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Shale Gas - Discovery, Cost and Impacts of Extraction

By Eve Pearce

Apr 13, 2014
 

How far can the impacts of fracking affect US housing markets?

 
 

Shale gas has proved to be a boom for the USA, which now leads the world in shale extraction. Additionally, the discovery and continued investment in shale gas has placed the US oil industry in excellent standing, no longer entirely at the mercy of global oil markets.

 

Shale gas has also created a much needed boom in employment in the oil and gas industry. However, while there are certainly many benefits, shale gas extraction brings with it its own set of challenges. One of the most pressing, is that the extraction of the gas could potentially impact housing, land and commercial property values in areas that are rich in deposits.

 

 

 

Map of shale plays - courtest of NaturalGasWatch.org

  

 

A Better Understanding of Impacts

 

Due to the fact that the shale gas industry is growing so rapidly, there are calls from certain academics, such as those from the Scott Institute for Energy Innovation, to develop a wider understanding of the process through research, especially considering that shale is expected to account for half of all natural gas supplies in the US by 2040. This could be a valuable practice, especially when it comes to allaying the fears of environmental damage and water pollution that the fracking process is often accused of causing.

 

While there is ongoing research in this area, another cause for concern raised by some is the potential impact on homes and house prices in affected areas.  So far, however, there is in fact evidence to suggest that house prices, and communities as a whole, can benefit from being near to a fracking site.

 

Housing prices in Williston, North Dakota for example, saw an average rise in value from around $100,000 to $120,000. This, along with substantial growth to the local economy, shows there are certainly benefits to be had. However, there are of course, risks and negative effects that need to be considered too.

 

One study focused on the effects of the Marcus Shale project on local communities. It noted that while economic benefits are likely, additional costs from road maintenance, lowered housing prices from properties linked to groundwater supplies, and a lack of local services in rural communities will incur greater costs.




 

Property Prices and Fracking - Why it’s not Just a US Concern

 

Although there is research that suggests the US success linked with shale gas is not achievable by many other countries such as the UK, there are none the less numerous projects underway internationally. Interestingly, many of these projects have faced the same criticisms as their US counter parts, and equally of concern is the affect on property prices.

 

The shale boom is something that the UK in particular is keen to benefit from, and hopes to alleviate potential future problems with energy supply by doing so. Although still in early stages of the process, there are concerns that property prices will be affected, and many UK realtors are keeping a close eye on developments. There are concerns that along with other factors that can limit or damage prices, especially in older buildings, there could be serious negative impacts on countryside properties.

 

Asbestos for example, is often a major concern in older properties, and in communities where a mineral boom takes place, there could not only be additional loss of value, but additional costs for companies looking to renovate or improve affected older buildings to accommodate the influx of workers. Despite government guidelines that promise to take into account some of the concerns, the general attitude towards fracking is still a mixed one at best.

 

One thing is clear however - fracking and shale gas are without doubt an essential part of America’s energy future, and while there are certainly great benefits that can be enjoyed by affected communities, there are also some valid concerns that need to be taken into account. Property prices are certainly affected, and this is often effected by the type of water supply received.

 

An expensive solution to lowering property values could be to ensure all properties receive piped water, but this could prove expensive to drilling companies if they are asked to foot the bill, and for anyone else. Ultimately, the perception of fracking could also have a negative, but not fully justified impact. In the end, all eyes will be on the US property market, especially countries who are already performing exploratory drilling, to see how far these effects go.

 

 
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