Fact check: Does fracking negatively impact property values?

April 7, 2016
By Autumn Lewien

In December 2015, Kaye Fissinger, president of the environmental group Our Health, Our Future, Our Longmont, published an op-ed in the Longmont Times-Call, a local Colorado newspaper, in which she claims that hydraulic fracturing, or fracking, leads to falling property values. "In some cases property values have declined up to as much as 75 percent due to the proximity of fracking operations," writes Fissinger, "[p]roperty values plummet along with the inability of homeowners to sell their homes when prospective buyers learn of the nearby fracking debacle."^[1]

Fissinger’s op-ed was published a few days before the Colorado Supreme Court heard cases from Longmont, where residents passed a ballot measure to ban fracking in 2012, and Fort Collins, where, in 2013, voters approved a five-year moratorium on fracking.^[2] The Supreme Court's decision is expected to be released in the spring of 2016.^[3] Meanwhile, the Colorado House of Representatives, on April 4, 2016, voted against a bill that would have granted local governments "more authority over fracking."^[4]

Does hydraulic fracturing impact property values? Yes; however, the evidence is inconclusive regarding the scope, positive or negative, of these impacts. Additionally, for most studies that find a negative effect, the estimated percent change is significantly lower than the 75 percent Fissinger cites.

Local fracking bans: Longmont and beyond

In November 2012, the citizens of Longmont voted 60 percent to 40 percent to ban hydraulic fracking within its city limits. The Colorado Oil and Gas Association (COGA), joined by the state of Colorado, filed a lawsuit in December, challenging the city’s right to ban an industry regulated by state and federal authorities. In July 2014, the lower court in Boulder, Colorado, overturned the Longmont ban, concluding that regulation of the industry is the state’s prerogative.^[5] One month later the Longmont city council voted 7-0 in favor of appealing, and on December 9, 2015, the Colorado Supreme Court heard Longmont’s case.

Longmont’s push to ban fracking is not unique. Over the past few years there have been a number of other bans and moratoriums across the country: Denton, Texas; Athens, Ohio; and Santa Cruz County, California, to name a few.^[6]^[7] In December 2014, New York Gov. Andrew Cuomo (D), acting on a joint recommendation from the New York Department of Environmental Conservation and Department of Health, announced a statewide ban on the oil and natural gas extraction process.^[8] However, similar bans have failed at the polls elsewhere, and in 2015, the Ohio Supreme Court Ballot Law Update: Ohio Supreme Court rejects anti-fracking county charters, but protects initiative process struck down local fracking bans.^[9]^[10]

Update: On May 2, 2016, the Colorado Supreme Court struck down the local prohibitions on fracking in Longmont and Fort Collins.

Why is hydraulic fracturing such a debated issue?

Hydraulic fracturing has been used for decades, but the scale and scope have increased sharply over the last decade, aided by advances in drilling technology.^[11]^[12] The result has been what National Geographic has called "the great shale gas rush."^[13] A recent study conducted by the U.S. Energy Information Administration forecasts that natural gas will supplant coal as the primary source of electricity in the U.S. this year, due, in part, to fracking.^[14]

Proponents of fracking claim that the fracking boom has created jobs and driven economic growth in states like North Dakota, Texas, and Ohio.^[15] At the same time, however, the technique—which involves the injection of large volumes of water mixed with sand and chemicals deep into shale formations to free formerly inaccessible natural gas, oil, and other liquid hydrocarbons—has led to public concern about potential environmental impacts and health effects.^[12] These issues range from potential water contamination and air pollution to noise, truck traffic, and even minor earthquakes.^[16]^[17]^[18]

A 2015 U.S. Environmental Protection Agency (EPA) report on the impact of hydraulic fracturing found no evidence that the drilling technique has led to widespread pollution of the nation’s water supply:

“

From our assessment, we conclude there are above and below ground mechanisms by which hydraulic fracturing activities have the potential to impact drinking water resources. [...] We did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources in the United States.^[19]^[20]

”

These findings, however, have done little to cool the national debate over the drilling technique. Public concern about fracking’s environmental impacts, and the political and media attention it has garnered, continues to drive opposition to fracking and may, as Fissinger claims, negatively impact property values.

Property Values and Fracking

Fissinger pointed Ballotpedia to a September 18, 2010, article in the Dallas Morning News as the source for her remarks.^[21] The article documents a case in which Tim and Christine Ruggiero, homeowners in Wise County, Texas, lost an estimated 70 percent of their home value—from $257,330 to $75,240—after Aruba Petroleum began drilling on their land. The Wise County appraisal review board, which voted to reduce the home and land values by 70 and 75 percent, respectively, noted that “the drilling company's use of the Ruggieros' land warranted the extraordinary reduction.”^[22] However, this case is not representative.

