A Study on the Impact of Unconventional (and Conventional) Drilling on Housing Prices in Central Oklahoma

Abstract

Shale energy development activity may benefit some aspects of a regional economy (such as increased jobs or tax revenue); however, there may also be negative impacts to the local environment, such as noise and underground water contamination. We study the impact of unconventional drilling activity on housing price in an area of the country with a long history of crude oil production. A prospective home buyer may want to avoid a place near sites that have been drilled using unconventional drill technologies such as horizontal fracturing. Adopting a hedonic price model, we estimate the impact of distance to and density of unconventional drilling on housing prices in two central counties in Oklahoma during the period 2001–2016. We also apply a semiparametric approach to deal with the possibility that the relationship between an environmental pollutant source and housing price is nonlinear. The empirical results are consistent in terms of physical housing characteristics and locational aspects in all cases, with drilling activity having only a minimal effect in benchmark models. Further, the semiparametric estimation results support the findings that drilling activity has only limited impacts on local housing prices.