Econonomics of Energy and Environmental Policy

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Shale Gas and Oil Development: A Review of the Local Environmental, Fiscal, and Social Impacts

In the early 2000s, advances in horizontal drilling and hydraulic fracturing technologies led to a veritable boom in the extraction of natural gas and oil from shale plays. In this review article, we discuss the local, state, and federal regulatory context in which this shale gas and oil production occurs and review how it affects local communities, the environment, and government income and spending. We find that long-term employment effects are relatively low, while shale development is associated with short-term boom and bust cycles that affect both employment and local and state finances. Environmental and community impacts include noise, light, and air pollution, increased risk of soil or water contamination, increased truck traffic, and increased demand for housing and schooling. The distribution of local costs and benefits hinges on ownership of oil and gas rights. There is variation across states and localities in how resource extraction is taxed and how these funds are used, including the extent to which the funds are targeted to specific purposes and whether they are spent in the short or long term. These policy differences can determine the ability of states and localities to prosper from this resource boom over the long term.
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Keywords: Shale gas, tight oil, rural development, regulation, fiscal issues, boom and bust

DOI: 10.5547/2160-5890.9.1.chit

Published in Volume 9, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


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