ERS Presents on Local Impacts of Oil and Natural Gas Production

Although the expansion in production of shale-derived natural gas over the past decade or so has reshaped the U.S. energy landscape, until recently, the primary source of data on oil and natural gas production stopped at the state level. For researchers interested in the impacts of these shifts in energy production at the local level, this left the picture murky. However, a data set released this spring by the U.S. Department of Agriculture’s (USDA) Economic Research Service (ERS) provides more granular data: County-level Oil and Gas Production in the U.S.Jeremy Weber, a research economist in ERS’ Resource and Rural Economics Division, gave a presentation on some of the findings that have emerged from the new data during a briefing sponsored by the Council on Food, Agriculture, & Resource Economics (C-FARE) and the USDA Economists Group, entitled “Oil and Gas Development in the U.S.: Data and Recent Research on Local Consequences” (webcast available here).

Weber described four of the areas in which research into the local impacts of oil and gas production is being conducted: negative associated impacts (“disamenities”), local economy, public finances, and agriculture. In the first category, Weber included consequences like increased truck traffic, groundwater and air quality concerns, negative health impacts, and housing price fluctuations. Studies looking at high-production counties have shown increases in automobile accidents and lower scores on tests of newborn health. Studies looking at housing values have shown mixed impacts. Regarding local economies, Weber discussed research showing that extraction creates jobs, but not as many as some have predicted (each mining-sector job creates a little more than one job outside that sector). Extraction is associated with increases in wages, but these effects are moderated by the influx of workers from elsewhere.

In the area of public finance, Weber observed that oil and gas production expands counties’ revenue base, but also increases the government’s liabilities. So far, the new sources of revenue (impact fees, taxation of mineral rights, and nonresidential taxes) appear to outweigh local governments’ liabilities. Lastly, Weber discussed the impacts of oil and gas production on agriculture. In some sectors, particularly water and labor, energy production competes with agricultural operations. However, the two industries may also complement each other, as farmers collecting royalty payments for use of their land reinvest the money into their farms. Weber concluded by pointing out that by all estimates, U.S. oil and natural gas production will continue to rise in the decades to come, so the impacts of increased extraction on local communities will only become more pronounced.

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Posted in Issue 15 (August 11), Update, Volume 33 (2014)

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