Broadening Benefits from Natural Resource Extraction: Housing Values and Taxation of Natural Gas Wells as Property

Abstract

We study the effects of the property tax base shock caused by natural gas drilling in the Barnett Shale in Texas-a state that taxes oil and gas wells as property. Over the boom and bust in drilling, housing appreciation closely followed the oil and gas property tax base, which expanded the total tax base by 23 percent at its height. The expansion led to a decline in property tax rates while maintaining or increasing revenues to schools. Overall, each $1 per student increase in the oil and gas property tax base increased the value of the typical home by $0.15. Some evidence suggests that the cumulative density of wells nearby may lower housing values, indicating that drilling could reduce local welfare without policies to increase local public revenues.

Who Wins in an Energy Boom? Evidence From Wage Rates and Housing

“…With respect to housing, this article contributes to a recent literature that has documented mixed evidence on the effect of the shale boom on housing values. On the negative side, Muehlenbachs, Spiller, and Timmins (2015) find that shale gas development had a negative effect on groundwater-dependent homes in Pennsylvania and Gopalakrishnan and Klaiber (2014) find that shale extraction had a negative effect on housing values in Washington County, PA. 7 On the positive side, Weber, Burnett, and Xiarchos (2016) find evidence that the shale boom increased housing values in zip codes with shale endowments in northeastern Texas and Boslett, Guilfoos, and Lang (2016) find that the moratorium on shale drilling in New York state decreased home values, indicating a positive relationship between drilling and home values. Bartik et al (2017) find that fracking increased median housing values by 5.7% and median rental prices by 2.0%.…”

“…In addition to migration induced by employment opportunities, demand for housing may also increase because booms expand the tax base from producing wells thereby lowering tax rates and increasing the funds available for public goods (Weber, Burnett, and Xiarchos ).…”

Household valuation of energy development in amenity‐rich regions

“…In a more comprehensive study of 36 counties across Pennsylvania, Muehlenbachs et al () find that shale development has a large negative impact on nearby houses with private wells (indicative of concerns over the impact of shale wells on water quality) and a small positive impact for other houses (indicative of the increased value of homes due to mineral rights and increases in economic activity) . Recent papers (such as Weber, Burnett, & Xiarchos, , examining Texas zip codes; Boslett et al, , examining counties in Western Colorado; Bennet & Loomis, , examining Weld County in Colorado; and a working paper by Keeler & Stephens, , examining West Virginia) have begun to expand the analysis of shale development's impact on housing into other areas. Most relevant to our research is the work by Bennett and Loomis () that considers the impact of oil and gas development in Weld County, Colorado, finding a small negative (less than 1%) impact on housing prices.…”

A quantitative description of state-level taxation of oil and gas production in the continental U.S

“…Property taxes are local taxes and will therefore generate more revenue in areas with more drilling, a desirable quality since much of the public costs and disamenities from shale development occur near wells. Indeed, recent studies have shown how taxation of oil and gas wells as property in Texas has generated windfalls for schools and local governments, affecting local tax rates, public debt, and housing values (Marchand and Weber, 2015;Weber, Burnett, and Xiarchos, 2016). State-level taxes, in contrast, spread windfalls from extraction more broadly but potentially leave jurisdictions where extraction occurs unable to fully address the local public costs of drilling.…”