Academic journal article Agricultural and Resource Economics Review

I Want in on That: Community-Level Policies for Unconventional Gas Development in New York

Academic journal article Agricultural and Resource Economics Review

I Want in on That: Community-Level Policies for Unconventional Gas Development in New York

Article excerpt

Within the last decade, the northern Appalachian basin has seen significant development of natural gas from unconventional reservoirs. Activities associated with this production have been collectively termed unconventional gas development (UGD) (Graham, Rupp, and Mitchell 2013). Wang and Krupnick (2013) suggested that this increase in UGD is attributable to several key factors: economically advanced drilling and well-completion technologies, favorable geology in that region, a preponderance of private mineral rights that allow landowners to receive substantial financial benefits, an existing infrastructure of natural gas pipelines, and the federal open access policy that governs the use of pipelines.

Studies of UGD have identified many potential economic and environmental benefits and risks associated with shale gas extraction. Labor markets reap substantial economic benefits, although it is not yet clear whether the benefits remain within the boundaries of a county or spill over to neighboring counties (Kinnaman 2011, Weber 2012, Considine, Watson, and Blumsack 2010). Owners of the mineral rights can gain substantially from leasing agreements and royalties paid by shale gas developers (Gopalakrishnan and Klaiber 2014), and state and county governments can benefit via severance taxes assessed on developers. The effect on housing prices is not yet clear. Several studies have reported increases in prices for homes near shale gas wells but decreases in prices of homes that rely on private water wells (Muehlenbachs, Spiller, and Timmins 2012, Gopalakrishnan and Klaiber 2014). Boslett, Guilfoos, and Lang (2015) found that New York's statewide moratorium on UGD was associated with a decline in the value of homes in the shale region. The primary economic risk associated with UGD is similar to the risk associated with conventional fossil fuel extraction-the threat of creating a "boom and bust" economy. Several authors have questioned UGD's ability to provide sustainable incomes and economic development in communities rather than short-lived, fleeting economic gains (Albrecht 1978, Anderson and Theodori 2009, Jacquet and Stedman 2013, Stedman et al. 2012).

The environmental risks associated with UGD are also open to debate. Potential risks include degraded water quality commonly attributed to migration of methane, failures of well integrity that can allow chemicals to leach out, and contamination from waste water. These risk have been the subject of several studies (Osborn et al. 2011, Olmstead et al. 2013, Vengosh et al. 2014). In addition, recent studies have linked UGD to public health risks and to an increase in seismic events in extraction areas (Graham, Rupp, and Mitchell 2013, Hand 2014, Hill 2013, Kim 2013, McKenzie et al. 2014). UGD's net impact on climate change is another point of debate (Miller et al. 2013, Newell and Raimi 2014).

Background on Local-level Unconventional Gas Development Policies

Several federal environmental laws apply to the shale gas industry, but the federal government does not explicitly regulate the industry. Consequently, state and local governments have been at the forefront of regulatory policy design (Richardson et al. 2013), and consideration of the risks and benefits associated with UGD has spawned a variety of state and local policies.

An important question for many states is the extent to which cities and towns can use home-rule to impose local bans and moratoria and/or to restrict UGD through zoning regulations. In California, the state senate's attempt to pass a statewide moratorium on fracking failed to gather enough votes (McGreevy 2014), but a number of counties and municipalities have passed bans (Baker 2014, Schwartz 2014). In Colorado, the cities of Lafayette, Longmont, and Fort Collins banned UGD, but the bans were overturned after suit was brought by the Colorado Oil and Gas Association; Boulder and Broomfield adopted moratoria (Proctor 2014). Recently, Ohio's supreme court ruled that the state's municipalities cannot use zoning regulations to block drilling activities (Smyth 2015, Knox 2015). …

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