Fracking May Drive Down Real Estate Values,
9/10/2013 - Fracking for natural gas may negatively
impact the value of homes near the drill site, according to a survey
to be reported in a forthcoming issue of The Journal of Real Estate
“Our surveys show a five-to-15 percent reduction in bid value for
homes located proximate to fracking scenarios,” reports Ron Throupe,
a professor in the Daniels College of Business at the University of
Throupe and a University of Denver colleague, Xue Mao, along with
Robert A. Simons of Cleveland State University, arranged for
telephone surveys of more than 550 homeowners in the Houston, TX
metro area and the Alabama-Florida panhandle.
They were instructed
to imagine that they were going to consider bidding on a house.
Most respondents were given a scenario about a house very similar to
their own home in a neighborhood just like theirs.
They were told
that an energy company had bought the rights to inject a pressurized
mixture of water, sand and chemicals into a lower groundwater
aquifer to recover natural gas under the property they were
The drilling equipment was over a quarter mile
away and visible from the house.
The house is on well water from a
shallow aquifer, separate from the lower aquifer the natural gas is
being recovered from.
The process, they were told, was expected to
go on for five years.
Among the Texas homeowners, 26 percent said they would bid on the
Among the Florida-Alabama homeowners, 36 percent said they
The top quarter of the bids submitted by the Texans who
would bid came in at around a six percent discount below the value
of their own homes.
The top quarter of the bids by the
Florida-Alabama homeowners had a steeper discount—about 15 percent.
The term “fracking” can influence public opinion, the researchers
In Texas, perceived as “petroleum friendly,” the projected
price discounts on houses near fracking operations were generally in
Among the Alabama-Florida homeowners, however,
perceived to be less familiar with fracking, the price discounts
were generally in double digits.
The future of real estate values in areas where fracking occurs
likely will be influenced by how comfortable homeowners become with
“There is a need to share best or improved practices in connection
with fracking operations,” the authors write.
“These include site
development or shrinkage, post reclamation, reuse and disposal
practices for frack fluid, cutting the emissions from drilling
operations, and the public review process.”
“There is an emerging focus on reducing the environmental impact of
exploration for oil and gas.
The questions to be researched include
the long-term implications of chemicals left underground, the air
quality implications, the storage solution to flow-back materials
such as toxic fracking fluids and radioactive materials, and safety
concerns near populations.”
The study is titled “A Review of Hydro-Fracking and its Potential
Impacts on Real Estate.”
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