Shale Gas Development and Property Values: Differences across Drinking Water Sources

Lucija Muehlenbachs, Elisheba Spiller, Christopher Timmins

NBER Working Paper No. 18390
Issued in September 2012
NBER Program(s):   EEE

While shale gas development can result in rapid local economic development, negative externalities associated with the process may adversely affect the prices of nearby homes. We utilize a triple-difference estimator and exploit the public water service area boundary in Washington County, Pennsylvania to identify the housing capitalization of groundwater risk, differentiating it from other externalities, lease payments to homeowners, and local economic development. We find that proximity to wells increases housing values, though risks to groundwater fully offset those gains. By itself, groundwater risk reduces property values by up to 24 percent.

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Acknowledgments

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