Study finds mixed financial effects of shale gas for local communities

A study by Duke University researchers has found that oil and gas development from shale fields does not always help the public finances of communities.

Duke University Energy Initiative director Richard Newell and associate in research Daniel Raimi collected data from communities surrounding 10 oil and gas plays for six months from September 2013. Team members traveled to shale gas and oil production regions around the US, including the Bakken in North Dakota and Montana, Marcellus Shale in Pennsylvania, Eagle Ford and Barnett in Texas, and Haynesville in Louisiana.

The report describes major revenue sources for local governments, which can include property taxes, sales taxes and state-collected severance taxes or fees that are sent back to the local level. Some local governments also partner with oil and gas firms to help maintain roads, with new costs including damage to roads from heavy truck traffic. They also partner to carry out water and sewer service expansions and several other projects.

The researchers also identified several local governments in western North Dakota and eastern Montana, near the Bakken shale formation, that have experienced net negative fiscal effects from shale gas development. Municipalities in rural parts of Colorado and Wyoming have struggled to manage population growth as natural gas production has surged also.

Newell said: "The fiscal effects for local governments tend to vary from state to state, but we found that for most of them new revenues were outweighing new demand for services."

The report is the first of a series of publications to be produced by the Shale Public Finance Project.