The impact of hydraulic fracking on property values has become the focus of a growing body of literature, and in general, studies suggest that benefits and costs of fracking vary sharply across property types and are influenced by a variety of variables, including proximity, drinking water sources (groundwater or piped water), and land type (rural or urban), to name a few.

For example, in a 2013 study, Gopalakrishnan and Klaiber, of the University of Ohio, using data from Washington County, Pennsylvania, found that, in general, proximity to shale gas wells negatively impacts property values; however, the degree of effect is dependent on property characteristics. For instance, for properties located within 0.75 miles of a well, the percent change in property values ranges from -1.4 to -21.7, with higher losses falling “disproportionately” on rural properties with private groundwater wells. The authors also found that the impact is largely short term and suggested “that perceptions of risk” may be driving the losses.^[23]

Muehlenbachs, Spiller, and Timmins (2012), using data from the same county, similarly found that “concern for groundwater contamination risk” decreases property values—up to 23.6 percent—for homes dependent on private-groundwater wells. For properties with access to piped-water, however, proximity to well pads increases property values by 10.7 percent. According to the authors, the increase is likely attributable to lease payments.^[24]

Similarly, a 2015 study conducted by Boslett, Guilfoos, and Lang suggested that the statewide moratorium on hydraulic fracturing in New York resulted in a 23.1 percent decline in property values. This decline, the authors conclude, indicates “a positive net valuation of [shale gas development].”^[25]

The main findings of several studies, including the ones discussed above, are detailed in the chart below:

Studies on How Fracking Impacts Property Values
Name of Study (Year)	Authors	Location Studied	Summary of Findings
“Shale Gas Development and Property Values: Differences Across Drinking Water Sources” (2012)^[24]	Muehlenbachs, Spiller, and Timmins	Washington County, Pennsylvania	The authors find that while proximity to wells increases property values for homes with access to piped-water, for groundwater-dependent homes, concerns about groundwater contamination risk reduces property values by up to 24 percent.
“Is the Shale Boom a Bust for Nearby Residents? Evidence from Housing Values in Pennsylvania” (2013)^[23]	Gopalakrishnan and Klaiber	Washington County, Pennsylvania	The study finds that, in general, proximity to shale gas wells is negatively correlated with property values (as proximity increases, property values decline); however, the impact is heterogeneous and largely short term.
“A Canary Near a Gas Well: Gas Booms and Housing Market Busts in Colorado” (2014)^[26]	James and James	Weld County, Colorado	The authors find that when the distance to the nearest fracked well is reduced by 1 km, a home’s value is also reduced by an estimated 7 percent, or approximately $15,000.
“The Housing Market Impacts of Shale Gas Development” (2015)^[27]	Muehlenbachs, Spiller, and Timmins	Pennsylvania	Recorded a 6.5 to 13.9 percent decrease in property values for groundwater-dependent properties that are within 1.5 km and 1 km of a shale gas well, respectively. On the other hand, fracking has a positive impact on property values for piped-water-dependent homes, which the authors attribute to lease payments.
“Valuation of Expectations: A Hedonic Study of Shale Gas and New York’s Moratorium” (2015)^[25]	Boslett, Guilfoos, and Lang	New York	This study finds that the 2008 statewide moratorium on hydraulic fracturing reduced New York property values by an estimated 23.1 percent, indicating “a positive and substantial valuation of [shale gas development]” in the state.

Ballotpedia has conducted its own study on this issue, concluding that there is “no definitive evidence that fracking negatively impacted home values and sales across seven counties in Colorado in 2015.” Indeed, the data illustrates that in two counties, homes close to oil and gas development had higher home values and sales, while in four counties property values and sales declined with proximity.

Conclusion

In a December 2015 op-ed, Kaye Fissinger claimed that "in some cases property values have declined up to as much as 75 percent due to the proximity of fracking operations."^[1] In our examination of the relevant literature, we find that fracking does have an impact on property values; however, whether that effect is positive or negative depends on a variety of variables, including proximity to a well and the home’s source of water. For example, one study finds that, for houses reliant on piped-water, proximity to well pads increases property values by 10.7 percent. On the other hand, for groundwater-dependent properties, "concern for groundwater contamination risk" may reduce property values up to 24 percent.^[24]