JPAM Featured Article: Broadening Benefits from Natural Resource Extraction: Housing Values and Taxation of Natural Gas Wells as Property
May 17, 2016 08:00 AM
"Broadening Benefits from Natural Resource Extraction: Housing Values and Taxation of Natural Gas Wells as Property"
As part of our ongoing effort to promote JPAM authors to the APPAM membership and the public policy world at large, we are asking JPAM authors to answer a few questions to promote their research article on the APPAM website.
By: Jeremy Weber, J. Wesley Burnett, and Irene M. Xiarchos
What was the genesis/history of the idea for your research?
In learning more about the extraction of natural gas from shale formations, it became clear that Texas’ Barnett Shale had the longest history of wide-spread drilling of hydraulically fractured wells. It therefore presented the best opportunity to study the effects of shale drilling on housing values over a long period. Moreover, the boundary of the shale formation divides the Dallas-Fort Worth region in half, meaning that for purely geologic regions some zip codes experienced much drilling while other nearby zip codes had no drilling.
What is the main conclusion that becomes evident from your research? (Or, what is our main takeaway?)
Housing values in zip codes in the shale (and therefore with drilling) appreciated more than in nearby non-shale zip codes, and the shale advantage in housing values persisted several years after drilling had substantially slowed. The taxation of natural gas wells as property by local schools and governments in Texas provides the primary explanation for the greater appreciation. The boom in drilling caused a large increase in the property tax base and local schools had cut property tax rates by nearly 10 percent.
What are some of the more interesting or surprising findings/conclusions, you discovered during this process?
We were initially surprised by the finding of greater housing appreciation in shale zip codes. This caused us to search for explanations and in doing so came across property tax data and realized the role that drilling played in expanding the tax base in shale areas. We were also surprised that, holding the tax base constant, the density of wells drilled in a zip code in current or previous years did not have a stronger negative effect on housing values.
What next steps do you envision should be taken because of your findings academically and/or practically?
The research highlights how policy makers can ensure that extraction of natural resources generates broadly-felt benefits in the neighborhoods where extraction occurs. Many states exclude oil and gas wells from property taxes and in several cases there are few alternative channels to generate local public revenues for tax relief, parks, or schools. Such states can look to our research for a concrete example of the benefits of such policies.
Jeremy Weber is an assistant professor in the University of Pittsburgh’s Graduate School of Public and International Affairs, with a secondary appointment in the Department of Economics. His research cuts across energy, agriculture, the environment, and well-being. He earned his Ph.D. in Agricultural and Applied Economics at the University of Wisconsin, Madison. Prior to coming to the University of Pittsburgh, Weber worked at the World Bank, Johns Hopkins University, and the Economic Research Service of the U.S. Department of Agriculture.
J. Wesley Burnett is an Assistant Professor of Economics at the College of Charleston in Charleston, SC. His research emphasizes the applications of applied microeconomic theory to solving and analyzing problems in environmental and resource economics. In a relatively short career, Dr. Burnett has secured nearly one million dollars in external, competitive funding and published over a dozen manuscripts in peer-reviewed journals. He is a member of the American Economic Association, the Southern Economic Association, the U.S. Association for Energy Economics, and the Association for Environmental and Resource Economics. For additional information, visit http://burnettjw.people.cofc.edu.
Irene M. Xiarchos, an economist and policy analyst for the Office of Energy Policy and New Uses, Office of the Chief Economist, USDA, works in the intersection of agriculture, rural development, energy and the environment. She earned her PhD in natural resource economics from West Virginia University. She was a visiting scholar at the Economic Research Service of USDA, served as manager of the BioPreferred program for the United States, and has taught economic and policy courses in West Virginia University and the Graduate School USA. She served in the American Agricultural Economics Association (AAEA) outreach committee and the USDA Economist Group. She has published in academic journals like Resources Conservation and Recycling, Energy Policy, Journal of Energy and Development, and contributes regularly to USDA reports. In collaboration with the Counsel of Food, Agricultural and Resource Economics (CFARE) she is leading a series of symposia that explores the nuances and opportunities related to the links of energy with agriculture and rural development.