property values have dropped for homes with drinking-water wells near shale-gas pads, according to new research.

Researchers from the Unviersity of Calgary and Duke University studied property sales from 1994 to 2012 in 36 Pennsylvania counties and seven counties in New York. They mapped sales against the locations of shale-gas wells, and they compared homes connected to public drinking-water systems to homes with private wells.

Properties with private wells suffered a loss in value compared to properties connected to a municipal water system, they found, offsetting gains in value from mineral-rights royalties. The loss varied with distance from the nearest shale-gas well. At 1.5 kilometers, properties with private wells sold for  about 10 percent less.

“If these two properties are similar in everything but the type of water they are using, then we find that difference equals negative 10 percent,” said Lucija Muehlenbachs, an assistant professor at the University of Calgary, at a seminar today in Washington D.C. sponsored by Resources for the Future, an environmental policy research institute.

Properties suffered greater losses when closer to shale-gas wells where hydraulic fracturing had been employed.

Within 1 km of shale gas wells, properties with private drinking water wells dropped 22 percent in value. Properties connected to public water suffered no losses, but also showed no net gains.

“If you get closer, if you look at the properties that are only 1 km from a shale gas well, then for the ones that are on groundwater we see a 22 percent loss in property values,” Muehlenbachs said, ”and for the ones that have access to pipe water, there’s zero gain, so essentially all of the positive benefits get wiped out by these negative externalities of having this well pad nearby.”

Such negative externalities include truck traffic, noise, light, and air pollution.

Muehlenbachs conducted the research with Elisheba Spiller and Christopher Timmins of Duke University and published the findings in a discussion paper earlier this year.

At distances greater than 2 km from shale gas wells—what Muehlenbachs calls the vicinity level—the researchers found a net increase in property values that declines over time—”evidence of a small boom-bust cycle at the vicinity level.”

Whether shale gas wells actually cause groundwater pollution is a topic fiercely debated.

“We don’t know,” said Alan Krupnick, Senior Fellow and Director of RFF’s Center for Energy Economics and Policy. ”What Lucija is getting in her data is people’s preferences and fears. That’s not necessarily reality, that there’s groundwater pollution, there’s just fear that they’re could be.”

One Department of Energy study found no evidence of groundwater pollution from a Pennsylvania shale gas well.

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