Economic Benefits of Fracking to Local Communities
The study found that the shale boom produced benefits valued at as much as $1,900 a year for the average household in nearby communities.
- Income climbed 7 percent
- 10% employment rate
- Home prices increased by 6% (20% in ND)
- Net benefits of around $300 a year for the typical household
Unpleasant Side Effects of Shale Boom
- More traffic
- More pollution
- General anxiety over the environmental dangers
- 20% increase in spending for police and public safety
South Texas Fracking Map
With President-elect Donald Trump’s promise to expand fossil fuels in the United States, hydraulic fracturing, or fracing, is poised to become an even more important part of the nation’s energy system.
On a national scale, its benefits are clear: lower energy prices, enhanced energy security, and lower air pollution and greenhouse gas emissions. But there have been concerns that negative health and social impacts outweigh the economic benefits for local communities where drilling takes place.
The first nationwide study of the comprehensive local impacts of fracing finds that when the costs and benefits are added up communities have on average benefited. (see study at https://epic.uchicago.edu/research/publications/local-economic-and-welfare-consequences-hydraulic-fracturing)
The benefits include a 6 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. On the costs side, fracing reduces the typical household’s quality of life by about $1,000 to $1,600 annually not counting the increase in household income.
“There appears to be a good deal of heterogeneity in the estimates across the nine shale regions in our sample,” says co-author Alex Bartik, of MIT. “These differences reflect both variation in how large fracing activity is relative to the local economy, as well as differences in local housing markets. In future research, we’re working on understanding this heterogeneity better.”
Co-author Janet Currie, of Princeton, adds: “Communities that have banned fracing would perhaps have seen less benefit.
The heterogeneity in effects lends support to the idea that local communities should have a voice in decision making about fracing. It will also be important to think about whether it is possible to compensate individual people in local communities who experience the costs of fracing without participating in the benefits.”
Despite the heterogeneity, the overall trend is clear, says Greenstone: “All in all, the current data shows that on average the overall benefits to local communities outweigh the costs.”