Download Possible Effects of Hydraulic Fracturing and Shale Gas

Possible Effects of
Hydraulic Fracturing
and Shale Gas
Development in Durham
County
Zheng Lu
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
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
The fracking process can be seen
below:
Hydraulic fracturing has enabled
the utilization of more US
resources
Technology has allowed potential
reserves in the Piedmont to be
tapped
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)
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
Hydraulic fracturing can
greatly impact water resources
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
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
Two maps are utilized to find
distance from house to well
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
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%
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
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?
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