Economic and Environmental Impacts of Fracking: A Case Study of the Marcellus Shale

Abstract

While many studies examine the individual costs and benefits from fracking, there are no studies that provide a unified comparison of costs and benefits. This study attempts to fill this void by conducting a cost–benefit analysis of developing natural gas from the Marcellus shale formation in Pennsylvania. Using more than seven thousand well records, this study estimates production decline curves for vintages of Marcellus wells and their productivity growth over time. The value added created from constructing and operating a recent average Marcellus well is estimated. Environmental impacts are estimated based upon several thousand records of environmental violations impacting air, land, and water resources. Air emissions are estimated during the life cycle of the well from drilling, hydraulic fracturing, production, transportation, and consumption. Using estimates of environmental damage costs, the economic value of these environmental impacts is estimated. The economic benefits, including the environmental benefits from displacing coal, range from $14 to over $30 million with an expected value of $23 million per well. These estimates are likely a lower bound because they do not include the benefits that arise from lower natural gas due to shale energy development. Environmental impact costs range from $162 to $755 thousand per well with the largest impacts arising from diesel use by water pumps and trucks, forest disruption from pipeline construction, and methane lost during flow back and downstream methane leakage. These environmental costs were estimated using relatively high estimates for environmental impacts and damage costs. Unknown impacts may remain, however, from unreported environmental violations and from possible long-term health impacts. Nevertheless, this study finds that the economic benefits from fracking substantially exceed the costs of known environmental impacts.