Shale Development: Risks, Responses, and Regulation
Advances in horizontal drilling and high-volume hydraulic fracturing have allowed operators to profit from oil and gas extracted from the extensive shale formations found in the United States. The resulting boom in shale development has exposed many areas, including heavily populated and environmentally sensitive areas, to the common as well as to the uncertain risks associated with drilling activities. This dissertation empirically analyzes responses to perceived risks of shale development as revealed through property transactions in a Pennsylvania county and through legislative decisions by New York towns. In general, I find that perceived risks to water feature prominently in both contexts. In Chapter I, I find that an additional nearby horizontal well increases property values on average, but that this positive effect is diminished for properties that rely on private wells for drinking water. Chapter II then considers when towns adopt a ban on shale development. In particular, I find that greater reliance on private water wells is associated with a higher probability of adopting a ban. Finally, in Chapter III, I discuss how governments could use regulations, tort liability, and insurance mandates to better manage risks to water, thereby possibly preventing property-value losses and outright bans.