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Title: The Long-Term Consequences of Oil and Gas Extraction: Evidence from the Housing Market

Citation Type: Working Paper

Publication Year: 2020

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Abstract: Pennsylvania has a long history of oil and gas extraction. When the production period ends, many wells are left behind and some remain unplugged. Unplugged wells impose serious environmental costs, including explosion hazard and risk of water, atmosphere, and soil contamination. This paper quantifies these costs by estimating the effect of unplugged wells on housing prices. I use rich data on oil and gas drilling, housing market transactions, and lease agreements to conduct difference-in-differences and instrumental variable analyses. I show that well abandonment reduces house prices. Old wells, left behind by oil and gas operators, affect house prices more than active, producing ones. However, this depreciation is reversible: if well site clean-up is completed, house prices recover almost entirely. I show that the benefits of proper well plugging are larger than the costs. This motivates environmental policies aimed at creating incentives for oil and gas producers to plug wells. These policies may include higher bankruptcy insurance requirements or environmental taxes.

Url: https://files.webservices.illinois.edu/9475/job_market_paper_shappo.pdf

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Authors: Shappo, Mariya

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Institution: University of Illinois

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Data Collections: IPUMS NHGIS

Topics: Housing and Segregation, Other

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