Possible Effects of Hydraulic Fracturing and Shale Gas Development in Durham County
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Possible Effects of Hydraulic Fracturing and Shale Gas Development in Durham County
Zheng Lu
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Shale gas has become viable in the last decade due to advances in technology
• The US has 2,119 trillion cubic feet of natural gas• ~60% is stored in shale/coalbeds/tight sands
• Large-scale production of shale gas has is possible due to
advances in horizontal drilling and hydraulic fracturing• Wells extend vertically for ~1000 feet until it reaches a potential
shale layer• Horizontal drilling goes along the layer for 1000-6000 feet
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Hydraulic fracturing utilizes pressure to fracture rock formations to create flow
• Typically involves millions of gallons of fluid pumped into a gas well at high pressures• Fluid is composed of water, chemicals additives, propping agents
(used to keep fractures open)
• Substantially increases natural gas extraction from unconventional sources
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The fracking process can be seen below:
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Hydraulic fracturing has enabled the utilization of more US resources
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Technology has allowed potential reserves in the Piedmont to be tapped
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Hydraulic fracturing and shale gas has many benefits• Shale gas is a clean fuel when compared to coal and oil• Less greenhouse gases emitted
• Job creation• Marcellus Shale development in PA has added over 100,000 jobs
in 2011 • Revenue• Marcellus Shale development has generated over $10 billion for
PA’s economy• Royalty payments for residents
• (12.5%-21% per unit of gas extracted)
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There are also environmental concerns associated with the process
• Water supply effects• Water is heavily used during the fracking process (millions of
gallons)• Might limit quantity available for other uses• Quality may be reduced
• Accidents• Accidental release of fracking fluid• Chemicals seeping into the water supply
• Pollution• Air pollution• Noise pollution
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Hydraulic fracturing can greatly impact water resources
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The NC Senate has approved a bill which would allow fracking• Approved on February 23, 2013• Allows NC Mining and Energy
Commission to start issuing fracking permits by March 2015
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We can use the hedonic model to measure the value of fracking
• Comparison to Washington County, PA (Marcellus Shale)• Recently allowed fracking
• Find data on house prices and attributes using Zillow• Utilize map of gas well locations in Washington County as a
cross-reference
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Two maps are utilized to find distance from house to well
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Simple hedonic model
• Widely used to value characteristics which do not have a given value in their own markets• Can be used to show marginal values of changing attributes
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The simple hedonic model suggests that living close to a well is bad
• Age and Well distance are significant at 5%• A 1% increase in age leads to a decrease in value of 0.24%• An increase of 1 mile increases house value by 11.4%
• Lot size is significant at 10%
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The fixed effects model
• Equivalent to a First Difference model because t = 2• Results are flipped from previous regression• Δage might be picking up inflation effects
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There are some issues with the regression analysis• Lack of data points• 20 different locations used for the first regression• 11 used for the fixed effects regression
• Sample size too small• Results may change by taking more samples
• Assumptions made probably too broad• Possible interaction terms?
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The results of the initial analysis are inconclusive• It is unclear if the benefits of fracking outweigh the costs• Finding a more efficient method/source to gather data on
houses would be invaluable• Drilling may affect individuals that depend on well water and
have a septic sewage system differently than those that depend on public water and sewage