A Distinctive US Approach to Shale Gas Development?

Local Responses to Complex Risks

Susan Christopherson Department of City and Regional Planning

Cornell University smc23@cornell.edu

Research on Social and Economic Effects of Shale Gas Development

What do we know about social and economic effects based on historical experience in resource extraction communities and early experience in Texas and Pennsylvania shale extraction regions. What are the research questions and sources of data? 8 projects

Why are communities taking action in response to shale gas development? What form does their response take?

Can opposition be characterized as NIMBYISM? What jobs are created in conjunction with shale gas and

oil development? How does actual job creation compare with projections from I/O models? What is the spatial distribution of job creation?

The Horizontal Hydraulic Fracturing Process

Production of Shale Gas in the United States

Production of natural gas from shale in the United States has expanded rapidly in the last ten years, and is projected to continue through 2040 (EIA 2013a)

Local Community Responses A consequence of fragmented governance

Learning over time about externalities and local

costs

Awareness of losers as well as winners

Concern about long-term social and economic as well as environmental effects.

At a National Policy Level, There is Support for Natural Gas Development

Why? It lowers costs for some manufacturers (in petro-chemicals) and improves the balance of payments through exports. Some evidence indicates that its use will lower CO2emissions. It creates jobs – in the petrochemical industry, financial services, and transportation as well as in oil and gas extraction.

Local and Regional Concerns

There are Winners and Losers Winners Non-resident owners of large acreage with mineral rights Resident owners of large acreage with mineral rights Some regional businesses – trucking, quarries, construction, hotels, restaurants, bars (not necessarily located near drilling sites) Losers Resident owners of small parcels or renters Some regional businesses – tourism, specialized agriculture (organic farming), businesses competing for labor, retirement homes, “brand” based business. Regional residents who absorb indirect and public costs related to safety, roads, traffic, air pollution

The Risks from Shale Gas Development are Significant

Environmental risks include water, air, and noise pollution, effects on habitat, seismic risks from injection wells, industrial accidents. These risks extend beyond the well site. Economic risks include the effects of a resource “boom-bust” cycle on local and regional economies, the” crowding out” of other industries -- tourism, organic farming, dairy farming, manufacturing -- and loss of property value because of proximity to industrial sites and activities. Social risks include increasing crime, conflicts within communities, and inability to provide housing or services to boom period population.

Risks of Industrial Accidents

The Extent of Risks Depends on The Pace and Scale of Development

Pace: How rapidly well development occurs in a geographic area

Scale: The number of wells developed in a geographic area

Pace and scale are determined by investment strategies -- land speculation, offerings to investors, relative prices for oil and gas etc.

The Boom-bust Cycle in Resource Extraction

Adapted from Tim Kelsey (2011), "Annual Royalties in a Community".

Years

Dolla

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Who is Affected By HVHF Development? How Extensive are the Effects?

Gas Development is a Regional Industrial Process

What Do We See in HVHF Regions? “Man Camps” Water extraction sites Compressor plants Pipelines Staging sites Rail spurs Gas storage sites and facilities Processing facilities for “produced” water or injection wells Trucks, trucks, trucks

Risks and Benefits May Occur Far From the Well Pad

Trucks carry drilling and fracturing inputs (sand, water, chemicals) and equipment move into and out of the region from distant points.

Gas development infrastructure (pipelines, gas storage facilities, produced water facilities may be located far from the drilling locations

Sand mining in Midwestern states and transport of Bakken oil by rail to refineries in Canada and the US creates risks for states and regions outside the shale plays.

Rural drilling locations may experience risks while expenditures occur in cities away from the drilling sites.

Disruption May Be Extensive and Long-Term, Depending on the Pace and Scale of

Development

Extensive Sand Mining in the Midwestern US

Shale Oil Transport to Coastal Refineries

“Classic” Depictions of Well Sites

HVHF Occurs in Highly-Populated Areas

Hydraulic Fracturing in Suburbs and Cities

Case Studies Tell Us Public Costs of Shale Gas Drilling During Boom include:

Accelerated road maintenance

Traffic congestion from trucks (An estimated 890 to 1,340 truck trips per well site)

Higher public safety costs

Increased demand for health and education services

Increased demand on public administrative services (e.g. planning and zoning, permitting, assessments,

housing assistance)

New service requirements, such as emergency response capacity and environmental monitoring and remediation.

How Will Local Costs Be Paid?

An illustration: SR 3020 in Towanda Township, Bradford County, Pennsylvania after a high volume of overweight drilling trucks and a Northeast winter

(Photo: PennDOT Engineering District 4-0)

Local residents may have to absorb whatever costs are not covered through state tax policy, local taxes and fees, or local agreements.

Unanticipated Costs A study of Sublette County Wyoming found that public safety costs rose significantly with increases in drilling. The question is the threshold at which communities cannot absorb new costs.

How Are Local Communities and Regions Reacting to Risks?

A Study of How Marcellus Shale Play Communities Are Responding

Our database of 298 communities that have taken some governmental action and 53 interviews with a stratified sample of communities, indicates:

A “wait and see” attitude, moratoria rather than outright bans.

Distrust of the oil and gas industry and of state policy makers to address risks and public costs.

A commitment to local community sovereignty or

“home rule”

What Did Interviews Tell Us?

Learning and time to plan have increased risk perception.

Community leaders are aware that risk of public costs extends regionally, beyond the well site.

Costs are clearer than benefits to regional residents.

Local control is emphasized because of lack of confidence in state level or industry ability to protect resident interests. There are few options available.

Some Significant Research Issues What local and regional public costs and benefits are

associated with shale gas and oil development? How are these costs and benefits distributed spatially and among segments of the population?

What do investment projections tell us about expectations regarding the productivity and longevity of wells and shale plays?

What strategies are being adopted by local government to regulate shale gas and oil development and mitigate negative effects?

What key governance policies differentiate national approaches to shale gas and oil development?

A Distinctive US Approach to Shale Gas Development?

Local Responses to Complex Risks

Susan Christopherson Department of City and Regional Planning

Cornell University smc23@cornell.edu